The U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit, a panel of London judges decided, setting up a constitutional confrontation at the country’s Supreme Court next month.
Triggering the country’s departure from the European Union would “inevitably” change domestic law without Parliament’s approval, Judge John Thomas said Thursday, delivering a decision that is a setback for Prime Minister Theresa May’s plan to unilaterally start the process by the end of March by invoking Article 50 of the Lisbon Treaty.
The ruling sent immediate shockwaves through London’s financial and political enclaves. The pound — the worst-performing major currency in October — rose to a three-week high against the dollar and lawmakers on both sides of the debate grappled over the whether the decision would force May to alter her plans. The government said it can still press ahead with the March timetable even if it loses an appeal.
“Plenty of pro-EU MPs have said that if they are able to vote on the issue they will vote in favor of triggering Article 50,” said James Knightley, a U.K. economist at ING Bank NV. “Base case remains that the U.K. will still trigger Article 50, but it could potentially see slippage from the originally stated March deadline.”
The government said it will appeal, and the Supreme Court has already set aside time for a hearing between Dec. 5 to Dec. 8. A court spokesman said it is likely all 11 judges would participate in the review for the first time in the tribunal’s seven-year history.
Round One
“This is just round one,” said Simon Gleeson, co-chair of public policy at law firm Clifford Chance in London. “Whether this tussle continues solely in the courts or also Parliament, in the form of a bill, it will continue to extend uncertainty and make planning and investment tougher for businesses.”
The pound extended gains after the decision was announced, touching a three-week high of $1.2448. It rose 0.6 percent versus the dollar as of 10:17 a.m. in London. Bank shares, including Royal Bank of Scotland Group Plc and Barclays Plc, also jumped after ruling.
Both sides of the Brexit debate were quick to react. U.K. Independence Party interim leader Nigel Farage said he was worried “every attempt will be made to block or delay the triggering of Article 50.” Opposition Labour leader Jeremy Corbyn said while he respects the decision of the British people, the “ruling underlines the need for the government to bring its negotiating terms to parliament without delay.”
Who’s Who in the London Lawsuit Challenging Brexit
The London legal challenge, brought by Gina Miller, who runs an investment startup, and Deir Dos Santos, a hairdresser, sought a court ruling that it would be illegal for the government to invoke Article 50 without first consulting Parliament.
“We’ve been able to be part of this debate and bring some sobriety as we go forward,” Miller said outside court. “I hope that they make the wise decision of not appealing and pressing forward to debate in Parliament.”
Parliamentary Sovereignty
The court said that the non-binding nature of the June 23 referendum made it a poor vehicle to impose sweeping changes on domestic law without a further vote of lawmakers.
The “basic constitutional principles of parliamentary sovereignty” in the U.K. lead to a “conclusion that a referendum on any topic can only be advisory as the result of a vote” unless the language is very clear, the judges said. “No such language is used in the 2015 Referendum Act.”
Last month in Belfast, Justice Paul Maguire rejected a pair of challenges to the Brexit process, ruling that it was beyond the power of the court to interfere in how the government triggers Article 50. He dismissed claims related to lawmakers’ votes and the Good Friday Peace accord in Ireland.
“A ruling by the Supreme Court on Brexit looms large in December so the process is far from over,” said Valentin Marinov, the London-based head of Group-of-10 currency strategy at Credit Agricole SA’s corporate- and investment-banking unit. “That said, abating concerns about hard Brexit could help the pound to recover more ground in the near term.”
Irrevocable
During the London hearings, Attorney General Jeremy Wright said that the challenge at its basic level was an attempt to interfere with democracy. Lawyers representing the claimants said that May’s bid to trigger Brexit on her own would amount to an unconstitutional power grab that tramples upon centuries of legal precedent.
Triggering Article 50 is “irrevocable,” Wright said during the case.
“It might mean that the prime minister has to show her hand a little more,” said Stephanie Flanders of JPMorgan Asset Management in an interview on Bloomberg Television. It’s likely to mean “a bit more transparency about the deal and a bit more of a debate domestically. I would not assume that the pound stays up from here or that we’re not leaving the EU.”