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"Bite-Size" Legal Predictions on Brexit And The Tech Sector (Part 2)

"Bite-Size" Legal Predictions on Brexit And The Tech Sector (Part 2)

Thanks to all those who viewed Part 1 of my Brexit and the Tech Sector update (which you can find here).

As promised, this Part 2 covers impact of Brexit on existing and future contracts, and some typical clauses which could be affected. An audit of key contracts to understand any related issues and risks is recommended.

The following areas provisions could be impacted by Brexit:

  • Governing Law – where such a clause prescribes “English law” or “Scots law”, should that be interpreted as the law at the time of contracting (which incorporates a range of EU laws) or something more forward-looking? Where no applicable law has been specified in the contract (not recommended!), which laws will apply? The answer to this question is currently determined in line with EU-wide rules in the so-called “Rome I & II” Regulations
  • Change in law provisions – some contracts pass risk / cost of significant changes in law to one of the parties (e.g. this often happens in IT outsource arrangements – could this be a ticking time bomb for suppliers who have signed up to such terms across multiple customers?)
  • Compliance with law provisions – the scope of clauses requiring compliance with law may just have significantly increased, or at least become uncertain
  • Legislative references – provisions which reference specific laws often extend to cover laws which replace them but this is not always the case, nor might it produce the desired outcome in a Brexit scenario (e.g. again to take an IT outsource example, what might TUPE laws look like going forward?)
  • Payment/pricing provisions – watch out for anything linked to the Euro, or tied to exchange rates generally
  • Foreign workers – contracts which rely on off-shored elements, or which involve foreign workers coming on-shore or the obtaining of visas, need to be looked at carefully (e.g. Strategic Integrator or agile contracts which involve bringing developer resource to the UK for initial design and build)
  • Force Majeure clauses – nothing has been tested in the courts yet, but could Brexit be classified as a force majeure event beyond the control of the parties, which could ultimately trigger termination rights?
  • Performance and Frustration – could a party trying to get out of a contract rely on performance related termination rights, or the contractual doctrine of frustration to argue that performance of the contract has become impossible, or that the basis upon which the parties first entered the contract has fundamentally changed?
  • Recognition and enforcement of judgements – in an increasingly internationalised trading environment, how will cross-border recognition and enforcement of judgements be protected to allow UK companies to protect their rights and enforce their contracts abroad?
  • Brexit specific clauses – going forward we may start to see contract drafting specifically tackle Brexit and provide for particular contractual outcomes depending on the ultimate settlement

This list is not exhaustive but should give a flavour for some of the key areas of contracts which might be affected by the Brexit decision.

Callum Sinclair
Head of Technology

Burness admin