Are you ready for the Brexit?
Mr J.A.J. (Joop) Werner I 1 November 2018 I Reading time: approximately 4 minutes
It cannot have escaped your notice: on 29 March 2019, the United Kingdom – consisting of England, Scotland, Wales and Northern Ireland – will leave the European Union (EU). This means that it is leaving the internal market and the customs union. The United Kingdom will thus become a “third country”, outside the EU, subject to different rules. Unfortunately, it is still unclear what these rules will be. The United Kingdom and the remaining 27 EU countries have still not reached agreement on this. The chance of a “hard” Brexit, without agreements on the relationship between the United Kingdom and the EU after 29 March 2019, is increasing. It is therefore wise to prepare yourself for this and pay attention to the following subjects.
- When exporting to the United Kingdom, you will be faced with customs formalities and longer waiting times at the border. This has consequences for the achievable delivery periods.
- After a “hard Brexit”, heavier administrative obligations will apply to exports to non-EU countries. You will have to adapt your administration and ERP system accordingly.
- Also, following a “hard” Brexit, EU products will be subject to the UK’s WTO import tariffs and other charges, which will lead to higher costs.
- Products imported into the UK will have to comply with the UK product requirements. EU product requirements will in principle no longer apply after the Brexit in the United Kingdom, and CE markings will no longer be valid.
- You are likely to pay more customs duties, which will lead to higher costs.
- Suppliers based in or dependent on the United Kingdom may face barriers and may not be able to supply any more or may not be able to do so within the same time frame and at the same rates.
- Also, after a “hard Brexit”, the heavier administrative obligations will apply to imports from non-EU countries. You will have to adapt your administration and ERP system accordingly.
- Unless you have a reverse charge permit, you will have to pay the VAT immediately upon import.
- It will probably become more difficult for employees from the EU to work in the United Kingdom.
- In principle, employees from the United Kingdom will only be able to work in the EU if it has not been possible to recruit within the Netherlands and the EU, Norway, Iceland, Liechtenstein and Switzerland.
- It is expected to be more difficult to have Dutch professional qualifications recognised in the United Kingdom.
- The end of the applicability of EU directives and fluctuations in the pound sterling exchange rate may affect the accrual of social security rights and pensions and the income of seconded staff.
Digital data and services
- Unless the United Kingdom chooses to incorporate the GDPR into its own national law or the European Commission takes an “adequacy decision” in respect of the United Kingdom, you will – save in certain exceptional cases in the GDPR such as express consent or necessity – be prohibited from transferring personal data to the United Kingdom unless you take additional appropriate safeguards, such as the use of a model contract, implementation of an approved code of conduct or certification in combination with contractual arrangements with your relationship in the United Kingdom.
- An EU trademark and a Community design only apply within the EU. When the United Kingdom leaves the EU, an EU trademark and a Community design therefore no longer offer protection in the United Kingdom. Automatic registration of EU trademarks and Community designs with the UK Intellectual Patent Office (UKIPO) is still under negotiation and UKIPO has announced its intention to automatically register all EU trademarks and Community designs for the United Kingdom even without the Brexit Agreement. However, no concrete arrangements for this have yet been made public.
- Both EU and non-EU countries fall within the scope of the European Patent Convention. No changes are therefore expected for European patents.
- It is not inconceivable that, after a “hard” Brexit (or possibly even now), your British contractual partner or you may be able to invoke a “material adverse change clause” or force majeure, suspend obligations or terminate the contract on that basis.
- Geographical scope clauses in, for example, distribution contracts and non-competition clauses also deserve attention. Where reference is made to the EU, the Brexit may lead to a limitation of geographical scope or lack of clarity.
What can you do?
- In order to avoid supply problems as much as possible, alternatives can already be sought, such as other suppliers if UK suppliers are no longer able to deliver, or are no longer able to deliver on time. In addition, you can already identify what additional information and documentation you will need for import and export and make it available, and what charges you will have to pay on import.
- If trademark and design protection in the UK is of interest to you, it might be wise to register separately for that too.
- If you are sending or planning to send staff to the UK, you will need to consider the possible effects of a “hard” Brexit on the employment conditions of your staff.
- In any event, you will need to consider whether, in the course of your business, you are exchanging personal data with UK companies and, if so, for what purpose. Depending on the answers to these questions, you may need to take additional measures to continue exchanging personal data in the future.
- You can also arrange many of the possible risks of a “hard Brexit” in advance by contract, for example by:
- taking into account longer delivery times;
- ensuring that you can pass on cost increases as a result of the Brexit;
- including generous force majeure clauses for yourself;
- opting for payment in euros and ensuring maximum payment security;
- formulating geographical restrictions in such a way that they are not dependent on UK membership of the EU;
- declaring your contracts subject to Dutch law and declaring the Dutch courts competent.
- If you have an existing contractual relationship whose term does not expire before the Brexit, you can try to clarify or renegotiate the terms and conditions. If this is not possible, you can investigate whether you can terminate the agreement without becoming liable for damages and then possibly negotiate a new agreement.
We will be happy to advise you further about the possibilities to limit your risks. If you have any questions about this, please feel free to contact Mr J.A.J. (Joop) Werner (corporate law lawyer) or Mr D. (Dennis) Spek (employment law lawyer).