Blackstones on Brexit

 

The UK Referendum on Thursday 23rd June 2016 will rule whether the United Kingdom (UK) should remain within the European Union (EU) or leave it. If Brexit occurred, the business would change on a global basis especially if they traded with, invested with or operated from the UK. Here at Blackstone Solicitors we believe that businesses should be aware of these changes.

KEY COMMERCIAL CHANGES:

1. DEHARMONISATION OF TRADING RULES: The UK currently benefit from the “four freedoms” of the EU’s single market due to the harmonising effect of EU law;

  1. Elimination of tariffs on goods
  2. Freedom to sell goods and services in the EU
  3. Harmonised export rules
  4. Harmonised minimum regulatory standards

Depending on how much EU law the UK decides to preserve within its domestic legislation post-Brexit, businesses that wish to trade between the UK and EU may find that they have to comply with two, potentially very different, legal systems, losing the benefit of only having to comply with harmonised EU trading law and product standards.

2. REDUCED FREEDOM OF MOVEMENT: Freedom of movement allows multi-national employers to freely move employees between operations across the EU. It is unclear how this principle would apply if there was a Brexit. Staff may need to be relocated to and from the UK if workers no longer have the right to work freely across the EU and/or the replacement of such employees in the EU if the role or function cannot easily be transferred to the UK.

 

THE MAIN IMPLICATIONS TO BUSINESSES:

1.CONTRACTS: Contracts that could be affected by Brexit will include many that relate to the grant of intellectual property (including Software, Trademark and Patent licences) and corporate transactions as well as many commercial contracts. The position under each contract will depend on the drafting of it and the applicable rules of interpretation.

  • Renewal – In the interpretation of any contract which is agreed following a Brexit, the courts will almost always apply the definition of the EU which is relevant at that date
  • Terminations – There is a broader risk of a party seeking to rely on a “force majeure” or material adverse change clause to terminate a contract.

 

Overall, Contracts may become subject to requirements of new regulations.

2. OCCUPATIONAL PENSION SCHEMES: The most likely effect of Brexit on UK occupational pension schemes will be economic. Many UK statutory requirements on pension scheme governance, and prohibitions of various forms of discrimination, derive from EU law. In theory, if the UK left the EU then this UK legislation could be repealed. However, such changes do seem unlikely.

3. INSOLVENCY: A Brexit would have a significant impact on cross-border insolvencies involving Europe because of Council regulation. The Regulation sets out certain conflicts of law rules for insolvency proceedings concerning debtors based in the EU that have operations in one or more Member States. Its central premise is that the Member State in which a debtor has its centre of main interests should be the place in which insolvency proceedings relating to that debtor are commenced. While insolvency proceedings can be started in other jurisdictions where the debtor has an “establishment” these can only be commenced by local creditors and take effect over local assets. If a Brexit occurred, the Regulation would cease to have effect in this country.

HOW CAN BLACKSTONES HELP?

Corporate services are often perceived as a highly complex area of law; with the consequences of getting things wrong being particularly severe. However, we’re here to support and advise you throughout the process, making sure all decisions made are the right ones and giving you the best chance of securing the outcome you are after.

At Blackstone Solicitors we believe that making the right decisions are imperative in the world of business and companies need to act carefully and knowledgeably when entering into transactions.

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