Brexit: UK Supreme Court ruling the tip of the iceberg

A display of U.K., Union Jack flags fly in front of The Houses of Parliament, in London, U.K., on Monday, Feb. 15, 2016.
Jason Alden | Bloomberg | Getty Images
A display of U.K., Union Jack flags fly in front of The Houses of Parliament, in London, U.K., on Monday, Feb. 15, 2016.

The U.K. Supreme Court's ruling that parliament must vote on whether the British government can start the Brexit process marks the start of a tumultuous period of legal disputes for U.K. Prime Minister Theresa May.

The Supreme Court ruled against the government with a majority of eight to three on Tuesday in a landmark case with potentially significant political ramifications.




Cliff-edge Brexit deal

Downing Street confirmed on Tuesday that May's pledge to trigger Article 50 of the European Union's (EU) Lisbon Treaty, the formal step required to begin the process of exiting the bloc, before the end of March would not be impacted by the Supreme Court ruling.

The U.K. Prime Minister announced last week that parliament would get a say on the final Brexit deal too. This means that the Supreme Court ruling on Tuesday effectively bookends the U.K.'s Brexit negotiations with votes in parliament.

"There is a serious question of how valid a (final Brexit deal vote in parliament) would be. Unfortunately for the U.K., the two-year deadline and Article 50 process is designed to give the much bigger EU more leverage than the exiting country," Kallum Pickering, senior U.K. economist at Berenberg Bank told CNBC in an email.

"Once the U.K. triggers Article 50, likely in March, the two-year countdown begins. If the U.K. doesn't agree to the terms of the post-Brexit deal and likely transitional arrangements then it may suffer a cliff-edge Brexit and find itself trading with the EU on World Trade Organization terms. That would be the worst outcome for the economy," he added.

More legal hurdles to clear

However, the British government has more legal hurdles in the pipeline too. A Dublin court is due to hear whether Article 50 could be reversed while two campaigners have filed a lawsuit claiming May does not have the power to take Britain out of the single market. The U.K. Prime Minister confirmed the government's desire to take Britain out of the single market in the most important speech of her premiership last week.

"The court case in Dublin, which looks at whether the UK could reverse its decision to leave after triggering Article 50 – for example if it is not satisfied with the deal agreed with the EU – is interesting from a legal point of view, but unlikely to be of much political significance," Larissa Brunner, analyst for Western Europe at think-tank Oxford Analytica, told CNBC in an email on Monday.

"There is currently no indication that there is any political will, either on the government's part or among the electorate, to stay in the EU," she concluded.