Everyone is waiting to see what happens with the Brexit vote this week. In the meantime, are you considering what the legal implications might be for your business if Britain does vote to leave?
Several areas we see businesses concerned with are adjusting business contacts, managing your workforce, and intellectual property rights.
It’s important to realise though that if the nation does vote in favour of Brexit, changes will not happen immediately. There will be a period of time when the United Kingdom can negotiate its future relationship with the European Union (EU). The process is regulated by law by Article 50 of the Lisbon Treaty.
Protecting your business contracts
While many people are not aware of this, a contract does not need to be in writing: it can arise from conduct, a course of dealings, e-mail exchange or orally. Many SMEs do have written contracts with suppliers, distributors and commercial agents. These contracts may have EU-wide operation, depending on the services, goods or human resources involved.
It’s important to consider whether the consequences of a Brexit would affect the operation or performance of contracts. One example is that EU law celebrates the principle of freedom of movement of goods without import duties or equivalent. Over time Brexit may lead to imposition of tax, duties or equivalent charges – this may make the supply of goods less economically viable.
In this case, it would make sense to either terminate or suspend the contract and so one would need to examine whether the “circumstances beyond the parties control provisions” (also known as “Force Majeure”) in the contract allow suspension and eventual termination. The other parties may well take an opposing view on whether a Brexit is a force majeure event, especially if the choice of law in the contract is not UK law.
Managing your workforce
Another set of contracts that might require review in light of Brexit is your employment agreements. Currently, British businesses can employ workers from within the European Economic area (the EU countries plus Norway, Iceland and the principality of Lichtenstein), as well as Switzerland, without needing immigration permission.
In the event that the UK leaves the EU, theoretically citizens of other member states would no longer have the automatic right to travel to and work in the UK. Realistically, there’s a good chance the UK will agree to the free movement of labour in exchange for an agreement on the free movement of goods.
However, in the absence of such an agreement, it could become far trickier for businesses to employ workers from the EU. If British national law is applied, new arrivals would undergo the points-based type system currently applied to non-EU nationals.
What about workers your business might already be employing from the EU, who are currently based here in the UK? If there is no agreement in place, some may have to surrender their positions and go back to their native country. Yet there are many UK citizens working in other EU countries, so it’s not difficult to imagine that a reciprocal arrangement might be put into place to address this situation.
If Britain does leave the EU, the chances of a mass exodus are slim. It could take years for the details of new arrangements to be finalised. Nothing will change overnight.
Protecting your intellectual property (IP)
Certain types of intellectual property are currently protected through EU directives (e.g. the community trade mark).
Arguably Britain would take these EU directives under its own law in order to enable an easy transition of protection under Brexit.
However, a long-term concern is that Britain might miss out on any future unitary patent regime that the EU intends to carry out. The unitary patent would mean that IP protection across the EU would be covered through a single application, a single fee and a single court.
If Britain leaves the EU, it would have to discuss participation in the unitary patent and whether or not its judges could be included in the enforcement process. Another wider concern is that Britain’s influence may be diminished in the future shaping of EU regulations which could include very the EU regulations relating to IP.
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