We assess the key commercial and legal issues as Scottish politicians press hard for a new independence vote in 2023
On 28 June 2022 Scotland's First Minister Nicola Sturgeon announced plans to hold a second referendum on 19 October 2023 using the same question as in 2014: “Should Scotland be an independent country?”
This Q&A is a brief update to our Scottish independence: Impacts for Business hub and was first published on 29 June 2022, revised on 25 August and then on 1 November 2022 to reflect the Supreme Court hearing in October (still pending judgment).
Is there an established mechanism for Scotland to hold an independence referendum?
Yes. Section 30 of the Scotland Act 1998 (Scotland Act) provides a mechanism to grant legislative powers temporarily or permanently to the Scottish Parliament. A section 30 order can be initiated either by the Scottish or UK Governments but requires approval by both parliaments before becoming law. Scotland’s first independence referendum was agreed on this basis.
In 2012, following the SNP's outright majority at the 2011 Scottish Parliament election, the Scottish and UK Governments signed the Edinburgh Agreement, which contained a draft section 30 order to allow a single question referendum provided it was held before 2015. The UK and Scottish Parliaments subsequently approved it and the referendum's legality was settled. The Scottish Parliament was granted control of key issues including the date, question wording and applicable franchise.
Is a section 30 order the route to a second referendum proposed by the Scots Government this time?
On 28 June 2022 the First Minister's letter to the UK Prime Minister referenced her readiness to negotiate the terms of a Section 30 order. However, the focus of the letter was on a referral to the UK's Supreme Court by the Scottish Government's Lord Advocate. On 6 July 2022 Boris Johnson's response confirmed the UK Government's position that now is not the time for a second referendum. His latest successor as Prime Minister, Rishi Sunak, has confirmed this position. Furthermore, Labour leader Sir Keir Starmer has been determined to rebut claims against his previous two predecessors that he might do a deal over a second referendum for UK Parliamentary support. He too has therefore ruled out agreeing any Section 30 order, stating: "no deals into the election, no deals out of it.”
What is the role of the Scottish Government's Lord Advocate in this?
Before new legislation can be introduced to the Scottish Parliament, the Scotland Act requires the Scottish Government minister responsible to state if, in their view, the provisions are within the competence of the Scottish Parliament. The minister reaches their view based on the independent advice of the Lord Advocate (and her deputy the Solicitor General).
No minister has yet attempted to introduce new legislation in defiance of a Lord Advocate advising it falls outside its competence. Among other things it would be a breach of the Scottish Ministerial Code.
The Lord Advocate's 28 June 2022 reference to the Supreme Court makes clear that she did "not have the necessary degree of confidence" that the proposed legislation for a second referendum would be within the competence of the Scottish Parliament. On that basis it was not, in any event, possible to introduce the Bill to the Scottish Parliament.
When will the Supreme Court hear the case and give its decision?
The Supreme Court hearing was held on 11-12 October 2022. Lord Reed said that it would be "some months" before there is a judgment.
What is the UK Government's case?
Its first argument is that the Supreme Court should decline to hear the case as it is outside its jurisdiction. It argues that there is a specific statutory procedure to use: section 33 of the Scotland Act (Scrutiny of Bills by the Supreme Court (legislative competence)) and this can only be used once a Bill has passed. Whereas the Lord Advocate is using a general provision for referring "devolution issues" to the Supreme Court which the UK Government argues was not meant to circumvent the section 33 procedure (the Scotland Act's definition of "devolution issues", on its face, not including questions relating to Bills).
If the UK's position on this is upheld then it would not be possible for an analogous case to be heard by the Supreme Court unless and until a Lord Advocate did have the necessary degree of confidence that proposed legislation for a second referendum would be within the competence of the Scottish Parliament, for such legislation to then be introduced and for it to be passed. However, at the hearing the suggestion was made that a Members' Bill might be able to get round this Catch 22 for the Scottish Government (ie a Bill introduced by a Member of the Scottish Parliament rather than a Scottish Government Minister).
If the Supreme Court nonetheless considers the case further, the key UK argument is that Section 29 of the Scotland Act provides an Act of the Scottish Parliament is “not law so far as any provision of the Act is outside the legislative competence of the Parliament”. Among other things, any provision which “relates to” matters “reserved” to the UK Parliament, which includes “the Union of the Kingdoms of Scotland and England” is outside that competence. The UK argues that legislation for any referendum on Scottish independence clearly falls within this category.
What is the case for the Scots Government?
The Lord Advocate argues "devolution issues" is broadly enough defined in the Scotland Act to allow her to make the reference outside the usual section 33 procedure (which would have required the Bill to have been passed first).
In relation to the legislative competence of the Scottish Parliament, the Lord Advocate's main arguments turn on the advisory nature of the referendum that the Bill proposes: "as a matter of law, the legal effect of a referendum held pursuant to the Bill would be nil."
What chance of success does the Scots Government in the Supreme Court case?
It has generally been understood, albeit not accepted by the Scottish Government, legislation for any referendum on Scottish independence would fall within the category of matters “reserved” to the UK Parliament, on the basis that it includes “the Union of the Kingdoms of Scotland and England." Although the Supreme Court has not given its view specifically on this question, its October 2021 ruling on whether a bill incorporating the United Nations Convention on the Rights of the Child was outside the Scottish Parliament's legislative competence is widely seen as confirming the great difficulties the Scottish Government faces in arguing its case.
Would the Scots Government proceed with a referendum on independence against the law if the Supreme Court decided against it and the UK Government refused a second vote?
In her 28 June 2022 statement to the Scottish Parliament, the First Minister repeated her position "a referendum must be lawful" as a matter of principle, but also as a matter of "practical reality". A referendum held outside of official frameworks could be boycotted by unionists and would have no practical effect. Recognition by the international community is also important to the Scottish Government, particularly in the context of its proposal that an independent Scotland should apply to join the European Union.
In her statement, the First Minister did, however, state that if a second referendum was not possible under the law, then the next General Election "will be a de facto referendum." Subsequent clarifications suggests that she is arguing that if the SNP won a majority of votes at the next General Election then that would in itself be a mandate for independence, and the commencement of independence negotiations, without the need for a referendum.
However, General Elections are very different from referendums and so there is scepticism about the wider political acceptance of the implications of any such result. The assumption therefore is that this is envisaged as an opportunity for the Scottish electorate to apply further pressure to persuade the UK Government it should agree to an official second referendum.
The strategy is not without risks for the First Minister. The SNP's best ever General Election result was 49.97% in 2015. Although note that other parties, notably the Scottish Greens, also support independence.
Does this all boil down to the law?
In the short term, at least, it seems likely the question of whether there will be a second referendum will be settled by the law. In the longer term, politics will play a greater role. It has been articulated in various ways by each UK Prime Minister from Margaret Thatcher onwards that Scotland ultimately has the right to self-determination. Given it is a political question, what this means in practice in terms of any decision by a future UK Government to agree to a second referendum is not agreed or set out anywhere. Any number of factors will play a role, including: the amount of time since the first referendum; electoral politics in both the UK and Scottish Parliaments; and the potency of the message sent by Scottish opinion polls on support for independence.
What have recent opinion polls shown?
During 2020 and into the first quarter of 2021 opinion polls generally had moderate leads favouring independence. However, since then polls have tended to show moderate leads against.
Does the Scots Government have a website hosting its various announcements relating to its independence proposals?
Yes. It is available here.
Where can I find out more about the potential impacts of Scottish independence for business and investors?
Implications will differ between sectors and based on specific operating models, but the implications of Scots independence for business would generally be deeper and more wide-ranging than the equivalent Brexit impacts. Indeed, Brexit itself has further amplified many of the implications and the stakes.
See our Scottish independence: Impacts for Business hub. It contains briefings on the following:
- Routes and obstacles to a second Scottish independence referendum
- Implications for the North Sea oil and gas sector
- Implications for financial services
- Implications for Great Britain’s single energy market, renewables and net zero
- Scottish independence and EU membership: process and implications
- Consequences for trade
- Currency: choices, issues and implications
- International law implications
- Contracts and other obligations
- Employment and pensions law implications