LMA Webinar Impact of the UK referendum vote to leave the ...€¦ · EU Referendum Act became law . 10 November 2015 . David Cameron set out the UK’s negotiating objectives . July

LMA Webinar Impact of the UK referendum vote to leave the European Union Simon Gleeson, Partner – Clifford Chance LLP Matthew Dunn, Partner – Clifford Chance LLP

Croatia*

Norway Iceland

Lichtenstein

European Union (EU) (28) Bulgaria Poland

Czech Republic Romania Denmark Sweden

United Kingdom Hungary

Albania†

Andorra Armenia

Azerbaijan Bosnia Herzegovina

FYR Macedonia † Georgia Moldova Monaco

Montenegro † Russia

San Marino Serbia † Turkey † Ukraine

† EU candidate countries

European Economic Area

(EEA) (30)

European Free Trade Area (EFTA) (4)

Switzerland

Council of Europe (47)

* Croatia has provisionally been admitted to the EEA pending full ratification of its accession treaty

The UK in Europe

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Eurozone (19) Austria Germany Malta

Belgium Greece Netherlands

Cyprus Ireland Portugal

Estonia Italy Slovakia

Finland Latvia Slovenia

France Lithuania Spain

Luxembourg

British Crown Dependencies

Isle of Man Channel Islands (Jersey, Guernsey, Sark)

EU Outermost Regions (OMRs) E.g. Martinique; Canary Islands

Other E.g. Gibraltar

EU Overseas Countries & Territories (OCTs) E.g. British Virgin Islands; Aruba

What happens next?

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5 May 2016 Scottish elections, local elections in England, Mayoral election in London. EU referendum cannot be held on this date.

2015 2016

23 June Referendum

April 2017 French Presidential Elections

August 2017 German Federal Elections

July – December 2017 UK Presidency of Council of EU

The UK’s ‘new settlement’ Jobs and growth. Complete Internal Market, conclude further trade agreements Safeguards for non-euro members Controls on migration – “emergency break” Further powers for national parliaments – “red card”

17 December 2015 EU Referendum Act became law

10 November 2015 David Cameron set out the UK’s negotiating objectives

July 2016 – July 2018 Possible Article 50 negotiation

2018 onwards - Possible full treaty change - If the UK voted to remain in 2016/17 it would have a full veto and be

in a strong position to revisit any negotiating objectives it felt needed more work

2018 2017

Q3 2018 Possible Brexit

Certain Possible

What happens if Britain votes to leave? – Article 50(1) of the Treaty on European Union:

“Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”

– Article 50 provides for a two year period to negotiate a withdrawal agreement. This can be extended by mutual agreement if an agreement is not reached.

– The UK would remain a member of the EU during the negotiation, whether it was two years or extended, and EU law would continue to apply to the UK. Undertakings established in the UK as a member of the EU would continue to enjoy the same legal rights and be bound by the same obligations in relation to the conduct of their business within the EU.

– Two years is an ambitious target. Previous negotiations have taken anything between three (Greenland voted to leave in 1982, withdrawing in 1985) and over eight years (Switzerland negotiated its bilateral agreements with the EU between 1992 and 2004).

– Phased agreements? It is not certain whether the withdrawal agreement would be the final agreement between the UK and the continuing EU. The consensus amongst commentators is that it would be, and that it would take a long time to reach that agreement with the UK being “in” until it was “out.” It is possible that the UK could leave under a skeletal withdrawal agreement and negotiate a more comprehensive agreement over a longer period of time.

– Q3 2018: the earliest the UK could leave. 4

Alternatives to EU membership – Norway. EEA + EFTA membership. The UK would leave the EU and could emulate Norway in becoming a member

of the European Economic Area and the European Free Trade Association. ***Partial access to the EU Internal Market in services.***

– Switzerland. Bilateral agreements + EFTA. The UK would leave the EU and could emulate Switzerland in agreeing sector-by-sector treaties with the EU, and Free Trade Agreements with the EFTA countries. ***Partial access to the EU Internal Market in services.***

– Turkey. Customs Union. The UK would leave the EU and could emulate Turkey and enter into a Customs Union with the EU.

– UK/EU FTA. The UK would be outside the EU but could seek to negotiate a comprehensive Free Trade Agreement with the EU.

– WTO. The UK would leave the EU and rely on its membership of the World Trade Organisation as a basis for trade with the EU.

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Implications for LMA-based loan documentation – Governing law and enforcement – Documentary considerations – Implications for Lenders – Tax – Material Adverse Effect

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Governing law and enforcement – Governing law – Jurisdiction

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Documentary considerations – References to the EU or to EU legislation in

documents – Article 55 BRRD

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Implications for Lenders – Illegality – Increased costs

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Tax and Material Adverse Effect – Withholding tax – Material adverse effect

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Next steps – Limited immediate documentation changes, but

ongoing review – LMA Brexit Working Party

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Contacts

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Partner, Finance Matthew Dunn

T: +44 20 7006 4160 M: +44 7961 724942 E: matthew.dunn

@cliffordchance.com

Partner, Finance Simon Gleeson

T: +44 20 7006 4979 M: +44 7977 423944 E: simon.gleeson

@cliffordchance.com