As “proper” Brexit gets closer, what do commercial lawyers need to consider?
21 October 2020
Businesses are having a tough year with the pandemic and now the spectre of a no-deal Brexit (and even if we do have a trade deal with the EU, there are still going to be many changes) isn’t making thing easier.
We have put together this article which revisits the implications of the UK leaving the EU for certain areas of commercial law, in particular, English contract law and contractual obligations, as well as other steps you can take to prepare for the unknown.
Advertising and marketing
The general rules on advertising and marketing are mainly derived from EU law and are well embedded in UK law as well as in the advertising codes of practice. This includes both advertising content, as well as methods of advertising and how to handle age-restricted products such as tobacco or alcohol. It is unlikely that the UK would make major changes to the rules to diverge from EU law, although the UK government’s obesity strategy would lead to stricter rules on advertising HFSS foods, for example. In addition, both the EU and the UK recognise that online advertising is something that needs to be addressed and both may take similar measures, although they may not be identical. The long awaited E-Privacy Regulation has still not been passed, which would, for example, affect direct marketing, although the UK may choose to implement all or part of it.
It seems likely that there will be some divergence between UK law and EU law, but these changes are likely to happen gradually. In any event, rules often differ between EU members states to some extent already. Organisations carrying out advertising and marketing campaigns across Europe already need to seek local law advice in many cases, so they will probably need to do more of this.
For more information about advertising changes see here.
Agency and distribution
Basic principles of agency are derived from UK law, but the rules on commercial agencies and remuneration and notice periods are firmly rooted in EU law. It is possible that the rules on commercial agencies will be changed. However, this will only be after public consultation and debate in parliament, so businesses would have time to consider the plans and the changes they needed to make.
Some agency arrangements involve outsourcing so the TUPE regulations may apply. Again, any changes to the TUPE regime would be changed after public consultation and parliamentary debate and so there would be time to prepare.
In terms of competition law, the UK Competition Act is based on EU law and will continue to apply to arrangements solely within the UK. If arrangements involve parties in the EEA, EU law will apply. This is particularly relevant for distribution arrangements, which often raise competition law issues.
Distributors who sell UK products on the EU market after the end of the transition period will become subject to importers' obligations. Additionally, manufacturers who choose (or are obliged) to designate an authorised representative or responsible person must ensure that they are established in the EU. Importers to the EU from the UK and vice versa may face new registration requirements, tariffs and unfamiliar customs procedures from the end of the transition period. These are outside the scope of this article.
Confidential information and trade secrets
The law of confidentiality has been developed through the common law in the UK, which will not change post-Brexit. Trade secrets are protected by the law of confidentiality, but are also subject to a specific statutory regime, which is also partly derived from EU law but is fully embedded in UK law.
Consumer protection law
Most consumer law in the UK is derived from the EU regime, but there are many aspects which are UK only, such as the rights in the Consumer Rights Act for consumers if goods are faulty. The CRA only came into force comparatively recently, so it is unlikely that wholesale changes would be made to it. However, there are more EU changes coming, such as GDPR-style penalties for businesses who do not comply with the law and changes to online trading, and it may be that the UK picks up some or all of these changes. There may be fewer rights for UK consumers buying products from EEA suppliers, or at the very least it will be more difficult for UK consumers to enforce their rights overseas. It may also be more difficult for UK regulators to work with EEA regulators on cross-border enforcement. One point that traders may wish to consider now is reviewing their terms and conditions relating to complaints to remove references to the European ODR platform and generally check internal processes no longer refer consumers to European ADR entities.
The key issue here is whether the UK will obtain an adequacy decision from the EU after the transition period ends. EU organisations needing to transfer data to the UK will need to have measures in place to permit this. On the other hand, transferring data in the other direction should be acceptable – although the UK government is keeping this under review.
Organisations processing personal data in the EU will also need to appoint a regulatory authority as its lead authority in the EU as the ICO can no longer carry out this function.
The eCommerce Directive currently allows EEA online service providers to operate in any EEA country, while only following relevant rules in the country in which they are established. This will no longer apply to the UK after the end of the transition period, if no agreement is reached. Information service providers should consider whether their services are in scope, and if so, ensure that they comply with relevant requirements in each EEA country to which they are directed.
The UK government has stated that if there is no deal, the geo-blocking provisions would cease to have effect under UK law. This means that once the transition period has ended, a UK trader could discriminate between its UK and EU customers in ways prohibited by the Geo-blocking Regulation. However, the Geo-blocking Regulation will continue to apply to UK traders who supply goods or services in the single market after the transition period ends.
The laws relating to franchising are largely unaffected by EU law except in the specific areas of law mentioned in this briefing, such as competition, data protection or consumer protection law. The EU has proposed changes to franchising law in the past, but there has been limited progress.
Intellectual property rights
We have set out the answers to key questions relating to how the UK’s departure from the EU will affect IP rights here.
There are key areas of law which affect outsourcing arrangements such as TUPE, data protection, and competition law, as well as public procurement law, which may change in light of Brexit. Those involved in sectors deemed essential to security are currently subject to enhanced security and incident reporting requirements, which will continue to apply, as the UK has legislated for it.
Product liability and safety
The UK's product liability and safety landscape is mainly derived from EU law. The overall long term impact of the UK leaving the EU on the UK's product safety and product liability regimes in the future is currently unclear. Changes are more likely if there is no trade deal with the EU. The EU is also working on changes to the product liability and safety regimes, so there is scope for more divergence in future.
Generally, English contract law consists of legal principles developed and maintained by English courts and Parliament. Most of it will be unaffected by Brexit. Some notable exceptions include areas already considered in this article, such as consumer protection laws and rules about interest on late payments (the UK government is consulting on giving the Small Business Commissioner more powers to deal with traders who do not pay their invoices on time).
Brexit should not affect a choice of English law to govern the contract (or non-contractual obligation). It is unlikely that Brexit will have much effect on English court procedure, but it will affect jurisdiction for cross-border disputes. It might also be more difficult to enforce an English judgment in the EU but an arbitration clause may be a way of addressing this concern.
Brexit could have a significant impact on commercial contracts. Some of the key issues include additional customs processes and procedures, tariffs being imposed, limits to the freedom of movement of people, and more changes in exchange rates. Such changes could have a material effect on the underlying commercial bargain. Rights to provide services and regulatory changes may also affect certain contracts such as financial services or broadcasting contracts.
The UK left the EU at 11pm (UK time) on 31 January 2020, and the transition period came to an end on 31 December 2020. The Trade and Cooperation Agreement reached on Christmas Eve 2020 sets out the shape of the ongoing future relationship between the UK and the EU and provides some degree of certainty for UK businesses.