By Robert Hanley, Esq., Ming Henderson, Esq., Amy S. Levin, Esq., Gordon Peery, Esq., Julia K. Sutherland, Esq., Peter Talibart, Esq. and Deirdre M. Murphy, Esq. of Seyfarth Shaw LLP Overview To the shock of corporate Britain the UK voted last week, by 52% to 48%, to leave the European Union. Within hours of the referendum result the British Prime Minister David Cameron announced that he would be standing down some time before October. The British Pound slumped, and stock markets around the world saw billions wiped off their value. However, despite the political and market upheaval, the UKaEUR(TM)s membership of the European Union will continue until it has been formally withdrawn, and that is likely to take several years. In the immediate future, the legal landscape will remain substantially unchanged in many respects. This note considers the exit (or BREXIT) procedure and timing, alternatives to EU membership and the legal implications of the UK leaving the EU. Exit procedure and timing Despite the dramatic market reaction to the BREXIT vote, the process by which the UK will leave the European Union will take several years and, in the meantime, the legal landscape will remain largely unchanged. The formal first step to exit is the UK notifying the EU of its intention to leave in accordance with Article 50 of the Treaty on European Union. Once served, the remaining countries of the EU are then obliged to negotiate with the UK the terms on which the UK will withdraw. The withdrawal agreement will cover not only the terms of the UKaEUR(TM)s exit but also the nature of the UKaEUR(TM)s future relationship with the EU. Under Article 50 the EU treaties will cease to bind the UK after two years from the date the UK serves notice of its intention to leave the EU (although this two-year period could be extended by agreement between the European Commission and the UK Government). The UK Prime Minister David Cameron has indicated that he does not intend to serve an Article 50 notice and that doing so will be for his successor. Accordingly, the two-year timetable for exit may not commence until October this year when the new Prime Minister has taken over. This leaves a period of several months for informal talks between the UK Government and the European Commission and other EU member states. Once the Article 50 notice has been served, the formal negotiation process is very likely to take at least two years owing to the complexity of the issues and the range of issues to be accommodated. The GovernmentaEUR(TM)s view (in the lead up to the BREXIT referendum) was that the negotiations could take up to 10 years whereas the successful aEUR~LeaveaEUR~ campaign has indicated its desire that negotiations are concluded before the next UK general election in May 2020, just under four years from now. In any event, once negotiations are concluded the withdrawal agreement will need to be ratified by the UK and the EU and, in the latter case, this means ratification by all 27 remaining member states which is unlikely to happen quickly. Alternatives to EU membership The nature of the UKaEUR(TM)s ongoing relationship with the EU will directly affect the way in which the UKaEUR(TM)s legal framework will change when the UK does eventually exit the EU. There are several alternative models the UK could choose according to how close (or not) the UK wishes to remain to the EU. The greater the UK seeks to distance itself from the EU the greater the likelihood of change to the UKaEUR(TM)s existing legal framework. The alternative models include the following:

• The European Economic Area (EEA) - Iceland, Lichtenstein and Norway have a relationship with the EU through membership of the EEA, which enables those countries to participate fully in the aEUR~Single MarketaEUR(TM). The Single Market ensures free movement of goods, capital services and persons. It also covers related areas such as consumer protection, company law, environment and social policy, and EEA members are bound by decisions of the European Free Trade Association Court. As a result, if the UK chose to join the EEA after leaving the EU, the UK would remain subject to the vast majority of current and future EU laws.
• The European Free Trade Association (EFTA) - A step further from the current position would be for the UK to elect to become a member of the EFTA. The EFTA is a regional free trade association based on numerous free trade agreements with other (EFTA and non-EFTA) countries. Iceland, Lichtenstein and Norway are all EFTA members as is Switzerland, but Switzerland rejected membership of the EEA. Switzerland has over 100 bilateral agreements which give it access to the Single Market in specific sectors. The Swiss arrangements provide for the free movement of goods (but not services) and Swiss goods are required to comply with EU laws in certain areas. Even in areas where compliance is not required (such as consumer protection, employment law and intellectual property), Swiss domestic law is consistent with EU law. Accordingly, even if the UK was to opt for this approach, it would not result in huge change in many areas of UK law despite having to negotiate many separate bilateral agreements.
• Customs Union - Turkey has entered into a customs union with the EU that allows Turkey access to the Single Market for goods without the need to pay tariffs, but it is required to levy tariffs on imports of goods from countries outside the customs union. However, a customs union would not apply to services that would make it unattractive to the UK given the importance of the EU to the UKaEUR(TM)s services sector.
• Free Trade Agreements - Like Canada, it would be open to the UK to negotiate a free trade agreement with the EU to facilitate tariff-free trade on specific goods and services. However, while these agreements address various issues such as tariff barriers they are unlikely to extend mutual recognition and the single passporting system for financial institutions, a critically important sector for the UK.
• The WTO Model - This is the default or base line position where there are no special agreements or relationships, and the UK simply relies on trade governed by the World Trade OrganisationaEUR(TM)s rules. Under this model the UK and the EU are each in the same position as any other country with which they have no specific agreement. This model would represent the most radical move away from the EU and result in the greatest changes from a legal perspective.

None of the above alternatives to EU membership offers a clear or obvious precedent for the extent, terms or structure of the new relationship between the UK and the EU. Successful conclusion of the negotiation process for a new UK/EU arrangement is likely to be time consuming and difficult given the background to the negotiations and the fact that a number of EU governments and institutions effectively hold a right of veto at some stage in the process.