From here to uncertainty: commercial contracts and Brexit

13 Apr 2017

On 29th March 2017, Article 50 was finally triggered, beginning a further two year period of uncertainty for the UK. Whilst we can’t predict the terms on which the UK will leave the EU, what we do know is that there will be legal and commercial implications for UK businesses. Now is the time for all UK businesses to consider how their existing contracts and trading relationships may be affected post-Brexit. Below, we look at some key commercial questions that UK businesses are likely to face.

Can an existing contract be terminated because of Brexit?

A possible “yes”, depending on the particular contract. Parties may rely on material adverse change or force majeure (unforeseeable circumstances) provisions within existing contracts as grounds for termination. Alternatively, a contract may be frustrated if performance was tied to a particular EU law. That said, the Great Repeal Bill should transpose all EU law in to UK law so this route may be unlikely.

Are there any issues with dispute resolution?

At present, judgments from the court of an EU member state are recognised by other member states’ courts due to a “cross border agreement”. Difficulty will arise if that agreement ends. Enforcing English judgments in the EU may be more complicated and could lead to parallel proceedings across multiple jurisdictions; adding to costs and uncertainty. Businesses should ensure all contracts are clear as to governing law and jurisdiction, or contain robust arbitration provisions.

How might intellectual property be affected?

”Pan-European” registered intellectual property rights are likely to be affected. For example, businesses with an EU registered trade mark (EUTM), which provides protection across the EU, would be at risk following Brexit. For this reason, UK businesses with an EUTM should now consider refiling that mark at the UK Intellectual Property Office. Similar issues may arise with registered community designs but the situation may be more complex as the UK registered design protection only extends to 3D designs.

What are the main data protection issues?

Data protection is one area with a measure of certainty. The UK has already committed to adopt the upcoming EU General Data Protection Regulation, due to be implemented in 2018. This will remain good UK law post-Brexit. That said, there may be contractual issues arising from common data protection provisions which place a prohibition on data transfers outside the European Economic Area: the UK may, after all, be outside that area.

We can advise you with any commercial challenges or issues you have, including those brought on by Brexit. 

For further information or advice regarding the service we offer in reviewing your contracts, please get in touch with Anthony Lee in our Commercial Team or: 
 

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