Introduction

Only three weeks after the referendum which has set in train the most profound social and political changes in decades, it is too early to say with any certainty exactly how UK charities and social enterprises will be affected. Much will depend on the details of the new UK-EU relationship post-Brexit. That charities and social enterprises will, as ever, have an important role in the changing social landscape is one of the few certainties. 

On Wednesday morning at our breakfast Brexit seminar, we began to work with our clients to chart a path through that landscape and plan for Brexit's impact on the sector. Along with a panel of BWB lawyers, we were fortunate to be joined by Karl Wilding, Director of Public Policy and Volunteering at NCVO, and Helen Mountfield QC of Matrix Chambers. 

We are encouraging clients to engage with us and NCVO on issues which you want to raise with the government as it enters the forthcoming negotiations with the EU.

This briefing summarises some of the headline points that were discussed. If you were unable to attend on Wednesday and would like to share with us your thoughts on how Brexit will impact on your organisation or the wider sector, we would welcome your comments. 

Political landscape (Karl Wilding, NCVO)

Following the referendum, the UK has faced a distinct lack of political leadership across all political parties. It is now incumbent on those working in the voluntary sector to show leadership not only within their own organisations but across the communities in which they operate. This must include engaging with those who voted on both sides of the EU referendum. Charities need to ensure more than ever that they are seen to be part of the communities which they are established to serve. 

Theresa May has talked about a major programme of social reform during her premiership and has been involved throughout her time in Parliament with a number of social causes including closing the gender pay gap and a campaign to end violence against women and girls.

She is expected to come under pressure from those who voted for Brexit to expedite the triggering of Article 50. She may be called on to hold a general election to obtain a democratic mandate for her premiership, although she has stated she will not do this. 

The government has established a new Brexit Unit. There is an immediate need for the voluntary sector to engage with government to highlight those issues which it wants to be taken into account at the negotiations with the EU. However, voluntary organisations should be prepared for their access to government more generally to be significantly reduced following the referendum owing to the time that government departments will now need to devote to the mechanics of Brexit.

The voluntary sector needs to take steps to address the fractions that are now facing UK society following the referendum. The Lord Ashcroft polls sampling the views of Leave and Remain voters on a variety of subjects from capitalism to feminism demonstrate a real divergence of views between these sections of society.

To read NCVO’s briefing on the implications of Brexit for the voluntary sector, please see here.

If there are issues that you would like NCVO to raise with government on behalf of the voluntary sector following Brexit, please send your comments to tell@ncvo.org.uk.

The law relating to Brexit (Helen Mountfield QC)

Challenges to referendum result

It has been suggested that the legality of the referendum results may be open to challenge on a number of legal grounds. In particular, many have queried whether the result is invalidated by virtue of the misleading and inaccurate claims made by Leave campaigners that £350 million per week would be spent on the NHS using savings from contributions to the EU. However, unlike an election, there is no legal mechanism like an election petition to set aside the result of a referendum in circumstances like this. In any case, the result of the referendum was advisory only and did not have binding legal effect.

However, there is a clear argument that since Parliament passed the European Union Referendum Act, which provided for the referendum to take place, there is a political imperative on Parliament to listen to the outcome of that referendum. 

Article 50

Article 50 of the Treaty on the European Union sets out the process for a member state formally to give notice of its intention to leave the EU. Once Article 50 notice is given, a two year time limit starts to run and:

  • The UK can negotiate an exit agreement with the EU.  The agreement must be approved by a simple majority of those voting in the European Parliament and by a “qualified majority” of the Council of the EU; or
  • An extension to the two year time limit may be agreed unanimously by the Council; or
  • If no exit agreement or extension are agreed within the two year time limit, then the UK’s membership of the EU will automatically end.

Questions have been raised about who in the UK, “in accordance with its own constitutional requirements”, may trigger Article 50 and whether once notice has been given under Article 50, that notice can be withdrawn and the process reversed.

Some argue that the Prime Minister cannot trigger Article 50 without the approval of Parliament because an Act of Parliament brought the UK into the EU and so Parliament also needs to approve our exit, overriding the Royal Prerogative. Another argument is that there are fundamental individual rights (of free movement and citizenship) that are conferred upon UK citizens by the EC Act and that the executive may not remove those rights without Parliamentary approval. The government has received legal advice to the effect that the Prime Minister alone may trigger Article 50 without Parliament (using the prerogative) but has said that MPs will have a role in the process of Brexit.

Immigration law and Brexit (Philip Trott, BWB)

Over 50% of attendees at the session employed EU nationals and many of those were employed at management level. It is not yet known what the status of these individuals will be – all depends on the nature of any new relationship that is negotiated with the EU. There is a risk that EU nationals will be more cautious about commencing work in the UK because of uncertainty around their future status. However, the position of EU citizens in the UK currently and probably for at least two years remains as it was before 23 June, i.e. they are entitled to be employed, self-employed or be economically inactive in the UK and will continue to enjoy full free movement rights.

As a general rule, EU nationals who have lived continuously and lawfully in the UK for at least 5 years automatically have a permanent right to reside but this will require them to provide adequate documentary evidence in order to attain permanent residence, which is a prerequisite to making an application to naturalise as a British citizen.

For organisations which want to remove the uncertainty now surrounding the future rights of their EU employees, they can apply for a sponsor licence, so that as and when EU migrants become subject to immigration control, they can be sponsored. To do so, organisations should ensure that their administrative arrangements in relation to these employees are in order so that it is easy for them to make an application. Alternatively, for those who do not wish to apply for a sponsor licence it may be worth investigating whether affected employees have acquired rights to remain in the UK through other indirect means, for instance though their spouse or co-habitee. 

For more information on the immigration law implications of Brexit, please contact p.trott@bwbllp.com.

Employment law and Brexit (Paul Jennings, BWB)

The key sources of UK employment law are the contents of the employment contract with an employee, statutory law, common law (i.e. judge made law) and EU law. European employment laws cover areas such as discrimination law, TUPE, family friendly laws, the Working Time Regulations and the Agency Regulations. 

Paul Jennings expressed the view that UK employment law will not alter materially as a result of Brexit. Many of the employment laws emanating from Europe were already reflected in UK law and reflect standards already imposed in the UK employment context. Also, it is likely that a significant departure from EU employment standards would result in a barrier to the UK’s access to the single market. 

Brexit may however present opportunities for subtle changes to existing employment laws that derive from the European Union, including amending discrimination laws to allow for positive discrimination and a relaxation of TUPE Regulations and a simplification and rationalisation of the Working Time Regulations and Agency Regulations.

For more information on the employment law implications of Brexit, please contact p.jennings@bwbllp.com.

Key issues raised by participants

Funding cuts

What appeared to be the biggest concern among attendees was the threat to existing and future funding commitments from EU sources. Britain Stronger in Europe estimated that 249 UK charities and other public benefit organisations received over £200 million in EU funding in 2014. There is uncertainty around what will happen to European Structural Funds. It is not anticipated that rules on public procurement, for example, will change significantly as a result of Brexit.

Universities

There is increasing evidence of UK universities being asked to withdraw from EU grant applications or not being invited to submit bids because the uncertainty around EU funding of UK organisations is considered a financial liability. Similarly, there are concerns about the impact that Brexit will have on the number of EU students who choose to study at UK universities. If EU citizens no longer have the right to work and live in the UK, race discrimination laws would prevent UK universities from continuing to offer them places at the same rates as domestic students. They would therefore need to be charged the higher rates charged to non-European students, which could result in a significant drop in the number of EU students attending UK universities.

Accessing EU funds 

Overseas aid agencies and other international organisations which want to access EU funding for their project work are advised to establish an entity in a member state other than the UK to avoid the uncertainty around the eligibility of UK entities to receive EU funding.

Organisations will probably need to have been established in an EU member state for a minimum period of, for example, two years before they can access EU funding. Therefore, organisations which have identified a need to establish an entity in another EU member state should not delay in doing so.

NCVO will try to draw together the experiences of NGOs which have established a presence in other EU member states so that this experience can be shared within the sector. 

‚ÄčCampaigning

Charities wishing to engage in political campaigning in the context of a possible forthcoming general election or otherwise should continue to seek legal advice. Political campaigning by charities has moved up the Charity Commission’s agenda and it was noted that before the referendum the Commission had published controversial guidance on this. 

EU Trademarks

For organisations with EU trade marks, nothing is going to change in the short term.   EU trade marks will continue to be effective and cover the UK during the course of the Brexit negotiations process.  Once the Brexit process has been completed however, EU trade mark registrations will no longer protect a brand in the UK. They will remain effective throughout the EU (subject to the mark being used in that territory). However, provision will almost certainly be made for the holders of EU trade mark registrations to retain their existing rights in the UK under those registrations.  One possibility is that trade mark holders will be able to split existing EU registrations into two separate registrations, one covering the UK and one covering the rest of the countries of the EU.  

Engaging with core values of the sector

At a time of increased racial tensions and displays of xenophobia and evident splits in society, it is more important than ever that the voluntary sector communicates and promotes its core values of inclusiveness and respect for all.

This is an ongoing discussion. BWB will continue to produce briefings and engage with the charity and social enterprise sector to update you on Brexit developments. If you have any thoughts that you would like to share with us on Brexit please email us at Brexit@bwbllp.com.

 


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Philip Kirkpatrick

Deputy Managing Partner and Joint Head of Charity

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Mairead O'Reilly

Consultant

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m.oreilly@bwbllp.com
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Posted on 15/07/2016 in Brexit Briefcase

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