Hunters’ Business Department is a team of leading corporate lawyers based in central London. The team develops close relationships with our clients and have acted for many as their on-going principal advisers through the generations. The lawyers in the business services team bring legal expertise and commercial perspective to the most complex transaction or project. Where appropriate, the team works closely with our other teams to provide a comprehensive service. The team is available at short notice to meet any sudden need, and is committed to giving speedy and practical business advice.
Q What will the impact of Brexit be on my business as a whole?
A No one knows what the outcome of the Brexit negotiations will be. The one certainty is that the UK remains a full member of the EU for the time being and no changes to the legal system will occur unless and until the UK ceases to be a member of the EU. Once notice has been given to the EU under Article 50 of the Lisbon Treaty, there could be two years of uncertainty during which inward investment will reduce, and domestic investment plans will be put on hold and some investors will become risk-averse. On the other hand, a cheaper pound helps our exports and might offset some of the negative effects of leaving. Overall, we should not panic, but consider rationally the likely impacts of the likely changes. We discuss below some of the specific potential impacts that a withdrawal from the EU will have on our commercial clients.
Q How are my contracts affected?
A Contracts with an international dimension should be reviewed for any effect of leaving the EU. Could such an event be a material adverse change or other trigger for termination by either party? Will a supplier be able to pass on any increase in tariffs imposed between the EU and the UK? If your business is denominated in a foreign currency, have you hedged your exposures sufficiently? If not, how will such things affect your cash flow and profitability? Will you be able to hire the seasonal labour you need to fulfil your contracts? Whatever the outcome of the political debate, businesses need to hope for the best but plan for the worst.
Q Which law governs my contract?
A If you contract with someone in another country, the contract should always specify the law by which it is governed. A contract entered into after 17th December 2009 would be governed by the Rome I Regulation. Where it applies, a court must recognise the parties’ choice of law, but this is subject to mandatory rules applicable in the relevant country. For example, the Unfair Contract Terms Act 1977 (itself based on EU law) contains mandatory protections for consumers and businesses contracting on standard terms; and the Financial Services and Markets Act 2000 contains overriding provisions which may apply notwithstanding a choice of a different law in a country. English employment law also contains mandatory overriding provisions to protect employees which cannot be derogated from by agreement. Where no choice of law has been made in the contract, the Rome I Regulation provides a mechanism for determining which law should apply in order to create greater certainty. The Rome II Regulation allows the parties to choose the law which is to govern their non-contractual obligations. Whether these rules will continue to apply in the future if the UK leaves the EU remains to be seen.
Q What will the impact be on the Financial Services Industry?
A This sector could be very significantly affected because much of the regulatory framework is now based on EU law. Banks and firms providing financial services based in one member state can be “passported” to work in other member states. If they were to lose the passport system, their ability to operate in Europe would be materially curtailed. Equally, the right of a foreign bank to operate in England would have to be separately regulated.
Q Can I export goods to the EU after leaving?
A This is a key question. Of course exports will still be possible but, depending on the terms of the exit deal between the UK and the EU, they may become subject to tariffs. The UK would like to remain in the single market which allows goods and services to be sold without tariff barriers within member states. The EU is likely to link any right to remain with the other fundamental principle of free movement of labour.
Q How will my multi-national workforce be affected?
A If you employ people from outside the EU, you will already have had to apply for a work permit for them and they will not be affected by leaving the EU. The position of EU citizens working in the UK (and UK citizens working in Europe) is currently the subject of intense political debate. One would hope that those people already living in another member state will be allowed to remain but the Brexiteers seem determined to impose restrictions on immigration from the EU.
Stephen Morrall – Partner
Stephen advises companies, partnerships and entrepreneurs on all corporate and commercial aspects of their business. This includes M&A, joint ventures, partnership structures, the structure and governance of closely-held and family businesses, finance and security transactions, international trade, commercial contracts and employment law.
Contact Stephen here.
This information is based on the law in force as at 26 July 2016. Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice. Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances.
If you have any further questions, please do not hesitate to contact our Solicitors, who will be able to assist you further.