Scotland post Brexit – July 2016 update

Overview

Although the EU Referendum was a UK-wide referendum, there were very significant variations in voting patterns across the country, with all the Regions of England (other than London) as well as Wales voting for Leave but with Gibraltar, Northern Ireland and Scotland all voting to varying degrees for Remain.

In Scotland the vote was approximately 62/38 in favour of Remain with Edinburgh being 74% Remain. This gives rise to a much talked about scenario in Scotland where “Scotland is forced out of the EU against its will”.  The governing Scottish National Party (SNP) election manifesto provided that this scenario was an example of a material change in circumstances which could justify seeking authority to hold a second Scottish Independence Referendum.

Since the outcome of the EU referendum Nicola Sturgeon as the First Minister of Scotland has made a series of statements indicating that it is her wish, and the wish of the Scottish Government, to seek ways in which to preserve continuity of membership of the EU notwithstanding the outcome of the EU Referendum and impending Brexit. The post-Brexit vote debate at the Scottish Parliament on 28 June gave overwhelming support to the Scottish Government taking steps to secure ongoing membership of the EU. At that stage Nicola Sturgeon made it clear that she was not looking for explicit parliamentary authority to pursue a Second Scottish Independence Referendum. However, she also made it clear that this was very much one of the options “on the table”.

The Scottish Government has established an expert committee of 17 members, including politicians, economists and constitutional experts. The committee is chaired by Professor Anton Muscatelli, principal and vice chancellor of the University of Glasgow and also includes Vasco Cal, a former economic adviser at the European Commission and Sir David Edward, a former European Court Judge and David Frost, a former diplomat. The purpose of this committee is to consider the impact of proposed changes to the UK's relationship with the EU on Scottish interests and to provide ongoing advice to Scottish ministers throughout negotiations with the UK and the EU on the best way to secure Scottish interests and objectives.

Nicola Sturgeon and others from the Scottish Government have subsequently held a number of meetings with EU politicians and officials seeking to explore how continuity of EU membership could be achieved. While there has been a willingness by some to engage in such discussions these have not been in the nature of detailed negotiations and there may be reluctance at this stage to allow these to take on a more formal nature given that the EU does not normally engage at a sub-national basis. Certain EU members, including Spain, have, given their domestic considerations, also expressed some reservations about any engagement with Scotland.

In order to secure ongoing membership of the EU a number of possibilities have been mentioned with each seeking to achieve this continuity in a different way.

A Scottish Veto?

One suggestion was that the Scottish Parliament could exercise a “veto” over the UK leaving the EU although the Scottish Parliament does not have a formal veto. The crux of the matter is a clause in the Scotland Act of 1998 under which the Scottish Parliament was established, and which provides that the Scottish Parliament cannot contravene EU law.

In order for the UK to leave the EU “cleanly”, it will be necessary for legislation to be passed in Westminster removing that provision of the Scotland Act. Under the “Sewell Convention” any amendment to the powers of the Scottish Parliament requires the consent of the Scottish Parliament. There is therefore scope for such consent to be withheld by the Scottish Parliament and Nicola Sturgeon has made it clear that such consent is unlikely.

This does not; however, amount to a right of veto as the UK Government could proceed without amending the provision of the Scotland Act, at least in the short term. Secondly and more importantly the power is no more than a convention that the UK Government will not “normally “act without the devolved institutions’ consent.  As a convention the UK Government can override the need for consent without any breach of constitutional law. Nevertheless, there may be some political considerations that may come into play should such an override be used.

The “Greenland Option”

Under this scenario the bulk of the UK would be outside the EU with Scotland (and potentially other parts such as Northern Ireland and Gibraltar) within the EU. The rest of the UK could become "externally associated" with the EU.

A number of UK dependencies, including Jersey, Guernsey and the Isle of Man are currently not part of the EU. So it is already the case that some countries, including the UK, have parts of their territories within the EU, and parts of them outside (although in the case of the UK, those territories do not form part of the UK).  The Treaty of Rome also envisioned associate status.

The precedent that is normally cited is that of Greenland which remains part of Denmark but is not part of the EU. In 1985 Greenland seceded from the European Economic Community (EEC) (as the forerunner of the EU), while Denmark remained within the EEC. The situation of Scotland (even if combined with Gibraltar and/or Northern Ireland) would be quite different, however, given the relative scale of the parts of the UK that would be outside the EU when compared to Greenland, which is geographically separate and has a small population.

While a possible precedent, it is unclear how exactly this approach could be structured in practice and it would inevitably require a great degree of co-operation both within the UK and with the EU. This solution would almost inevitably also  require considerable constitutional change within the UK and further devolution of powers from Westminster.

Scottish Independence within the EU

The EU is essentially a number of nation states who have agreed to pool some levels of sovereignty within the context of the EU. Therefore achieving continuity of EU membership for Scotland, or more correctly Scottish citizens, could involve Scotland seeking membership of the EU as an independent state.

There are conceptually a number of ways this might be achieved. The two more likely alternatives would be either for Scotland to apply as a new applicant or for Scotland (potentially with other parts of the current UK) continuing as member of the EU (ie where effectively for EU purposes England & Wales etc have withdrawn from the UK). Both of these options have some challenges.

In either event the constitutional precedent in Scotland would be that independence would require an affirmative vote in a referendum in Scotland along the lines held in September 2014 (at which time the vote was 55/45 against independence). In order to get to this point not only would the Scottish Parliament require to approve legislation, there would almost certainly also need to be a delegation of powers by the UK Government given that the constitution is  matter reserved to Westminster. This is what happened in relation to the 2014 Scottish Independence Referendum. There is, however, a view in some quarters that the approval of the UK Government is not necessarily required and this point has not been tested.

It will take some time to put the necessary legislation in place and for discussion between the Scottish and UK Governments to take place. In anticipation of this, Nicola Sturgeon has already indicated in her speech on 24 June 2016 that preparatory work on the requisite legislation was to commence.The timing of any referendum would depend on a number of factors but the stated aim of the Scottish Government has been that if there is a referendum this is held within the 2 year period between the triggering of Article 50 by the UK and the UK formally leaving the EU.  Politically it would also be preferable that at the time any referendum is held that there is a level of clarity on the terms of the UK’s departure and the basis of any continued EU membership for Scotland. This would suggest that any referendum is likely to be held in latter half of 2018 at the earliest.

If Scotland were to apply as a new independent country this process could not in theory begin until it was independent and at that point any application might logically be at the “back of the queue”.  In reality there are likely to be discussions at a number of levels between representatives of the Scottish Government and the EU on the terms and timelines of such an application.

If Scotland (together with potentially Gibraltar and Northern Ireland) was to seek to assume the UK’s current membership of the EU then that would involve a bespoke set of negotiations with the UK Government and with the EU leading to the secession of England and Wales from the EU. This really would look like uncharted territory and there would likely need to be a detailed consideration of international as well as EU law.

Maintenance of Borders

In any solution which involves the ongoing membership of the EU by Scotland when England has left the EU there is the question of what the appropriate border arrangements would be. In part these will depend on what has been agreed on free movement of people. There is the prospect of a hard border with customs posts etc which would present some additional issues. However, similar issues would arise in the island of Ireland if Northern Ireland leaves the EU as part of a UK exit.

One option may be to have all of Ireland, Scotland, England and Wales as one internal passport free-zone. In this event neither Scotland nor the Republic of Ireland could not join the Schengen agreement because that would mean that England and Wales would lose the control over immigration which was emphasized by the Leave campaign as one of the main benefits of leaving the EU.

Currency

The question of what currency an independent Scotland would use was hotly debated in the context of the 2014 Scottish Independence Referendum.  Similar issues would require to be resolved for any ongoing membership of the EU by Scotland whether it continues within the UK under the external association structure or is independent.  This would clearly have a major impact on businesses in Scotland including banks. In this context the options available would appear to be continued use of the Pound Sterling, adoption of the Euro and establishment of a new currency (which may or may not shadow either the Pound or the Euro).  The eventual approach on currency will depend on a number of factors including the positions taken in negotiations and the likely attitude of the electorate to those alternatives in the context of any referendum.

Scotland within the UK and out of the EU

It is possible that the outcome of negotiations involving Scotland, the UK and the EU could be Scotland remaining part of the UK and outside the EU. This could happen because it is viewed that there is insufficient support in Scotland for a new independence referendum or the second referendum rejects independence. There is no visibility on what the ongoing constitutional relationship between the UK and Scotland will be but there is likely to pressure on the UK from the Scottish Government and others for greater autonomy for Scotland, for instance in relation to migration where it has been mooted that Scotland could, within parameters set by the UK, set its own migration policy.

It was also stated by the Leave campaigners that in the event the UK left the EU then the powers exercised in areas such as agriculture and fishing by the EU would pass to the Scottish Government. It remains to be seen if this would indeed be the case and to what extent these would be held at Westminster.

Conclusion

We are at the beginning of a process which is likely to be lengthy and the outcome of which is both constitutionally and politically uncertain. It is not yet clear what the preferred outcome for the UK of Brexit negotiations will be and it is also unclear what the response of the EU and its individual states will be. However, in the context of Scotland there is a clear political will by both the Scottish Government and the Scottish Parliament for Scotland to remain within the EU. At this stage, it is not clear whether this will be the outcome but what is clear is that the Scottish Government is currently seeking to take all steps which it can to achieve that goal.