Hangover at Teatime: Why ‘Brexit’ Breakup Is So Very Hard to Do

'Brexit': What Investors Need to Know
  • `Army of lawyers' would be needed to extract Britain from EU
  • Exit would thrust U.K. into years of international legal limbo

“Brexit” lovers beware: breaking up with the European Union is hard to do.

QuickTake Will Britain Leave the EU?

A vote on June 23 to leave would not free the U.K. from the EU’s shackles the next morning. It would trigger a phase of one-against-27 summitry in which Britain in all likelihood ends up stuck with most of the European regulations it is trying to escape.

Victory for Britain’s secessionists in the referendum would hand leverage to countries at the heart of the European project, Germany and France, which would drive a hard bargain to deter others from following the British out the door.

Britain’s anti-EU forces “will be pleased to have succeeded in the referendum until about teatime on Friday the 24th,” said Andrew Duff, a U.K. Liberal Democrat who served 15 years in the European Parliament and co-drafted the latest EU treaty. “After that the full complexity and costs of the decision to exit would begin to be exposed.”

Disentangling the U.K. from European precedents dating back to its joining the bloc in 1973 would probably take much longer than the two-year period for withdrawal negotiations laid down in EU treaties. A government report released Monday warned of a decade of uncertainty if voters choose to leave the EU.

Britain would also be in the uncomfortable position of having to reinstate wide sections of the EU rulebook so as not to give up on beneficial aspects of the bloc from the single market to continent-wide crime fighting.

The European arrest warrant is a case in point. Set up in 2004, this EU-wide system to fast-track the extradition of dangerous criminals was used by Britain to seize a suspect in a failed follow-up to the 2005 London transport bombings who fled to Italy, and to haul a fugitive murderer back from Poland in 2012.

Britain rehearsed a EU regulatory backflip in 2013 and 2014 when Prime Minister David Cameron’s government opted out of 130 EU police and criminal-justice measures, then opted back in to 35 of them including the arrest warrant. Departure from the EU would bring about a legislative merry-go-round on a far grander scale.

Single Market

The focus would be the EU’s single market, embraced by backers of Britain’s “Stay” and “Leave” campaigns alike. It provides for the international movement of goods, services, investment and people, stitching together a European market that rivals the U.S. in size.

Those four European freedoms come at the cost of accepting common regulations. British politicians delight in mocking them, as if every rule was a carbon copy of the unlamented standards for the shape and size of fruits and vegetables, which were scrapped in an EU red-tape-reduction drive in 2009.

“People will not be impressed with this relentless campaign of fear,” Leader of the House of Commons Chris Grayling, who is campaigning to leave the EU, said in a statement. “Claims that it will take twice as long to sort out a free trade deal with the EU as it did to win World War II are clearly ludicrous. There’s a free trade zone from Iceland to the Russian border and Britain will still be part of it after we vote ‘leave.’”

Regulations vs Directives

A pro-Brexit vote would still force a root-and-branch review of every EU-related law on Britain’s books. European legislation, made almost entirely with Britain’s approval, comes in two flavors: “Regulations” apply instantly EU-wide, while “directives” serve as binding guidance for the passage of laws at the national level.

Some laws are a hybrid. One example is the European Company Statute, popular in Britain because it allows one-stop EU-wide corporate registrations. Some parts would lapse on the day of Brexit, others would linger on the British books -- and the House of Commons would have to put the Company Statute, and countless other pieces of legislation, back together again.

“For that you will need an army of lawyers,” said Adam Lazowski, professor of European law at the University of Westminster in London. “This can be done, but my question is how much is this going to cost the state budget, the business community and how much uncertainty it will create. It’s going to be an exercise of gigantic proportions.”

Seven Scenarios

Legal squadrons will fan out to determine the U.K.’s future relations with the EU as well, but unlike the rejigging of domestic legislation, this won’t be a U.K.-controlled exercise. In a paper for the Centre for European Reform in London, Jean-Claude Piris, a former chief EU legal adviser, floated seven alternatives.

These include hashing out a U.K.-EU free-trade agreement, joining the likes of Norway in broad market-access arrangements, copying Switzerland’s sector-by-sector accords or conducting business under the aegis of the World Trade Organization.

Work and Pensions Secretary Iain Duncan Smith, one of the leading ministers campaigning for a British exit, played up the prospects facing Britain if it votes to leave, telling BBC Television’s “Andrew Marr Show” on Sunday that “the U.K. has faced bigger trials than this over its years.”

Whatever route the U.K. takes, two things are clear: it would have to retain a swath of EU regulations to stay plugged into the European market. And re-anchoring the U.K. in the world system would take years. Canada’s pursuit of an EU trade agreement, now at seven years and counting, is a cautionary tale.

“It took Britain 12 years to get in and I think it would take six to 12 to get out,” said Peter Ludlow, a Brussels-based historian and chairman of the EuroComment research firm. “And it won’t be a nice getting-out.”

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