It is quite a while since my last Brexit blog (How is the Legal Landscape Likely to Change – 8th March 2017). Whilst there has been a great deal (a very great deal) of discussion in the media, speeches at venues around the country and the continent, rounds of negotiations, and other varied politicking, nothing very much has emerged in definitive terms to guide us as to the actual implications and effects of Brexit (the pitfalls or the opportunities, depending on your point of view). Hence the lack of my blogs, because I want to keep these blogs fact-based, and not influenced by personal points of view.
The Government has published what it described as its Great Repeal Bill (proper title The European Union (Withdrawal) Bill), which, whilst proposing to repeal the European Communities Act 1972, which is the basis in UK law of our current EU membership, actually confirms into UK law all current European law which is not otherwise automatically incorporated into our law. This seems a sensible and pragmatic approach – to ratify everything, and then look at each issue on its merits in the fullness of time, and decide what should in the long term be retained and what should be changed. This will avoid uncertainty and confusion on the day that Brexit actually happens.
In the absence of anything more definitive than this, and unfortunately at this stage absolutely no indication on the critical question for business of whether we will be able to trade openly and freely post-Brexit with other members of the EU (that is to say without tariffs and equally importantly non-tariff barriers such as customs checks and the like), this blog now considers the increasingly interesting and relevant question of what are the potential commercial and legal effects of Brexit on existing commercial contracts, many of which were entered into long before the prospect of Brexit became a reality.
Looking first at such existing contracts with EU-based businesses, what will be the position if, in the light of Brexit, a contract becomes either unworkable or, perhaps more likely, unprofitable, possibly because of the fall in the value of sterling in relation to the euro, or because of the impact of tariffs or other non-tariff barriers. Will it be possible to bring these contracts to an end, assuming that there is no express right of termination in the particular contract which applies.
The answer at the moment is “nobody knows”. It may be possible to argue that a contract has become frustrated because it is impossible to perform (impossibility of obtaining necessary labour perhaps), it may be possible to argue that the contract is subject to a “force majeure” event rendering it terminable. I suspect, particularly in situations where a contract has simply become unprofitable (as distinct from incapable of performance) for one of the parties, these possibilities will be difficult to argue, but much may depend upon the particular wording of the contract. This is, however, an issue which our Litigation department is monitoring closely.
What about new contracts, what should businesses be protecting themselves against should Brexit adversely affect a trading relationship with a business partner in the EU. Well, perhaps you should be trying to describe the circumstances which might trigger termination, such as variations in cost as a result of tariffs, or border delays because of non-tariff barriers (e.g. custom controls), to name just two possible situations. Also, think carefully about the need to enforce judgments within the remainder of the EU which have been obtained in the English Courts – there is currently automatic reciprocity between all EU member states as regards enforcement of judgments, what will be the position post-Brexit, it is far from clear at the moment. Possibly you might simply want the chance to review the contract post-Brexit, in which case the contact will need to say so.
Although these issues are currently clouded in uncertainty, both our Litigation and Commercial teams are aware of the relevant issues, both in terms of extricating you (if this is possible) from any existing contract, or best-protecting you in any new contracts you want to enter into and we would be very pleased to advise you based on your specific circumstances.