Brexit: the impact on your business

23 Jun 2016 | Comment

Today UK voters will be asked to decide whether they wish to leave the European Union, of which the UK has been a member since 1973. Whilst the outcome of the upcoming EU referendum is uncertain, whatever your views, we can all be sure that a vote to leave the EU will have a significant impact on business and legal issues faced by our clients every day.

As my colleague Emma recently pointed out, many of the policies and procedures implemented and adopted in England and Wales derive directly from EU law. A vote to leave the EU would mean that much of this legislation would no longer apply and this would leave numerous holes left to be filled by the government. There are many areas of the law which will inevitably be affected by a vote to leave and these include employment law, company/corporate law, tax law, intellectual property rights, environmental law, data protection, cross-border dispute resolution, competition law… and the list goes on.

We summarise below some of the key issues that are likely to affect our clients.

Dispute resolution

Even if litigating in a national court, EU law provides a lot of the framework for dispute resolution procedure. For example, the rules on jurisdiction, governing law, service and enforcement are all governed by EU law. If we vote to leave the EU then we will undoubtedly need and want to preserve this framework. The danger is that if we are no longer part of the EU it will become much harder to enforce judgments obtained in England and Wales in other countries.

Whether we will be able to preserve our enforcement rights will depend on us obtaining the agreement of other member states to remain part of the framework and there is no guarantee this would be available to us. Whilst this may be possible, we may end up being worse off as other countries such as Norway who are not part of the EU remain subject to certain regulations as a result of being part of the EEA. However, they simply have to adopt European law without having any say at all.

Intellectual property rights

Perhaps one of the most significant changes will be in the law of intellectual property as this area is largely based on EU law. For example, EU community trademarks and EU registered trademarks will cease to be enforceable in the UK. If we exit from the EU then the government will have to offer a procedure where the trademarks already obtained under EU regulations are converted into recognised trademarks in the UK. This alone could potentially be a mammoth task. In reality, this procedure could create huge complications for owners of trademarks and their ability to enforce their rights in different countries as well as in the UK.

Contract law

A vote to leave the EU could potentially lead to an increase in contractual disputes in relation to existing contracts. This could result in parties to a contract being unable or unwilling to comply with the terms of an existing contract made before the referendum. Issues such as free movement of people, exchange rates and trade barriers may all impact upon existing contracts and, of course, the parties’ bargaining power for future contracts.

As a consequence, companies may find themselves involved in more disputes. However, it is likely the increased complexities and costs of pursuing breach of contract claims against a company who is based in an EU member state will prevent companies from enforcing their rights. If we vote to leave the EU then the only certainty is that there will be huge uncertainty for the foreseeable future after the referendum as the UK adjusts to a dramatically different economic and political environment. Due to the notice period that the UK would be required to provide, the exit date would not be before 2018 meaning that the period of two years following the vote would be used to navigate the UK through the changing landscape in the hope that we can make the reality of the decision work. There is, of course, a risk that during this period of uncertainty the UK may ultimately end up trying to negotiate the same trade rights it has now but with none of the member state power or influence from which it currently benefits. The result is yet to be seen.

Whatever the outcome, our lawyers will be ready to advise our clients on the practical impact upon their businesses and the steps that may need to be taken in order to adapt to the post-referendum climate.

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