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Article 50 - Implications of implementation, framework negotiations , challenge of completion Brexit Update

What is the process for the UK leaving the EU?

The only formal process for leaving the EU comes through Article 50 of the Treaty on European Union (TEU). The government of the withdrawing state notifies the European Council of its wish of leaving the EU. This triggers the negotiation process around the transitional arrangement and also any future arrangement between the EU and the leaving state. Two years is allotted for the negotiations, during which all EU laws continue to apply to the leaving state. If no agreement is reached after two years, all EU rules and rights cease to apply to the withdrawing country – unless the period is extended by unanimous agreement of the other 27 states. The leaving country is not part of any discussions around the agreement and is essentially presented with a take-it-or-leave-it offer at the end of the negotiations. Any trade deal must also be approved by the European Parliament.

the following video discusses the possibility of a two year extension and britain moving towards a Hong Kong offshore business model

Brexit may well be one of the most important black swans in recent memory, with US$2 trillion erased from global markets on Friday alone, but things may not be so bad, at least not from a Hong Kong point of view.

From an international competition perspective, London is a major competitor to Hong Kong as a gateway for Europe. For example, London is the second largest offshore yuan trading centre after Hong Kong.

London is also the second major market in talks about establishing a stock connect scheme with the Shanghai Stock Exchange. Hong Kong and Shanghai established a link in 2014.

However, in the wake of the pro-Brexit referendum result, the UK will try to gradually set about the task of negotiating an exit from the European Union, which draws into question London’s role as a platform for investment products such as the sale of dim sum bonds to European investors. Could some of these deals be about to shift back to Hong Kong?

The stock connect between Hong Kong and Shenzhen could be announced sometime this week, ahead of the July 1st handover anniversary, which would help to shore up Hong Kong linkages with mainland Chinese bourses. The net effect is that Hong Kong stands to gains in terms of its status as a gateway to China.

There also repercussions for London’s leading role as a fund management centre. Funds issued in the City can be sold in European Union. While it is not clear how the UK will negotiate its exit from the EU, it’s likely that some fund houses will set up offices in other financial hubs such Dublin. Hong Kong could be another choice as we already enjoy a mutual recognition scheme with mainland China such that funds domiciled in Hong Kong that meet certain criteria can be marketed to millions of potential investors on the mainland.

Then there is HSBC, a favourite stock for many Hong Kong investors.

The bank in February decided not to move its headquarters back to Hong Kong, opting instead to remain in London.

HSBC has always considered Hong Kong as a stepping stone to the mainland China and as Hong Kong and Asia is its major profit contributors, why not consider moving its headquarters back to Hong Kong?

Many brokers and investors have discussed such a possibility. To counter the "paradoxical migration" of many finance houses and service providers , hints and undertones of London currently the financial hub of HUB of europe metaphorizing into the Hong kong offshore business template .

Legal complexities of Brexit and acquired rights , formulae would have to be found within 2 year window, would member states be happy with extension ?

The British business of negotiating the framework would require interim trade regime, example here is a dislocation of trade from car auto industry especially 10 % UK tariff cars going to europe.

Freedom of movement legal or physical of EU nationals , the sheer complexity , is a hot potato are also discussed all Juxtaposed with trade negotiations , 3 basket negotiations.  

Before re joining WTO, what details are needed within the a framework and a transitional one at that. Not forgetting cross party consensus approval.

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