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Brexit: dotting the ‘i’s and crossing the ‘t’s

Brexit: dotting the ‘i’s and crossing the ‘t’s

Since the official start date of the EU Referendum campaign earlier this month, Brexit articles and stories have dominated the press.  A lot of the discussion has been around EU laws and, in particular, what might happen to these laws if the outcome of the Referendum is a Leave vote.  Ultimately, a lot of the questions that have been raised cannot be answered until – if there is a Leave vote – we have a clearer idea of what the UK’s new relationship with the EU will look like.  A summary table is available here, which sets out some of the options.

Here, we have set out a quick overview of what implications Brexit may have on some key commercial areas:

Commercial Contracts

For contracts with a particular EU focus – for example, an agreement for the distribution of goods or services throughout the EU – Brexit could have a significant impact, and parties may wish to consider whether they want a specific right to terminate on Brexit.  Businesses may need to review their current contracts in case this needs to be built in, and this should also be part of the discussion for contracts currently being negotiated.

Brexit could also inadvertently trigger termination rights under force majeure clauses, or trigger rights to re-negotiate under material adverse change clauses.  Unless this is specified, however, there is always room for the other party to disagree with your position.  If Brexit should (or shouldn’t) trigger these provisions, then this should be built into the contract.

Data Protection

Data protection laws are founded on EU law.  Significantly, the new General Data Protection Regulation is due to take effect around July 2018, potentially around the same time as Brexit following a Leave vote.  The new Regulation represents significant reform of the current law – so would Brexit allow the UK to keep our existing data protection regime under the Data Protection Act 1998?

The realistic answer is – probably not.  The Regulation will apply to the processing of personal data of EU citizens, so any UK business handling the personal data of EU customers or employees will be caught.  Multi-national groups with entities in different Member States will also be caught.  And since data transfers to and from the UK would be considered international, the UK would in any event have to demonstrate that it has a sufficiently robust regime in place to ensure the protection of personal data.  Arguably the easiest way to demonstrate this is to have data protection laws which are similar to or based on the Regulation.

Intellectual Property

Current EU laws allow for the registration of ‘European Union trade marks’ and ‘registered Community designs’, which apply throughout the EU (to save parties having to have individual registrations for the same trade mark or design in each Member State).  On Brexit, however – in the absence of any agreement between the EU and the UK to the contrary – ‘European Union trade marks’ and ‘registered Community designs’ would arguably no longer have any effect in the UK.  Business should therefore be considering their intellectual property portfolios to ascertain if they hold any registered EU IP rights which will need to be separately registered with the UK Intellectual Property Office, and to consider the cost implications of this.

Competition

This is another area which is largely founded on EU law, as competition is fundamental to the EU common market.  The UK has its own competition laws and regulator (the Competition and Markets Authority), however competition matters with an EU element – such as mergers affecting markets across Member States – are instead subject to EU-wide laws and regulation by the European Commission.

It is not expected that Brexit would have a significant impact on the short term operation of competition law, however longer-term the UK would have the opportunity to develop an independent regime different to the EU.  This could be both a benefit and a hindrance.  While this allows the law flexibility to adapt to UK-specific needs, it also means that parties could be subject to two different regimes.  For example, certain merger transactions could require approval from both the UK and EU authorities before clearance.

We have examined various facts around the EU referendum process, links to which can be found here. Over the coming weeks and months, our specialists will be publishing further analysis of how their sectors may be affected if the UK votes to leave the EU, to help you understand the areas of uncertainty and assess the potential risks to your business.

Please do get in touch if you have any queries over how your business could be affected by the UK voting to leave the EU.

Joanne Snedden
Solicitor

LChalmers