UK PM Theresa May triggers Article 50

Hard Brexit- soft landing in Malta.

Dr. Maria Chetcuti Cauchi | 29 Mar 2017

Brexit

A 44-year era is officially coming to an end as UK Prime Minister Theresa May has formally signed a letter that will trigger article 50 and officially start the process that will see the UK’s days as an EU member state coming to an end. Brexit is really and truly becoming a reality.

The wording is clear: EU law shall seize to apply to the UK from the date of entry into force of the withdrawal agreement or, failing that, two years after notification. Thus, unless both the EU and the UK agree to extend the deadline for talks, the UK will leave on 29 March 2019.

Although the Brexit process has been formally triggered today, negotiations with the European Commission are set to begin in mid-May or June 2017.

'Hard Brexit' – What will this mean for British businesses?

In past months, we have seen several references to a hard Brexit, the prospect of which has prompted several UK domiciled businesses to look at other jurisdictions.

A hard Brexit would see the UK regaining its sovereignty in every aspect, including relinquishing full access to the UK single market and the customs union in favour of new trade deals. The UK would also be wholly responsible for creating and applying laws within its own territory.

Economists have predicted that if this route is taken, there is a chance that the UK will initially revert to the rules set by the WTO for trade with the EU member states.

However, full sovereignty would come at a cost. Businesses would be the ones paying the price for Britain’s splendid isolation as British goods and services shall be subject to tariffs. Moreover, sectors such as agriculture could lose protections against cheap imports from abroad. Leaving the customs union would also mean a significant increase in bureaucratic checks on goods passing through ports and airports.

Malta – an ideal jurisdiction for company relocation

Markets hate uncertainty – the situation created by Brexit is proof enough of this. Discussing whether the EU and the UK will come to a mutually beneficial agreement in terms of separation and trade, or whether we will be faced with the consequences of a hard Brexit is a largely speculative exercise which only serves to highlight the uncertainty felt by UK businesses. Businesses will certainly not wait in the dark for two years to lapse or for the British markets to stabilise. They want to operate in a stable environment that will allow them to grow without unnecessary hindrance.

Moreover, successful British businesses are increasingly realising that they cannot afford to make do without a presence in an EU domicile and thus they are eying jurisdictions like Malta as ideal domiciles to do business in the EU.

In the light of Malta’s excellent relations with the UK and full EU-citizenship, a number of UK domiciled companies have chosen to relocate to Malta and benefit from its business-friendly culture. Malta has already amassed success in various industries, including financial services, funds and fund managers, iGaming, Pharma and more, and continues to invest in its various industries.

Malta offers a highly skilled, English-speaking workforce, a favourable tax regime, and several businesses incentives. The Maltese economy shared the limelight with the German economy and registered growth even during the 2008 financial crisis, proving that the Maltese economy stands stable, buoyant, and ripe with opportunities for investors and businesses.

Key Issues for Brexit Negotiations

Michel Barnier, the EU’s Chief Brexit negotiator hopes for an orderly withdrawal and an ambitious free trade agreement for the UK post-Brexit, however, it is still highly uncertain how the plans for separation and trade deals will pan out. Certainly, a no-plan exist would spell out severe consequences, both for the UK as well as the EU.

Unravelling 44 years of complex legislation which has embedded itself deeply into UK domestic law shall be no easy feat, particularly because there are a whole plethora of sensitive issues  which would need to be resolved, including:

  • Brexit ‘divorce’ bill – The UK has a number of obligations which it needs to honour as it leaves. Various sources have claimed that these could run into £50bn.
  • Trade –  As the UK seeks to withdraw from the single market, May has announced that the UK shall seek a new customs arrangement and a free trade agreement with the EU and thus secure EU freedom of movement for its citizens. Whether the EU is willing to negotiate such an agreement is yet to be seen.
  • Expats – The rights and duties of UK citizens living in the Member states and EU nationals living in the UK shall be a top priority for both parties.
  • Jurisdiction – once the UK leaves the EU, it will no longer fall under the jurisdiction of the European Court of Justice and will need to create an alternative resolution mechanism for disputes at a European-scale, particularly trade-related cases.
  • Security: the UK government seeks to continue cooperating on security and intelligence sharing. Discussions may also explore cross-border security arrangements and the European Arrest Warrant.
  • Transitional deal – prior to the conclusion of the final deal, an interim agreement may be resorted to. 


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Dr Jean-Philippe Chetcuti

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