It can’t have escaped your notice that on 23 June 2016, the UK voted to leave the EU. However, it will now take at least two years for the process of that withdrawal to be complete and until that time the UK will continue to be a member of the EU and subject to EU law.
Many provisions of EU legislation are already enshrined in UK law. These will continue to apply unless and until they are changed and we don’t anticipate any radical changes, at least not in the immediate future.
But while full Brexit will take years to actually happen, it would be sensible for all organisations to review its potential impact on their key agreements, particularly any with a high value, long duration and other major importance.
What to look for
Most standard agreements should contain a template provision in relation to changes in legislation.
This means that any reference to a specific piece of legislation (either UK or EU) is deemed to include any future amendment or replacement of that legislation. This should help to cover the situation where a piece of legislation is found to no longer have effect in the UK post-Brexit and so new legislation is introduced to fill the gap.
But given that EU and UK legislation has grown together so organically over the last 30 years, to renegotiate and separate the two would be an almost impossible task. It may well be that any new post-Brexit UK legislation will simply replicate (or certainly be close to) current EU provisions.
Any territorial references will need to be examined. Once the UK has left the EU, any definition of a territory as ‘EU’ or ‘Europe’ will not include the UK.
Confirmation that a ‘European’ territory will still include the UK could be agreed in a side letter or separate agreement.
Consideration would need to be given to the practical consequences of the EU and UK becoming separate territories For example, a party may have to sell and promote products or rights into two distinct economic markets (EU and a separate UK) rather than one economic market (EU including UK).
Most agreements will not contain a specific reference to a Brexit style event preventing performance as a reason for termination of the entire agreement. Similarly, the definition of a ‘Force Majeure’ event in most agreements is unlikely to include a reference to a Brexit.
Generally, whether Brexit could be regarded as a ‘material adverse change’ or force majeure reason for termination will come down to the relevant facts, and the specific drafting, in each case.
To avoid this uncertainty over whether Brexit could affect performance under an agreement and so result in termination, organisations could include a clause in future agreements requiring the parties to negotiate in good faith with a view to amending the relevant agreement, so that its pre-Brexit effect and intentions are properly reflected post-Brexit.
Transfers of employees
Agreements, particularly those which include a supply of services may contain reference to what are known as ‘TUPE’ provisions regarding the transfer of employees where an economic undertaking is transferred. These provisions are largely derived from EU law and have been a contentious area. As such, they may be one of the limited pieces of legislation subject to post-Brexit reform.
For now, however, the status quo remains and the blanket removal of such workplace protections is unlikely.
For many organisations, a significant part of their agreements is the protection and use of trademarks and other intellectual property. Whilst there’s no certainty, the general expert consensus is that there will be no change to UK intellectual property rights and EU registered trade marks will remain in force for some time until transitional measures are put in place.
Many agreements will not be affected by the Brexit decision in the near future. However a review of the most important agreements should highlight any economic and potential future considerations resulting from the current period of uncertainty as we look towards a post Brexit world.
For the moment, it’s business as usual regarding how the UK interacts with the EU, both economically and legally. An exit from the EU will be a lengthy and protracted negotiation. No-one knows quite how or when this will occur as it’s never happened before (Greenland leaving the EEC in 1985 being the only similar example). No time table has even been set to trigger the divorce proceedings and the only certainty seems to be a period of uncertainty.
The diplomacy, concessions and compromise necessary for determining the UK’s relationship outside the EU will last many years but we have highlighted current points of interest/future planning and as the situation changes we will regularly update.
This post was edited by Conor Hannon. For more information, email firstname.lastname@example.org.