In March 2017, former Prime Minister Theresa May triggered Article 50 – the mechanism for a member state to leave the European Union (EU).  This set a deadline of two years for the UK to negotiate its exit from the EU, with 29 March 2019 agreed as the date for it to leave, which was then postponed until 31 October 2019. But what is Article 50 and is it still relevant?  How does it impact UK businesses?

What is Article 50?

Since the UK voted to leave the EU, ‘Article 50’ has become a regular part of everyday language.  However, it is worth recapping exactly what Article 50 is and why it is so important to the Brexit process.

Article 50 of the Lisbon Treaty is the legal mechanism for an EU member state to leave the EU.  It was agreed in 2009 – before that, there were no formal means for a country to leave the EU.

Considering the political and economic gravity of triggering Article 50, it is actually very short, just five paragraphs, which set out the steps a country must go through to withdraw from the EU.  First of all, a country must notify the European Council (ie the other 27 EU Member States) and negotiate with the EU 27 its terms of withdrawal from the EU. The provision requires this to happen within two years- unless all Member States agree unanimously to extend it.

The UK cannot take part in any discussions between the EU27 themselves about its departure.  Interestingly, UK MEP's in the European Parliament may still take part in the debate and vote on the terms of departure of the UK.

But what about the future UK-EU relationship?

Under Article 50, scant detail is required as to what the future relationship should be – the Member States are only required to agree 'a framework' for the future arrangement.  This is part of the difficulty facing the UK – while, under Article 50, a Withdrawal Agreement has been agreed between the UK and the EU (but has not been ratified by the UK Parliament), there is no certainly about the future trading relationship. The Political Declaration has general aspirations within it – but importantly refers to creation of a level playing field.  This means that the UK will remain with similar regulations to that of the EU, in order to prevent the UK having a competitive advantage in terms of its costs of production, and undercutting EU trade.

Thus, the Political Declaration provides:

The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards, environmental standards, climate change, and relevant tax matters, building on the level playing field arrangements provided for in the Withdrawal Agreement and commensurate with the overall economic relationship. The Parties should consider the precise nature of commitments in relevant areas, having regard to the scope and depth of the future relationship. These commitments should combine appropriate and relevant implementation domestically, enforcement and dispute settlement as part of the future relationship.