30th January, 2017
The Treaty of Lisbon, which came into effect in 2009, brings together two previous treaties to form the constitution of the European Union. Within the Treaty of Lisbon, Article 50 outlines the conditions under which a member country can leave the E.U. Once invoked, Article 50 places a two year deadline on the withdrawal negotiations.
On June 23, 2016, the citizens of the United Kingdom voted to leave the European Union. More than 30 million people voted, and 52% voted to leave the E.U., making Brexit official. But before the U.K. can officially leave the E.U., Article 50 of the Lisbon Treaty needs to be invoked.
The majority of the people throughout the U.K. are waiting to leave the E.U. 53% of people in England were for Brexit, and 52.5% of people in Wales agreed. Those who did not wish to leave the E.U. were mostly found in Scotland, where 62% of voters said that they would rather remain. Also, 55.8% of people in Northern Ireland wanted to remain in the Union, but their votes weren’t enough to keep Brexit from happening. 1
Now it is a matter of waiting for the full withdrawal of the U.K. from the E.U., and that requires the implementation of Article 50.
What Is Article 50 and the Lisbon Treaty?
The Treaty of Lisbon, also referred to as the Lisbon Treaty, was signed in December 2007, but it was not until 2009 that the treaty actually took effect. Put simply, it is the E.U.’s constitution, and it is actually one of a pair of treaties that set the constitutional foundations of the E.U. Within it, Article 50 provides the terms related to a country choosing to leave the Union.
The Lisbon Treaty contains a five-point, 250-word framework that basically outlines the voluntary departure from the E.U. It states that any Member State within the European Union can make the decision to withdraw itself “in accordance with its own constitutional requirements.”
Article 50 also stipulates that the exiting Member State has to notify the European Council and let them know about any intentions to leave the E.U. In this way, formal negotiations can take place and a withdrawal agreement can eventually be reached. As soon as the negotiations begin, the nations involved have a two-year deadline to strike a deal. If that time passes and a deal is not made, all of the E.U. treaties and laws will be terminated.
Promises vs. Reality Regarding Withdrawal
Theresa May, who is Britain’s Prime Minister, made public statements in October 2016 regarding when she would hope to trigger Article 50. Even though her aim was to get everything rolling by the end of March 2017, the United Kingdom’s Supreme Court ruled that she has to hold a vote within Parliament before she can do anything else, and before they could actually start the process of exiting the E.U.
So even though Theresa May was hoping that Britain would be able to depart the E.U. by 2019, and that she would be able to start the process without getting a decision within Parliament first, this likely will not be the case after all.
There are lawmakers who are in opposition to May, and that will surely complicate the situation for her as well. Those lawmakers could delay the entire process by adding amendments to the bill, even though people aren’t expecting them to block the government’s bill completely.
What to Expect When Article 50 Is Triggered
As soon as Article 50 is actually triggered, formal talks will start amongst negotiators for the 27 member states that remain, as well as the U.K. They will work on what is necessary to allow the U.K. to leave the Union, and they will also be working out future relationships between the nations involved.
This entire process is not a simple one. In fact, it is complicated, and there are a lot of topics to tackle, including freedom of movement, open borders, and trade, as a few examples.
After negotiations are complete, the final deal has to be passed by the European Parliament and Council of Ministers. At that point, the deal can be signed off, and the U.K. Parliament will have the chance to review and sign off on the new agreement prior to it becoming law.
Many people around the world are wondering if Brexit can ever be reversed. The truth is that, even after Article 50 is invoked, the U.K. could very well decide to hold another referendum that would be focused upon the terms of their deal and/or whether they should actually stay within the E.U. after all. This would all have to happen prior to the exit deal being finalised, though.
There is the possibility, though it is unlikely, that Northern Ireland and Scotland could also end up delaying the deal. Elections throughout Europe in the coming year could slow down the negotiation process as well.
On top of that, the U.K. Parliament could even end up voting down the exit agreement if they do not entirely agree with it once it is presented to them in 2019. However, Britain would still be out of the E.U., even if there is no agreement set in place.
Once the U.K. has left the E.U. officially, they could potentially make their way back into it by asking the rejoin via Article 49 of the Treaty of Lisbon.
What Happens to People Transferring Money Internationally?
Since the Brexit vote, the value of the British pound has been volatile. So if you are transferring money internationally, you should be prepared for even more unpredictable movements in currency pairs.
Using a money transfer service like OFX can help ease your fears and manage your risks, especially if you take advantage of our Forward Exchange Contract that protects you against exchange rate movements by locking in a rate for up to a year. Another option is OFX’s Limit Orders tool, which allows you to set a target exchange rate and then wait for it to take effect before your transfer is actually made. These two options are particularly helpful to those who make recurring international payments, such as those who invest in foreign real estate. Plus, using a service like OFX to make your transfers will also help you save money on transfer fees, regardless of whether the pound’s value increases or decreases.
Only Time Will Tell What Happens After Article 50
Even though there are plans in place to make negotiations go as smoothly as possible for both the E.U. and the U.K., no country has ever left the European Union before, so it is difficult to predict exactly what will ultimately happen.
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