As everyone knows who has not been on Mars in the last month, in a referendum held on 23 June 2016, the British people voted by a relatively narrow majority to leave the European Union, of which the UK has been a member since 1973. This process has become known as “Brexit”. The referendum is not legally binding on the British government but most people consider it politically binding and it is therefore more likely than not the UK will leave the EU in the course of the next few years. Details on the legalities and formalities of the process can be found on our Brexit blog. Two years’ notice of departure has to be given. Any notice is not expected before September, although its precise timing is up to the new UK prime minister who will be chosen by the ruling Conservative party on 9 September. In the meantime, here are some thoughts on what Brexit may mean for the IT/C sector and what to watch out for. Click here to get to our Brexit website and here to register for one or more webinars of our “Brexit: What it means for your business” webinar programme.
No immediate changes
The first important thing to note is that the referendum result changes nothing in the short to medium term. The same laws, whether EU, UK or English, that governed commercial relationships before the referendum continue to govern it afterwards. The laws that were in force yesterday will be in force tomorrow. And EU laws which are to take effect before the UK’s exit will still do so: the General Data Protection Regulation is one prominent example. Click here for our related post and stay tuned for more from us on that.
What will eventually change will depend on the model the UK and the rest of the EU negotiate for the UK’s relationship with the remaining EU member states. Here is a post on the different post-Brexit options for the UK.
One option after exit would be for the UK to become an EEA member (like Norway) with full access to the single market. If this model is adopted, very little at all will change, ever, except as part of the normal EU legislative process.
But even if a different model is chosen which would give the UK more freedom to divert from the laws governing the single market (e.g., the Swiss model or the Turkish model), we mustn’t forget that English law, for centuries one of the world’s main choices for the law governing international contracts, will remain just that: here is a post which expands on that a little.
So, there is no need for any hasty decisions, but we must look to the future. Here are a few thoughts about some of the IT/C issues that are worth thinking about over the next few weeks as the process of rebooting the UK’s relationship with the EU takes shape and negotiations begin in earnest. Some of these are about changes which may in the long term happen to the law; others, more immediate, are issues relating to the interpretation of existing contracts and the drafting of new ones.
1. Issues in existing/future contracts
- Force majeure and similar events: is Brexit a force majeure event? This depends on the drafting. While most force majeure clauses will be drafted too narrowly to catch Brexit, it is feasible that some unusual force majeure clauses can be construed to cover it. Going forward, we might well see clauses expressly classifying an exit from the EU or at least an exit from the single market as a force majeure event, or as triggering a right to terminate.
- Drafting and interpretation of territorial restrictions or grants: for example, distribution or licensing agreements with a definition of “EU” or “Territory” should be looked at carefully. Does it mean the EU at the time of the agreement or the EU for the time being? Only the context will tell
2. General b2b contract law
- The effect of EU law on English common and statute law relating to contracts in the b2b space is minor but here are some specific issues that may need to be considered:
- the clear advantages of English law as an appropriate global forum choice will remain;
- there are some matters relating to payment terms which are currently regulated at EU level and may change in certain circumstances, depending on how the UK exits; andc. existing protections for commercial agents whose contracts are terminated in accordance with their terms may vary or even cease.
3. Consumer law
This is unlikely to change substantially. Current primary legislation is largely UK rather than EU legislation. Some aspects of consumer law specifically derived from the EU such as distance selling laws may need reconsideration if the UK leaves the single market.
4. Telecoms regulation
This is also unlikely to change substantively as much of the regulatory authority is vested in individual member states of the EU. A more detailed analysis of this issue will appear on our Brexit blog soon.
5. Intellectual property
Again, Brexit will not entail immediate changes but this post illustrates the likely long-term impact of Brexit on trade marks, patents, copyright and other IP to watch out for.
6. New legislation
The EU will continue to legislate and the UK will be bound by any new legislation at least until exit is complete; one thing to watch is the creation of the digital single market, which is not going to be paused. We are holding a webinar on the impact of Brexit on the Audiovisual sector which will include discussion on the digital single market strategy – register here.
So there will be no major changes in IT/C contract law immediately or indeed in the medium term and it is important to note this. Baker & McKenzie’s Brexit Blog will be updated regularly with our thoughts and we will provide pointers to that blog on LegalBytes when issues of interest to the IT/C community are posted.
Keep calm and carry on!