Brexit’s impact on your contractual obligations

Our Corporate team examines the possible implications of Britain’s pending exit of the EU on business contracts and what steps businesses may need to take.

We previously published a series of blogs outlining what effect this may have on various sectors of industry, and now that Britain has voted to leave, it is important for businesses to determine how the UK’s departure from the EU may affect them and the steps that they may need to take to mitigate the impacts.

The businesses affected are most likely to be those who trade with other EU countries. As a result, they may need to review the terms of any ongoing contracts.

Going forward

How the UK’s relationship with the EU will continue moving forward looks far from certain, with question marks looming over whether the UK will retain access to the single market and when the UK will actually trigger the article 50 procedure to exit the EU.

This is also exacerbated by disruption and in fighting within both of the UK’s major political parties, adding further uncertainty to UK policy making.

Although the UK’s exit from the EU may not take place for some time, businesses should consider reviewing their contracts at this stage to ensure they are not caught off guard by any future developments.

Particular issues to consider include:

• Contracts that have been priced on the basis that trade between EU countries will have no tariffs or other barriers imposed on them. Various members of the Leave campaign have stated that they are confident of the UK retaining access to the single market even after we have left the EU. However, Germany’s foreign policy spokesman Jurgen Hardt has advised that this may not be a realistic option.

• Contracts that rely on harmonised licensing or regulatory regimes. One of the key arguments of the Leave campaigns was what they perceived as unnecessary “red tape” emanating from Brussels. Therefore if the UK opts to cut any licensing or regulatory regimes that harmonise UK and EU law, contracts that rely on compliance with such provisions could be hindered.

• The impact of market disruption and fluctuations in currency.

• Review of any terms that could be enforced against a company in light of the Brexit vote such as a force majeure clause. Quite a few current agreements we have reviewed include provisions that state “any law or any action taken by a government or public authority, including without limitation imposing an export or import restriction, quota or prohibition, or failing to grant a necessary licence or consent” will be a Force Majeure event.

• Contractual relationships that rely on the free movement of people and workers in the EU. The Leave campaign argued that stronger controls were necessary to reduce immigration from the EU; therefore businesses that frequently recruit workers from the EU could be affected.

If you are a company that frequently trades with other EU countries, you contact our Corporate team on 01772 258321 to discuss any issues.