BREXIT – After the Big Bang comes the slow fizzle

July 21, 2016

The Leave campaign was conducted as though a vote for Brexit would create an overnight legal revolution, putting the UK in charge of its own laws again. The reality may be somewhat different. Unlike most fireworks where the big bang follows a slow fizzle, Brexit’s legal rocket may operate the other way round. Firstly, we are likely to stay in the EU for most if not all of the two years that it will take to negotiate a BREXIT. Until then the large number of laws that have already emanated from Brussels into our daily life will stay in place.

Firstly, we are likely to stay in the EU for most if not all of the two years that it will take to negotiate a BREXIT. Until then the large number of laws that have already emanated from Brussels into our daily life will stay in place.

What happens after that is very difficult to predict since it depends what gets negotiated;

Will we continue to have full access to the single market as if we were still part of the European Economic Area? Will we have more limited access – like EFTA countries such as Norway and Iceland? Or will the UK have its own bespoke deal?

Whatever the outcome, although the potential for wholesale legal change is quite large, it may be that in practice change happens at a much slower pace for a number of reasons;

(i) It will take any Government a long time to re-cast all of the numerous EU laws currently applying in the UK, even if the UK Government wanted to do that. Many such laws are highly complex and would be difficult to untangle from UK-only provisions that we wished to retain.  In addition, there will inevitably be only limited legislative time available in Parliament, so only high-priority changes are likely to be tackled with any pace.

(ii) It will actually make sense for many existing EU-inspired laws to stay in place. For example, many social and employment benefits such as the full extent of paternity and maternity law would now be very difficult to take away without large scale protest.

(iii)  We may be required to maintain some EU laws as a condition of our continued access to the single market -eg laws against state subsidy or data protection laws.

For all these reasons we are not likely to be throwing the legal baby out with the bathwater.

In the meantime there are sensible precautions SME’s can take;

– Be careful about dispute resolution provisions in your contracts with overseas customers and suppliers. If you work with a French supplier and you agree that French law applies or that the French Courts are to resolve disputes then you may find that over time their system diverges further from ours because the common glue of over-arching EU legislation starts to fall away

– Make sure that your payment terms are quite strict. Recession still continues in large parts of the EU and may rear its head again here in the UK. Protecting cash therefore becomes even more important than ever. Upfront payments are better than staged payments. Staged payments are better than back-end payments. Make sure you have shorter credit terms for payment (if you are being paid from abroad) backed up by interest penalties if payment is late.

– Protect yourself against currency swings. It may be that the current volatility in Sterling continues in which case you don’t want to get caught short (whether you are buying goods with a weakening Sterling or paying for them in appreciating Dollars or Euros). It may be worth having fixed exchange rates in your agreement or at least ameliorating in the contract the effect of sudden lurches in currency one way or the other.

– Have a written contract, rather than relying on handshakes or emails. When businesses are under pressure they look for loopholes to escape inconvenient obligations. Properly drafted contracts can close those loopholes.

– Keep your eyes and ears open for legal changes. Change is likely to be piecemeal rather than by root and branch. For example, you can now obtain an EU- wide trademark through one EU registration. Once we have left the EU that may no longer be the case, and you may have to apply for trademark protection on a country by country basis. If that happens there won’t be any great fanfare, it will be just one of a number of changes happening on a rolling basis.

Clive Rich, Founder and Corporate Lawyer at LawBite. You can receive a free consultation with Clive or one of LawBite’s solicitors here.