I have held off writing about the dreaded "B" – Brexit word until now, but as currently there are less than 50 days until we leave, and in England it takes that long to buy a house, I therefore felt I had to send you something. Although this written by me under the gunnercooke banner there are one or two personal views. Almost all of it involves legal and business issues and I have deliberately and completely kept away from any political comment. That said , I think
everyone would accept that the Brexit exit process has been and remains a complete fiasco. Even now, and despite the thousands of articles, reports and discussions – we still don't know what is going to happen, or when. Without ratifying the Withdrawal Agreement (see below), or agreeing another mechanism that would delay or annul the withdrawal process, the UK is scheduled to withdraw from the EU on 29 March 2019 on a "no deal" basis…
For millions of smaller businesses, they generally have neither the management time, skills nor money to take action/advice in a vacuum—so many, many of them are just waiting until the absolute last minute (or even later) to see what happens.
That said, some key sectors such as pharmaceuticals and financial services have been preparing for a "no deal" Brexit for some time.
If we had to pick a few areas to look at, they might include data and intellectual property; and also contractual arrangements.
Now, to give you a few general comments around the political and legal issues and please note these are taken from many tens of thousands of pages of so-called advice and commentary) see below. What shines through is the fact that while businesses need certainty, there is absolutely none in this process.
European Union (Withdrawal) Act 2018 (the “EUWA”).
The EUWA has four principal objectives:
An end to the application of EU law in the UK after exit day
Conversion of EU law into UK law so that EU legislation continues to have a statutory framework in the UK after Brexit.
Creating powers that, where the government considers it necessary, correct existing legislative provisions and afford the devolved administrations the power to make corrective amendments.
Maintaining the current scope of devolved decision-making powers in areas currently governed by EU law. In theory, at some point after Brexit, each EU-inspired measure remaining in force as UK law will be reviewed as appropriate, and a decision taken as to whether to retain, modify or withdraw it….. so…….
I guess you can imagine the potential nightmare for businesses, with many thousands of pieces of legislation to be reviewed.
Trade Bill 2017-2019 and international trade arrangements
The government's Trade Bill will establish structures for independent UK international trade arrangements after Brexit. However, a number of WTO members have objected to the UK's plan to "copy and paste" the EU's
international trade commitments into new WTO schedules for the UK. This will force the government to enter into lengthy negotiations with other members on individual terms of trade after Brexit. It is still possible for the UK to trade with WTO members on the proposed terms while individual WTO schedules dealing with tariffs and quotas are negotiated, but it appears that this will complicate the ability of the UK to strike new independent trade deals in the meantime.
Despite EUWA, the Trade Bill, the two white papers, and the Draft Withdrawal Agreement, the precise implications of Brexit for UK commercial law are still largely unknown ( rather like everything else). While much of UK commercial law does not result from EU initiatives, and will not be affected by Brexit, a significant proportion of it comes from the EU, or is affected by EU law. In addition to issues arising out of cross-border trading with EU 27 countries after Brexit, areas that might be liable to see changes after Brexit (mainly as a result of long-term divergence rather than Brexit itself) include advertising and marketing, commercial agencies, consumer law, distribution, e-commerce, outsourcing, product liability and labelling, and supply of services.
The uncertainty is increased by the fact that, according to the UK’s National Audit Office, there are 34 EU regulatory organisations whose frameworks affect the UK. However, there is no authoritative assessment of what proportion of UK laws and regulations are directly affected by the EU
EUWA, the Trade Bill, the white papers and the Draft Withdrawal Agreement provide some indication as to a way forward legally. However, they do not:
It is still impossible to predict the outcome of the negotiations, whether it will involve some sort of "soft" Brexit, a "hard" Brexit, or, hardest of all, a "no-deal" Brexit. The expression "nothing is agreed until everything is agreed" has been used by both parties.
On the plus side, businesses can at least be reassured that there will be no massive legal change to the law relating to commerce within the UK on the date Brexit takes effect. However, there remains uncertainty about various issues relating to trade with between UK and the EU 27 countries after Brexit, mainly concerned with tariffs, regulatory compliance, and practical logistics.
Some commentators believe that it could be many years before we have a clear idea of what EU-origin legislation (whether in the area of commercial law or otherwise) will be retained, modified, or withdrawn. Many of the relevant measures could potentially remain in force as UK law for a long time. Businesses should also bear in mind that much of this legislation had the support of the UK during the Brussels legislative process. If the rationales for supporting the legislation still stand, it seems reasonable to assume that the legislation stands a good chance of being retained.
Here are just three examples which may be of use/relevance –but more importantly, to show you the complications.
Commercial Agents Regulations
The Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053) implement the Commercial Agents Directive (86/653/EC) in England, Wales and Scotland. The Directive itself is applicable to member states of the European Economic Area (that is, the 28 EU member states, as well as three of the four member states of EFTA (Norway, Iceland, and Liechtenstein)).
The Regulations give commercial agents (as quite narrowly defined) certain rights that go beyond those implied under the common law of England and Wales. These include rights to minimum periods of notice and a right to compensation or an indemnity on termination of the agency. A considerable amount of EU and UK case law has developed since the Directive and Regulations were introduced.
In accordance with EUWA, the Regulations will remain in force immediately after Brexit, but with a different constitutional basis. After that, there might well be pressure to withdraw the Regulations from a government whose strategy is to extend free market policies. The Regulations could be regarded by some as over-protective of agents.
Such a course would be clearly consistent with the Brexit referendum result. However, the government might decide that any course of action with such drastic consequences should be delayed until the issues had been reviewed in the same way as any change in UK law, and in particular so that UK agency businesses have the opportunity to make representations. The Regulations would continue to be effective under English law until Parliament decided whether
protection for commercial agents should be abolished entirely, or whether some modified form of protection should be granted. This might take a long time.
If after Brexit the UK continues to form part of the EEA as a member of EFTA (a course which the government has so far ruled out), it would seem that steps would need to be taken so that the Directive continues to be implemented within the UK.
Data protection arrangements and particularly, transfers of personal data from EEA member states to the UK are perceived as one of the more immediate issues that need to be addressed in anticipation of a "No-deal" Brexit. After Brexit, data processing in the UK and transfers of personal data from the UK to EEA states will continue to be governed (in effect) by the General Data Protection Regulation ((EU) 2016/679) (GDPR). This is because the GDPR
will be transposed into UK legislation.
With regard to data transfers between the UK and EEA member states after Brexit:
Impact on existing contracts
Brexit could have significant implications for commercial contracts. Potential pain points include the imposition of tariffs, restrictions on the freedom of movement of people, or more change in exchange rates. Changes such as these could materially affect the commercial bargain underlying those contracts. Changes in the underlying legal landscape may also affect some existing contracts profoundly. For instance, if the UK loses its passporting rights into EU member states, it may no longer be legal to perform some financial services contracts, or broadcasting contracts. Parties to existing contracts will be concerned to examine their contracts to see if any relief is available (or how quickly they can bring the contract to an end).
In financially uncertain times, parties often look to force majeure and material adverse change clauses for relief. As ever, their effect will depend on the contract's drafting and interpretation. Current views suggest that:
Force majeure. The consensus of legal opinion seems to be that Brexit is unlikely to trigger a standard force majeure clause.
Material adverse change. It may be easier to argue that financial consequences of Brexit constitute a material adverse change, although not every contract includes a material adverse change provision.
If the contract is silent, parties should consider whether the contract could be frustrated, or void for illegality. But a contract is not frustrated simply because it becomes more expensive or more difficult to perform. One commercial landlord has already applied to court for a declaration that Brexit will not frustrate its lease.
Right now, there are no conclusions we can helpfully draw. Just watch this space.