Like many Canadians, we watched the vote in the UK, on whether to remain or leave the EU, with great trepidation.
At 52% the Leave movement ruled the day with stronger than expected support from voters across the country particularly Wales. Other parts of the UK, are now considering the political fall out, including northern Ireland, Scotland and other regions. Much will be written on the campaign. What was the ‘deciding factor’, the motivation behind the Leave campaign and David Cameron’s ‘miscue’ on calling for the referendum. With the results now in and being analyzed, Canadians and Canadian companies operating in the EU are set for a period of immediate uncertainty, confusion and change.
Of note, for Canadian companies the change process will be at least two years. That said, there are important milestones and considerations at play which require careful monitoring.
The process for the UK to invoke Treaty 50 which details the exit provisions from the EU, will require the UK government to negotiate the terms and conditions as well as consider the go forward structure around regulatory, legislative and trade agreement provisions. The specifics in these negotiations matter. Companies will at the very least need to deal with both the EU and UK governments in the future. The material question will be what about the interim, the differences in regulatory, legislative and terms of trade between the two jurisdictions. There may be other changes within the member states of the EU which will also need to be carefully analyzed as they will impact Canadian companies entering or operating in the EU.
Canada is set to install a new High Commissioner to London. The former Clerk of the Privy Council, Janice Charette, will inherit a very uncertain, complicated and interesting job. Top of mind for her, for Prime Minister Trudeau and for Canadian companies will be the finalization of the Comprehensive Economic Trade Agreement (CETA). Consideration around the terms and conditions for a separate trade agreement with the UK will likely be top of mind.
Prior to the referendum in the UK, the plan was to have CETA adopted by the EU-Canada Summit in October of 2016 as a ‘mixed agreement’. The mixed agreement would then proceed to the European Parliament to be ratified by the end of 2016. It is likely this plan will continue. The same approach to the mixed agreement is anticipated to apply to the UK, since all EU legislation and agreements will apply to the UK until they officially withdraw from the EU in two years time.
For Canadian companies operating in the EU the next few days will be telling. The withdraw negotiation process for the UK from the EU will be set out through the EU leadership and Parliament over the next number of weeks. It is a fascinating and important development to watch.
H+K’s EU team will be monitoring and able to navigate this historic period of change.