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Implications of Brexit Seminar- Overview

The BCFA hosted an Implications of Brexit seminar with guest speakers from Fox Williams LLP. Here is an overview on what was discussed at the seminar...

Legal Overview- Stephen Sidkin, Fox Williams LLP

Opening remarks

  • Companies are trying to get out of leases through various legal strategies caused by Brexit i.e. The European Medicines Agency previously operating out of Canary Wharf has closed its doors and moved to Amsterdam. This will have a negative effect on property prices and the UK economy.
  • For customs and regulatory changes i.e.VAT if no deal companies should see documentation on the https://www.gov.uk/government/brexit
  • If the UK leaves on 29th March with no deal, companies will have to apply the same customs duties and procedure as if they were trading with non-EU countries.
  • According to Government statistics, approximately 140,000 UK businesses have only traded with EU companies so will have no knowledge of Customs procedures/declaration forms.

Key Brexit process dates

  • 29 March 2019 11.00pm – exit date, irrespective – as we have an EU Withdrawal Act as law. This can only be changed by another act of Parliament, which means amending legislation will have to go through Parliament.
  • Any amending legislation relies on the remaining 27 EU countries being prepared to extend timeframes.
  • There will be a “so called” Hard Brexit if no withdrawal agreement is agreed.
  • 31 December 2020 – Transition deal ends (under current legislation). What exists today will exist until this date and time.  
  • For businesses this means UK remains effectively status quo ante and all EU rules including new ones apply.
  • Businesses ignoring this timeframe with no planning are foolish.
  • Transition deal principle agreed but application remains open as “Nothing is agreed until everything is agreed”

The UK is currently seeking to balance simultaneously (at the same time as running the country)

  • Negotiations with EU
  • No Deal contingency planning
  • Discussions with senior parliamentarians and with devolved Scotland and [Northern Ireland] administrations – note there is currently no devolved administration in Northern Ireland.
  • Vision for EU relations post Brexit
  • UK industrial strategy
  • Available resources - 45 years of UK law which has been enmeshed with EU law as to be disentangled.
  • New UK legislation to enable Brexit  
  • Parliamentary processes
  • Conservative party processes
  • Progressing non-Brexit issues.                                                            

No deal issues

  • Very significant impacts forecast
  • Imposition of WTO tariffs
  • HM Government Contingency Planning – there appears to be lack of sufficient contingency planning
  • Goods will get into the UK but with severe delays.
  • HMG website has 75 briefs
  • Briefs set out what UK would do but some aspects reliant on unknown EU co-operation
  • UK companies hard pressed to look at all of this with their current workload.

Relevant UK briefs

  • Trading with the EU
  • Exporting controlled goods
  • VAT for business
  • Trade remedies
  • Classifying goods in the UK trade tariff

European Union (Withdrawal) Act 2018

  • Initially the “Great Repeal Bill”
  • Ends application of EU law in UK
  • Converts existing EU law into UK law at time of exit
  • Aims to maintain continuity for business
  • For businesses the Devil is in the detail
  • Royal Assent given 26 June 2018

Withdrawal Agreement?

  • Will we have one – currently who knows.

The island of Ireland

  • Historical issues
  • 2 interlocking unions v no hard border
  • Everything we face is down to some extent to pure politics
  • The UK is effectively a single market in its own right- England, Scotland and N. Ireland.
  • This Union currently interlocks with the E Union
  • The 4 fundamental Freedom laws of the EU remain – free movement of people, goods, services and capital. The interlocking is the issue.

UK EU Withdrawal Agreement Bill

  • Will incorporate agreement into UK law
  • Draft published July 2018 under scrutiny
  • A meaningful vote in House of Commons? Presently no decision.

IF the Withdrawal Bill is finalised

  • 21-month Status Quo transition period to 1/1/2021 - Preferential UK business access to EU Market and Customs Union – time for businesses to prepare
  • UK & EU Goods post March 2019 - Free circulation maintained, following single market rules and VAT compliance until they reach an end user
  • Intellectual Property Rights - Registered during transition shall be granted comparable rights in the UK

UK Trade Bill

  • Was going through Parliament – now stalled
  • Essential legislation to enable the UK to negotiate its own Trade Agreements post Brexit - Essential for businesses who import/export
  • Content subject to on-going deliberations
  • Anticipated to come into force ready for UK Brexit

Cross Border Taxation (Customs) Bill

  • Creates essential UK standalone legislation to replace that of EU
  • Modifies some indirect taxation
  • Conservative remain group amendments narrowed available options for the Government
  • Voting passed the Bill
  • Not dependent on ongoing EU negotiations
  • Misconceptions:
    • “If we can’t agree the terms of a free trade deal, a hard Brexit will follow in March 2019.” – we are not actually negotiating a free trade deal we haven’t got to trade deals yet.
    • “If there is no deal, goods will simply not get into the UK.  At some point, the World Trade Organisation would intervene, and goods may trickle through with tariffs applied.”  - WTO have no obligation, or motivation to sort us out
  • Some businesses are making plans.  Most are not.
  • There is a lack of understanding as to what is being negotiated and why – see above.
  • A hope that Brexit will just go away (the so-called “Ostrich approach”).
  • A belief that if it does not, the effect on business will be manageable.

Guides for businesses. 

Existing business contracts

  • There has always been a need to review periodically important business agreements.  The vote on 23 June 2016 increased that need.  The vote on 15 January 2019 has put the needle into the red zone on the rev counter. 
  • English law requires few agreements to be in writing or signed. Agreements can be in place by conduct, orally or simply to be sent and electronically filed and the parties abide by it is law.
  • The starting point is to determine which are your important business contracts. 
  • Then consideration should be given to the effect Brexit will have on your suppliers and customers.  Supply chains may also be affected by cashflow or continuity problems and a contracting party may therefore seek to end or renegotiate an existing contract which it has with you. 
  • If a hard Brexit comes into force, suppliers to UK companies could take advantage of this.

Scope and duration

  • Consider geographic references such as “Territory” that may be EU-specific. 
  • Does the contract require compliance with a specific piece of EU Legislation?
  • Check whether an agreement is likely to span the UK’s formal exit from the EU and whether that change will affect the interpretation of the agreement.  An agreement which provides for automatic renewal unless notice is given by a contracting party requires particular consideration.  It may be preferable to try and change the renewal date or include contingency arrangements.

Pricing

  • Consider long-term contracts with fixed pricing and how these could be affected by changes in taxes and tariffs. 
  • Foreign exchange and inflation issues may also have an impact on pricing and payment structures.

Supply Chain Delays

Single Market v customs union v WTO

What could this mean both in terms of pricing and tariffs? What of regulatory obstacles?

The issues of:

  • force majeure – intended to cover the “unexpected”
  • material adverse change – usually in construction contracts
  • rules of origin – how is your product made – constituents?
  • transfer pricing – companies manufacturing overseas for another market? Thought needs to be given to setting up another operation so goods are in free circulation.

Termination

  • An agreement may contain a clause that provides termination rights in the event that the UK leaves the EU.  In the absence of any express provisions, Brexit may also fall under general provisions relating to material adverse changes or force majeure.  General contract law principles such as frustration could also apply.
  • You should also consider what is the governing law of the agreement and the clause dealing with how disputes are to be resolved.  Are such provisions appropriate to ensure that you can achieve the appropriate remedy in the event of a breach of contract by an EU based counterparty?  

To view Part One of the Seminar with Stephen, click here

For further information see: www.foxwilliams.com/brexit-lawyers.html

Brexit and the right to work in the UK- Sacha Schoenfeld, Fox Williams LLP

Following the rejection of the Government’s Withdrawal Agreement on 15 January 2019, we look at how this may affect UK immigration law:

Current position

As things stand, the UK is due to leave the EU with or without a deal at 11pm on 29 March 2019. The Prime Minister now has until Monday 21 January to return to the Parliament with an alternative plan.

The public test phase of the EU Settlement Scheme (“the scheme”) will open from 21 January 2019, allowing all EU citizens with valid passports and their non-EU family members who hold a biometric residence card to apply for ‘settled status’ and ‘pre-settled status’.

A deal before 29 March 2019

The Brexit process will continue as planned if the UK and the EU come to an agreement before 29 March 2019, subject to any changes to the status of EU nationals within that deal. Please see here  and here for a guide on applying under the scheme.

Delay in Brexit/Extension of Article 50

There will be no change for EU nationals, and freedom of movement will continue to apply to EU nationals in the UK, until specific changes are introduced. Until then, the scheme will remain in place and EU nationals will be able to apply for settled or pre-settled status, and it remains to be seen whether the transitional period will be extended beyond 31 December 2020. This scenario applies in the event the Government seeks a major renegotiation with the EU or in the event of a general election or a second referendum.

No Deal

Although a No Deal scenario is unlikely, the UK government has guaranteed the status of those EU citizens who are living in the UK on 29 March 2019. In this scenario, EU nationals (and their dependents) will have until 31 December 2020 to apply under the scheme. Given there will be no transitional period in the event of a No Deal, this guarantee does not apply to EU citizens arriving after 29 March 2019, effectively producing a cliff edge for EU nationals who have not arrived in the UK by 29 March.

Post-Brexit immigration system

The Government’s White Paper on a post-Brexit single immigration system is currently being debated and considered in Parliament (see here). The new system is due to come into effect after the transitional period, i.e. from 1 January 2021. Until then, current immigration rules apply to all non-EEA nationals. The Government will need to make amendments to this White Paper in the event of a no-deal.

To view Part Two of the Seminar with Sacha, click here

For further information see: www.foxwilliams.com/brexit-lawyers.html