The most surprising thing about the British referendum on UK's EU membership is not that Leave has been ahead in some opinion polls, but rather how utterly unprepared we all seem to be for a 'leave' result.
While Brexit has indeed been discussed at many UK Boards, those discussions (with a few exceptions) have not focused on a thorough and considered analysis of the specific risks and contingency plans - they have instead had a somewhat 'general discussion' style.
The broad majority of businesses, small and big, are still failing to have 'leave plans' despite the fact that this is one of the most significant political risks with economic consequences that businesses could be facing since 1989, and we have all been aware of it for a considerable amount of time.
If the result on 23 June is 'leave', shareholders and investors will rightly want to know what specific measures and contingencies companies will put in place. Whether shareholders may wish to take action against boards that have failed to fulfil their fiduciary duties to analyse and mitigate risks is something to be seen.
It is certainly too late now to mitigate such risks, but it is not too late to prepare the messages to be deployed by each company to its investors, shareholders and employees. Going beyond the referendum, boards that have failed to put in place contingency plans may need to consider whether this has been a symptom of wider failures in their governance processes that may need to be addressed in due course.
A leave vote will mean that the government will need to do a multiplicity of things and all of them simultaneously:
- Deal with the immediate and daunting economic consequences of the decision
- Disentangle the EU institutions (are UK MPs going to be allowed to continue voting on EU legislation if such legislation will not be applied in the UK? Will the UK Commissioner still be shaping the EU financial services policy if it is clear that the UK is no longer a member of that club but a competitor instead?)
- Disentangle the legislation in the UK from the European 'acquis', at least in areas where the UK does not want to follow the European lead
- Negotiate the framework for relations between the UK and the remaining EU countries
- Renegotiate the trade agreements with non-EU countries
- Deal with the status of the UK in some international organisations such as the WTO
All this would need to happen while the government deals with the political crisis that would, without doubt, follow a leave vote.
In that highly complex scenario of persistent legal uncertainty, understanding the legal and regulatory provisions that are crucial to each business is of paramount importance. Businesses do not only need to know what legislation and trade concessions matter to them – they will need to be able to articulate them clearly and loudly to the government so that their priorities are not lost amongst the unavoidable 'general mess'.
Whether shareholders may wish to take action against boards that have failed to fulfill their fiduciary duties to analyse and mitigate risks is something to be seen.
It would be also crucial for companies and business associations to be able to feed their interest into the negotiating position for each of the bilateral trade agreements to be renegotiated early on. Those agreements were reached while non-EU countries allowed access to their own markets in exchange for access to a European market of 500 million consumers. It is only natural that those countries will want to renegotiate their concessions if all that is at stake with the UK is a market of 65 million consumers instead.
As renegotiating those deals (more than fifty) will take years of intense negotiations in parallel in many fronts, ensuring that the government prioritises the right agreements and provisions will be a must.
The lack of preparation is also worrying on the European side. Many European companies do a considerable amount of trade with the UK and many have their investors linked to the City, regardless of whether they are established in the UK or not. However, very few of those companies have found a voice during the campaign commensurate to the interests that they have at stake.
The vote on the 23rd of June will change not only the UK, but the whole of Europe and possibly the world as well. If the result is 'leave' every single company and citizen will need to rapidly evaluate the effect that such vote will have on them.
Even if the result is to remain in the EU, the mistrust generated by the fact that the UK government would have put the whole European project at risk – and without any apparent need - will not disappear just like that. If the UK decides to stay in the EU the only option for the UK is to lead.
Miriam González is an international trade lawyer and a Partner at Dechert LLP