2017 shows the first pictures of Brexit, i.e. the withdrawal of the United Kingdom from the European Union. It is expected that by the end of March Britons will commence the process that will start negotiations with Brussels which will supposedly last two years.
Even though the British premier Theresa May stresses that she wants the whole process to be smooth and orderly, we can expect hard negotiations along this path, and at the same time also the EU’s desire to end it much sooner. At the moment, no party can predict with certainty how Brexit will really end.
It is certain, however, that on the day of exit, if the British do not incorporate the same laws in their national law, the legal system as laid down in the EU legislation ceases to apply. Among other things, Brexit will interact with existing legal relationships, whereby companies will have no influence on the exit flow itself. Therefore, Brexit is not only something happing “far away” at the level of the UK and the EU, but this issue, especially the consequences, should be addressed by national economies as well as companies, whether Slovenian companies operating on the international market, or international corporations, exporters and those having any contractual relationship with British entities or EU entities that are dependent on or related to the British. Brexit will directly affect a number of legal areas.
Existing contractual relationships and civil disputes
In order to strengthen the Single Market, the EU has unified the system of rules on the jurisdiction of the courts, it has also defined the law applicable to the settlement of disputes, and the manner in which the judgments of national courts in another Member State are enforced. Perhaps because of British pragmatism, a comparable arrangement will be maintained in this field. Nevertheless, it is reasonable that individuals and companies that have contracts with a “British” element, especially those who are only entering into such a contractual relationship, assess the risks brought by Brexit in all such relationships. This applies in particular to the enforcement of judicial decisions: those who hold an enforceable decision of the British courts and intend to enforce it in another EU jurisdiction should do so as soon as possible.
In the field of industrial property, the EU provides for, inter alia, two commonly used institutes: the Community trademark and Community model. For now, nobody really knows what will happen to these institutes after Brexit. It is highly probable that Great Britain will maintain the possibility of protecting the trademark and model at national level, but at the same time, at least two issues related to the scope of protection and the possible “transformation” of existing Community trademarks and models into British law remain unresolved. Protection of industrial property is a prerequisite for a successful business. Companies operating in the UK, while their products are protected by a Community trademark or model, are still provided with additional protection through institutes under the British National Law. It makes sense, however, that these companies start considering how they will react in the event of the cessation of the Community model and trademark.
Implications in the field of financial and banking services
Especially in recent years, the EU has strongly regulated banking, finance and investments. An important instrument in this regard is the so called passport regime, which makes it easier for companies operating in those fields to engage in activities in another Member State. Under this regime, a company that is authorized to provide investment, banking or financial services in one Member State may also provide such services in another Member State, and it does not need a special permit, but it only needs a notification to the national regulator. The lion’s share of investment, financial and banking companies operating in the EU is based in London, and the majority are already considering transferring to an EU Member State. Companies that have concluded business deals with them should thoroughly review the concluded contracts and carefully consider the system that such contracts provide in upon corporate changes. They may have an impact on the potential costs of such a contract, the possibility of varying the scope of the tax review and the powers of tax authorities in other EU jurisdictions, etc.
The actual consequences of Brexit and its effect on certain fields will be seen this year still. Today’s conclusions are based primarily on assumptions, but we can nevertheless firmly state that in the case of companies that are in any way affiliated with Great Britain there is legal uncertainty from which they will have to protect themselves in one way or another, and in due course take appropriate business and legal decisions.
(The text was published in the form of a column on 06.01.2017 in the weekly business v newspaper Svet kapitala. The author of the column is Katja Šumah, attorney at law at Law Firm Miro Senica and attorneys Ltd.)