The UK’s highest judicial body dismissed the government’s argument that May could simply use executive powers known as “royal prerogative” to invoke Article 50 of the EU’s Lisbon Treaty and begin two years of divorce talks.
The court ruled against the government by an 8-3 vote, Judge David Neuberger said Tuesday. The judges ruled unanimously, however, that legislatures in Scotland and Northern Ireland don’t get to vote on the Article 50 process.
They need now win the approval of lawmakers threatens her March 31 deadline for starting the divorce talks, although most colleagues say they won’t try to stop the breakup given 52 percent of voters backed it in last June’s referendum.
Of course the government is disappointed with the outcome,” Attorney General Jeremy Wright said outside the Supreme Court. “The government will comply with the judgment of the court and do all that is necessary to implement it,” he added.
It was widely expected that the Supreme Court will confirm the High Court ruling and hence force May to pass a bill through parliament. However, considering the Conservative majority in parliament, David A. Meier, Economist at Julius Baer believes “that passing a bill should be a formality and not force PM May to reconsider her “hard Brexit” plans”.
Knowing that this would be most likely necessary, May would hardly have presented “hard Brexit” plans if she had had doubts about her party’s support. We therefore do not expect a strong GBP reaction to this decision and stick to our neutral 3-month outlook. In the surprising case of a rejection, some pound weakening is obviously possible.
BoAML’ experts continue to expect the Government to be able to successfully trigger Article 50 by the end March. There is likely enough time and well within Parliament for the triggering Bill to be presented, debated and approved by both Houses over the next two months. Indeed, David Davis confirmed as much in his response to the court ruling. Statements by the Government and Opposition also consistently emphasise their wish to respect the result of the referendum. The profit warning from BT today may also prove a cautionary tale of how Brexit uncertainty is likely already weighing on business investment decisions and consumer confidence.
The key issue for investors will be whether dissenting MPs can successfully amend the Bill to increase scrutiny or parliamentary involvement in the negotiations. Suggested amendments include transparency on the negotiating strategy (via a white paper), progress reports in parliament and forcing ministers to renegotiate with Brussels if MPs vote down a final deal.
This latter amendment, being pushed by Jeremy Corbyn, warrants attention. The worry from many MPs is that they will be given a ‘take it or leave it’ style ultimatum at the end of the negotiating period. The possible wording would require MPs to vote on the Government’s proposed deal before the deadline with enough time to go back to negotiations with Brussels if rejected.
Whether the UK and all 28 EU governments could agree on two deals within two years might prove wishful thinking though. Further, it is unclear what the recourse would be if the Government were unable to negotiate a better deal second time round or rejected the next deal. Article 50 suggests the UK would exit the EU without a deal unless it was revoked and the UK decided to stay in the EU. So it is unclear how this amendment would actually empower parliament.
For David Page, strategist at AXA IM “procedural difficulties may remain.
The Supreme Court ruled that an Act of Parliament will be required to trigger Article 50. There is a risk that procedural challenges and proposed amendments may make the end-March timetable challenging. The Scottish National Party has already suggested an intention to amend the Act. However, the Court did rule that the government does not need to consult regional assemblies. This removes one of the larger remaining potential hurdles for PM May’s ambitious timetable. As such, there is a good chance that PM May manages to trigger Article 50 according to her timetable of end March, with only some risk of a small procedural delay to this.
