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4th July 2016

Impact of Brexit

Businesses are concerned to understand the immediate and longer term implications of the UK formally leaving the EU.

There is much uncertainty due to the lack of a proposal for the model the UK will adopt, but in the short term these are some headlines that will allow businesses to understand some of the issues, what will happen and what they should do. Due to the current uncertainty, we are not able to give more specific advice.

Exit process and what happens to EU-imposed regulation in the UK?

  • No immediate changes are likely.
  • From the point of formal notification of the UK leaving the EU there will be a two-year negotiating window before the UK formally leaves the EU.
  • The Government will need to implement an in-depth review of key existing EU-imposed law during the two-year negotiating window, with a view to recommending to keep the law on the statute book, or possibly to amend it.
  • The size of this task means UK law is likely to be amended to retain much of the existing EU-imposed law, but with supremacy of UK courts.
  • Until the end of the two-year notice period, when the UK will leave the EU, the UK’s status as regards EU laws does not change.
  • The extent to which the UK will need to harmonise its laws in the areas of free movement of people, goods, services and capital will entirely depend on the terms of the deal struck between the UK and the EU, as occurs in respect of every other non-EU country that has a trade deal with the EU. There is at present uncertainty as to what model may replace the UK’s EU membership.

Contracts, exports and supply chain

  • Be considered – but don’t delay: consider how Brexit could affect your business and start discussions with suppliers and customers. You may be able to identify the challenges and work together on possible solutions.
  • Long term contracts: if the operation of the contract was dependent on the ongoing operation of particular EU legislation (such as the free movement of goods around the EU), on the UK giving notice to leave the EU it is possible that the contract could be frustrated or force majeure provisions could be triggered.  Consider whether existing long term contracts should be amended & whether new contracts should build in protections to preserve the commercial purpose.
  • Disputes: in the two-year negotiating window there will need to be changes to the rules on jurisdiction, developments in that period may have an impact on decisions on disputes that arise e.g. there may end up being a particular date by which it will be advantageous to commence proceedings.
  • Governing law clauses are likely to continue to be recognised by both EU and UK post-Brexit.  The effectiveness of exclusive jurisdiction clauses will depend on what approach the UK takes re EU going forward, but are likely to still be recognised

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