April 24, 2017

April 24, 2017

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April 21, 2017

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Brexit Update: General Election 2017

The Prime Minister of the UK has unexpectedly announced that she intends to hold a General Election on 8 June.

Theresa May had repeatedly denied that she had intended to do so. She announced that she had changed her mind “recently and reluctantly” because “the country is coming together but Westminster is not”.

Triggering a General Election is no longer entirely straightforward as a matter of law. Before the 2010 election, a Prime Minister was free to call an election on demand, although under the British constitution, the ability to do so technically fell under the prerogative power of Her Majesty the Queen.

The Fixed-term Parliaments Act 2011 (FtPA), which came into force on 15 September 2011 as a condition of the Liberal Democrats entering into coalition with the Conservatives, removed the ability of the Queen, using her prerogative power on the advice of the Prime Minister, to dissolve Parliament. The logic behind the FtPA 2011 was to establish a regular, five-yearly, general election cycle and provide a degree of predictability and stability to British politics. Only one election (on 7 May 2015) has actually taken place under the new cycle. The next general election is, therefore, not scheduled to take place for another three years, on 7 May 2020.

An early election could be triggered by a motion of no confidence in the government. That would have had to be engineered by Mrs May and optically would not have been desirable. Alternatively, an early election is possible if a motion (simply stating “That there shall be an early parliamentary general election.”) is agreed by the House of Commons by a majority of at least two-thirds of all seats (or without division). Assuming the motion will be duly passed by the House tomorrow, Mrs May can then recommend that the Queen formally set 8 June 2017 as the date for the election by proclamation. The next following general election will then be scheduled for Thursday 5 May 2022, assuming FtPA is not repealed.

Although dissolution of Parliament does not follow immediately, so as to ensure that essential business can be completed, purdah normally begins six weeks before an election (in this case, that would be 27 April 2017) leaving very little time for anything to complete its passage through the current Parliament. One particular impact to note is that the combined effect of this snap election and the Parliamentary summer recess means that Royal Assent for the Finance Bill 2017 should now not be expected much before the end of September 2017 (even though many of its more complex provisions, including, for example, the restrictions on corporate interest and loss utilization, are already in effect).

Jeremy Corbyn, the leader of the Labour Party, has announced that he will support the motion. Labour MPs, many of whom will consider, on the basis of the polling evidence, that they will lose their seats, are still likely to fall into line and support the government motion. The Liberal Democrats are resurgent as an overtly anti-clean Brexit party, but have only 9 seats. UKIP appears to be experiencing some weakness, recently having its one MP defecting, and its new leader Paul Nuttall failing to secure what it must have considered to be a winnable parliamentary seat in Stoke, but it remains popular and will regard itself as the guardian of a “true” Brexit. The SNP, having won virtually every seat in Scotland last time, can be expected to oppose Brexit and support a second Scottish referendum.

What does this mean for Brexit? Mrs May said that holding an election now was intended to “guarantee certainty for the years ahead”. She was running a government with a narrow majority elected on David Cameron’s manifesto, a manifesto which, for example, committed the government to staying in the Single Market. It must have become apparent to Mrs May that her small majority in the House of Commons and the risk of the House of Lords causing trouble substantially weakened her negotiating hand. With the EU moving slowly in the run-up to summer due to the French and German elections, it made some sense to use the relatively quiet period in the early summer to hold an election now.

If, with the Conservatives currently 20 points in the lead, Theresa May wins with an increased majority (although who would confidently make any political predictions at this time?), then the direction for Brexit becomes clearer. If Theresa May wins with her own mandate, she can seek to negotiate the Brexit she wants, confident that not only she will have the support of the House of Commons, but that the House of Lords will be unable to block a manifesto commitment. It also strengthens her hand with regard to Europe. It is not expected that the outcome of the Election will affect the EU 27 negotiating position on Brexit, but it does strengthen her hand to the extent that her final deal will not be perceived as being at risk of rejection by the two Houses.

Whether or not the FtPA is repealed, holding an Election now pushes out the likely date for the subsequent General Election to 2021 or 2022. This neatly provides the opportunity for a 3 year transition/implementation from March 2019 to March 2022, as envisaged in the draft negotiating guidelines.

Will the Conservative Manifesto present a clear view of the Brexit that the UK is seeking? One would expect so. What does that Manifesto say? Does it argue for an ultra-clean Brexit, or does it engage more subtly with some of the issues, such as trade and immigration, understanding the need for compromises and looking for a deal that works economically, as well as politically, for the UK? At least it presents an opportunity to be able to produce the clarity that a simple Leave-Remain referendum could not do. Although the calling of the General Election is being seen as a means to neutralize the so-called “Bremoaners”, it may also be an opportunity to neutralize the Brexit “Ultras”, who seek a clean Brexit whatever the economic cost to the UK.

But is there an alternative scenario? The General Election will largely be a second referendum on Brexit. The British public – famously – divided 52%/48% on the referendum. It currently seems unlikely, but suppose that an anti-Brexit coalition were able to be formed after the Election. In that case, the issue of whether Article 50 is revocable or not becomes of central importance. Were the vote to install a Prime Minister who opposed Brexit, it is highly unlikely as a political matter, even if not technically permitted as a legal matter, that the EU would object to the revocation of Article 50. In which case the UK may remain as a member of the European Union.

On balance, a likely outcome at this time is that Theresa May wins a larger majority, effectively endorsing and elaborating on the vote in the original Brexit referendum. But six weeks is a long time in politics at any time, and UK politics is more unpredictable now than at any time in recent memory.

© Copyright 2017 Squire Patton Boggs (US) LLP

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About this Author

Jeremy Cape, Squire Patton Boggs Law Firm, Tax and Corporate Attorney
Partner

Jeremy is a tax partner in the London office, advising on a wide range of issues, including finance, restructuring and insolvency, funds, outsourcing and M&A. He has substantial experience in both domestic and global matters, with specific expertise regarding emerging markets and Africa, counselling both governments and taxpayers. He is the only UK-based lawyer specifically rated as an Africa-wide tax expert by Chambers Global.

44207-655-1575
Aline Doussin, Squire Patton Boggs, London, Trade lawyer
Senior Associate

Aline Doussin is a senior associate in the firm’s Regulated Industries department specialising in International Trade (including export control and sanctions), EU Regulatory and Public Policy. Aline’s experience is derived from her similar previous position in a major international law firm, and from her former roles at the World Trade Organization (WTO) in Geneva and as an in-house lawyer in Japan Tobacco International (JTI).

Aline’s work involves acting for a wide range of businesses, governments and trade associations on the following issues:

  • Sanctions and export controls specialist services including:

    • Compliance advice on the implementation of export control and sanctions obligations 

    • Internal investigations to ascertain potential violations of export control and sanctions laws 

    • Disclosure to EU Regulators 

    • Defence before the national regulators including at EU level 

44 20 7655 1146