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A preview of 2017 for the commercial eye

If 2016 was the year of unpredictability (Brexit and the election of Donald Trump), 2017 looks like the year of uncertainty. Whether and when the UK will leave the European Union remain unanswered questions, with the House of Lords yet to approve the invocation of Article 50. This creates further speculation surrounding the ongoing enforceability and applicability of current European legislation as well as the impact of any future legislative changes which may be introduced by the European Union. Businesses of all sizes should, therefore, brace themselves to deal with whatever the next 12 months brings.  

Brexit and Contracts

Leaving the European Union is likely to lead to contractual complications for many businesses. Preparation should already be underway to ensure that contracts comply with the General Data Protection Regulation (GDPR) which will come into force in the UK, regardless of Brexit (information on the GDPR is available on the Schofield Sweeney website). The uncertain year ahead should leave businesses concerned about the way contracts are drafted, especially where such contracts are sensitive to the impact of Brexit i.e. those involving European Union imports and exports or dependent on labour from other European Union countries.

A Force Majeure clause deals with unexpected and disruptive events which may excuse a party from its obligations. A year ago, Brexit was largely unexpected and many would also argue that leaving the European Union is indeed disrupting. It is, however, unlikely that Brexit and the impact it will have on the UK will fall within the definition of a Force Majeure event in most contracts. Businesses should, therefore, consider carefully the way in which termination clauses are drafted so that there is the ability to exit a contract if obligations become untenable as a result of Brexit. Similarly, businesses may wish to consider negotiating clauses which allow them to vary the terms of their contract if and when the impact of Brexit warrants this.

Careful thought should be given to the definitions used in addressing such issues. For example, the meaning of “EU” should be appropriately defined so that it accounts for exit of the UK (or indeed any other member states). Likewise, given how vague Brexit has been defined thus far by the government – “Brexit means Brexit” – a clear definition of the events which shall constitute such event should be used in contracts to avoid any later complications: will the event of Brexit be defined by the triggering of Article 50, or when the UK actually leaves the European Union and/or single market?

Brief encounters of a 2017 kind

Other areas to keep a close eye on in 2017 are:

  • Digital Single Market: The essence of the Digital Single Market is to ensure common data protection laws and to provide better access to products and services with a focus on the free movement of goods, persons, services and capital. Certain initiatives of the Digital Single Market will be implemented before the UK leaves the EU, but it is unclear as to what extent the remainder will be implemented, and/or whether the rest of the EU will continue to reciprocate arrangements post-Brexit.
  • Commercial Agents: The Commercial Agents (Council Directive) Regulations 1993 provides protection to commercial agents across the EU. There will be questions as to whether such protections shall remain for the long-term post-Brexit. Agents should consider taking steps to incorporate the statutory protections into their contractual arrangements with principals. The importance of this is even greater where an agency agreement may have been entered into in reliance upon the Regulations;
  • Competition law: If the UK exited the EU and EEA entirely, the UK would be free to determine its own competition rules. However UK companies doing business in the EU will continue to be subject to the EU competition law, so the interplay between these regimes would need to be considered carefully. With much of what is to come in 2017, there is uncertainty as to the impact British businesses will face post-Brexit and much will come down to the relationship which the UK negotiates with the EU.

Next steps for businesses

With a “hard Brexit” apparently on the cards, it is important that businesses keep up to date with any related developments. Steps should be taken to ensure that contracts and arrangements are prepared to deal with the uncertainty ahead so far as is possible. Significant changes in the political sphere are also expected to impact IP rights, and businesses relying on European protection should start re-assessing their enforcement abilities and strategies.

For further information please contact our Commercial Team on 0113 220 6284

 

About the Author

Karen Crutchley

Partner

Karen is a Partner working in both the Commercial and Corporate teams.

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