In a blow to Theresa May's ambitions to implement a "clean Brexit", on Tuesday morning UK’s Supreme Court ruled the UK Prime Minister can’t start the Brexit process without approval from Parliament, a decision that could potentially complicate her path toward a clear break from the European Union. Eight justices voted against the government and three voted in favor of it, in a decision that was widely expected.
The case had been brought by a group of British citizens opposed to Brexit with the help of some of the U.K.’s top constitutional lawyers. Spearheading the legal challenge were British businesswoman Gina Miller and hairdresser Deir Dos Santos. Grahame Pigney, a France-based expatriate who used crowdfunding from more than 4,000 people to pay for lawyers, joined the suit as a co-party
The government responded that the ruling wouldn’t affect May’s plans to trigger talks to leave the EU by the end of March and the opposition Labour Party said after the judgment it wouldn’t seek to stop Brexit from happening. But Labour said it would try to amend any bill introduced by Mrs. May to kick off the Brexit process, possibly influencing how the U.K.’s new relationship with the EU will look.
According to the WSJ, while a majority of lawmakers voted to stay in the EU, many have said they won’t seek to block Article 50, which formally starts Britain’s exit from the EU, given the popular vote, in which 52% voted to leave. “The British people voted to leave the EU, and the government will deliver on their verdict—triggering Article 50, as planned, by the end of March,” a U.K. government spokesman said. “Today’s ruling does nothing to change that.”
Lord David Neuberger said any change in the law to put Brexit into effect must be made by an act of Parliament. “To proceed otherwise would be a breach of settled constitutional principles stretching back many centuries,” he said. He said the Supreme Court justices were ruling on the process of legally bringing the result into effect, and that the ruling had nothing to do with whether the U.K. should exit from the EU or the timetable.
While the outcome was not surprising, the case has been one of the most politically charged in decades. After the High Court ruled against the government in November, pro-Brexit activists called the decision an attempt to overturn the will of Britons who chose to break away from the bloc in a June referendum. The Daily Mail newspaper said the three High Court judges who ruled on the case were “enemies of the people.” But the landscape has shifted since then.
As previously reported, in December, Mrs. May won lawmakers’ backing to trigger the start of Brexit by the end of March after promising to give Parliament, the majority of whom backed staying in the EU, an opportunity to scrutinize her plan first.
Mrs. May has outlined a plan for a definitive break from the EU, saying she intends to take the country out of the EU’s single market for goods and services. Leaving the single market will create uncertainties for U.K. businesses that rely on trade with Europe, particularly financial markets, auto makers and aerospace.
Asked in an interview with a German newspaper this month whether the U.K. was seeking to become a tax haven with low levels of corporate tax, U.K. Treasury Chief Philip Hammond said the U.K. could change its economic model if it isn’t granted access to trade in the EU after it leaves the bloc.
Jeremy Corbyn, Labour leader, said in a statement after the ruling that Labour “will not frustrate” the process for trigger the U.K.’s exit.
“However, Labour will seek to amend the Article 50 bill to prevent the Conservatives using Brexit to turn Britain into a bargain basement tax haven off the coast of Europe,” Mr. Corbyn said. “Labour will seek to build in the principles of full, tariff-free access to the single market and maintenance of workers’ rights and social and environmental protections.” He added that the party would demand that the U.K. government lays out a plan for negotiations so parliamentarians could hold it to account.
Kelvin Hopkins, a Labour member of Parliament, urged his party not to seek to complicate the process of leaving.
“My colleagues in the House of Commons need to realize that if we are seen to frustrate the will of the British people, by opposing or delaying Brexit we could find ourselves in a position where we will never see a Labour government again,” Mr. Hopkins said in a statement.
Over four days of hearings before the Supreme Court last month, the government said it had the right to trigger Brexit because of the so-called royal prerogative, in which executive authority is given to ministers so they can govern on the monarch’s behalf.
The market's reaction has been subdued, with the resulting modest decline in sterling - the opposite of what would be expected from the adverse ruling - suggesting that the court's decision had been fully priced in by the market. In fact, as HSBC predicted ahead of the decision, "if ruling states that Parliamentary approval will be needed to start the Brexit process it will be “mildly negative” for the pound." as the government is prepared for this and “should be able to table a short and simple Parliamentary Bill in the coming days” meaning Article 50 could still be triggered before the end of March.
Sure enough, GBPUSD is now modestly lower following the announcement.
And indeed, as Reuters writes, Theresa May's plans to start the process of Britain leaving the European Union by the end of March are unlikely to be hindered or slowed by Tuesday's Supreme Court ruling the government must seek parliamentary approval. In the ruling, judges on Britain's top judicial body upheld an earlier High Court decision that lawmakers had to give their assent before May can invoke Article 50 of the Lisbon Treaty which formally starts two-years of divorce talks.
However, the legal defeat, while an inconvenience and embarrassment for the government, is not expected to delay its Brexit timetable or, as some investors and pro-EU supporters hope, make it possible to stop Britain leaving the bloc. Part of this is because the opposition is divided.
"We will not block Article 50," Jeremy Corbyn, leader of the main opposition Labour Party which campaigned against Brexit, said last week. "All Labour MPs (members of parliament) will be asked to vote in that direction next week, or whenever the vote comes up." Not all Corbyn's colleagues may go along, but May can get the votes she needs for overall passage.
However, what the decision could do is give an opportunity for Labour and other lawmakers who oppose a "hard Brexit" - an agreement with the EU that puts immigration curbs above access to the single market - to have a greater influence on what the final deal should look like.
The greatest potential threat to May comes from parliament's unelected upper chamber, the House of Lords, where many peers remained strongly opposed to Brexit and do not have voters to worry about. If the Lords were to vote against approving the triggering of Article 50, the Brexit timetable could be severely delayed.
However, the government is confident the bill will pass through the Lords because there would be a constitutional crisis if unelected peers were to thwart the will of the people expressed both through the referendum and from their representatives in the Commons.