HOW SCOTLAND MIGHT ACHIEVE INDEPENDENCE JULY 2021 HOW SCOTLAND MIGHT ACHIEVE INDEPENDENCE Scotland may have voted, in 2014, to remain part of the UK, but Brexit and the SNP's persistent political ascendancy mean that the dream, or spectre, of Scottish independence remains alive. In this briefing – the first in a short series – we explore some of the legal issues that will arise and how Scotland might achieve independence – a matter probably more of politics than of law. The Treaty of Union between England concerned and for everyone else. (which included Wales) and Scotland The rest of the United Kingdom (rUK) provided that the two Kingdoms "shall could not ignore Scotland's democratic upon the first day of May [1707] and will, but nor could Scotland dictate the forever after be United into one Kingdom terms on which it seceded from the by the Name of Great Britain." Forever is union. The negotiations between a long time. Similar provisions in the Irish representatives of rUK and of Scotland treaty of 1800 have only survived for six to establish the terms upon which out of the 32 Irish counties, and Scotland Scotland should become an independent has already had one referendum on country would unquestionably affect the whether to dissolve the union. In that way business is carried on both north vote, in 2014, the electorate of Scotland and south of the border, as would the decided by 55% to 45% to remain within choices made by Scotland as an the union, but Brexit and the electoral independent country. success of the SNP mean that Scottish Now might not be the time for full-scale independence remains very firmly on contingency planning for Scottish the agenda. independence, but it is certainly the time The 2014 referendum followed the SNP's to consider how a (second) Scottish winning 69 of the Scottish Parliament's referendum, followed by independence, 129 seats at the election in 2011. This might affect the organisation and conduct majority in favour of a party whose raison of business. If independence were to d'être is independence persuaded the occur, the planning horizons could be UK's Prime Minister that he could not uncomfortably short, still more so the deny Scotland the opportunity to decide time available to execute any plans. whether or not it wished to remain within A second independence vote could be the UK. followed swiftly by actual independence, The SNP might have lost the ensuing even though unpicking the relations referendum, but it regards Brexit (which between Scotland and England, Wales 62% of the Scottish electorate opposed) and Northern Ireland will make Brexit as having changed everything, and it seem like a trivial undertaking. A divorce continues to enjoy enviable electoral would, however, have profound success. The SNP won 64 Scottish implications for anyone doing business in parliamentary seats in the elections of or with Scotland, and there may not be May 2021, but the Green Party, which much time to explore those implications also supports independence, won a after a vote. further eight seats, bringing the number This is the first in a short series of of pro-independence MSPs to 72; briefings exploring some of the legal more, even, than in 2011. issues that will arise, including the Independence, should it happen, will potential impact of separation on affect anyone who does business in or businesses. This briefing looks at how with Scotland. Scotland can be part of Scotland might achieve independence – the United Kingdom or it can be an a matter probably more of politics than of independent country, but moving from law. Subsequent briefings will look at: the former status to the latter is highly complex both for the Governments 2 CLIFFORD CHANCE HOW SCOTLAND MIGHT ACHIEVE INDEPENDENCE • The effect of Scottish independence on Government before the elections said that Scotland's international status, laws, a referendum should take place in the first people and companies. half of the current Scottish Parliament's term of office, which runs to May 2026, • The division of assets and liabilities suggesting a referendum before the end between rUK and Scotland, what of 2023. currency Scotland might use (the most complex issue likely to face Scotland The SNP Government in Scotland on independence) and the effect of will, in practice, want to ensure that independence on contracts. independence formally occurs at the very latest before the next Scottish • The implications on tax and pensions parliamentary election. If it did not, regimes and financial services, as well the 2026 election could offer opposing as the consequences if Scotland were parties the opportunity to reverse the to join the EU. initial decision, particularly if the preparations for independence, including Achieving independence negotiations with rUK, were not going As mentioned above, the Scottish well. At the time of the first referendum, independence referendum of 2014 the SNP anticipated that it would take followed the SNP's triumph in the 2011 18 months of negotiations between If independence were to Scottish elections. This persuaded the Scotland and rUK after a vote in favour occur, the planning UK's then Prime Minister, David Cameron, of independence to put in place horizons could be that he could not, consistently with arrangements sufficient for independence democratic principles, resist an (though many regarded that as a very uncomfortably short independence referendum in Scotland. optimistic timetable). Given that a As a result, the Edinburgh Agreement of referendum and its campaign will also 15 October 2012 between the take time, this indicates that the First Governments of Scotland and the UK Minister does not have long before provided for the transfer to Scotland of she must push the issue, though the the power to hold a referendum. This was timing is complicated by the done formally by an order in council COVID-19 pandemic. under section 30 of the Scotland Act Prime Minister Boris Johnson has said 1998. The object of the referendum was, that he will refuse any request for a according to the Edinburgh Agreement, section 30 order, but he would need to to "deliver a fair test and a decisive consider the politics of refusal at the expression of views of people in Scotland relevant time. If he were to refuse, the and a result that everyone will respect." Scottish Parliament could contemplate These steps put the legality – and the itself legislating for a new referendum, binding nature – of the 2014 referendum though First Minister Nicola Surgeon has beyond doubt. The outcome of the generally been reluctant to take legally referendum was not the one the SNP had doubtful steps towards independence. hoped for. In 2017, following the Brexit As explained below, it is unlikely that the vote, Scotland's First Minister, Nicola Scottish Parliament currently has the Sturgeon, asked the UK Prime Minister necessary powers to call a referendum. Theresa May for another section 30 order giving the Scottish Parliament power to The Scottish call a second referendum. That request Parliament's powers was refused on the basis that the UK's impending withdrawal from the EU gave The Scottish Parliament was established the UK and its Government more than by the UK Parliament's Scotland Act enough to occupy its time without also 1998. It has limited legislative contemplating another Scottish competence, and anything done outside independence referendum. that competence is not law (section 29(1)). A measure is outside the Scottish The success of the SNP and the Green Parliament's competence if it "relates to" Party in the May 2021 Scottish elections a reserved matter (section 29(2)(b)). makes it inevitable that the First Minister Reserved matters include "the Union of will again demand a section 30 order to the Kingdoms of England and Scotland" enable a second referendum to take (paragraph 1(b) of Schedule 5). Measures place. A White Paper from the Scottish can be taken under section 30 to enlarge CLIFFORD CHANCE 3 HOW SCOTLAND MIGHT ACHIEVE INDEPENDENCE the powers of the Scottish Parliament. without significantly exacerbating This was done in order to enable the resentment in Scotland towards rUK Scottish Parliament to call the 2014 (generally referred to derogatorily as referendum, but that enlargement of the "London" or "Westminster") and Scottish Parliament's powers was strengthening the SNP's hand? An time-limited and has now expired. enhanced sense of bitterness towards rUK might help the SNP, but the SNP Would a referendum on Scottish must also get the timing right. Will its independence called by the Scottish electoral dominance continue? Even if Parliament, without a section 30 order, it did, to lose one referendum may be "relate to" the union of England and regarded as a misfortune; to lose two Scotland? The predominant view is that it in relatively quick succession would surely would, not least in the light of the draft bar the issue for at least a generation. Scottish legislation published in March 2021 in which the Scottish Government One compromise possibility that has been proposed that a second referendum raised is that a section 30 order could be should pose exactly the same question conditional on varying the electorate to as in the first referendum ("Should include not only all UK voters resident in Scotland be an independent country?"). Scotland but, in addition, Scots resident Some argue, however, that there is in rUK. This would be controversial (if nothing to stop the Scottish Parliament Scots in rUK, why not Scots outside rUK legislating for an advisory, or consultative, too?), novel and time-consuming. Who is referendum which, unlike the 2014 a Scot? Is it necessary to be born in referendum, would not be accepted by Scotland, to have one or both parents the UK Government as binding.