d Brexit: The Countdown How will it affect you? Are you prepared? How can we help? Dechert LLP Page 2 Brexit: The Countdown Brexit Day is only a matter of months away, and the negotiations have not yet provided any clarity. If you haven’t already, you need to start making plans. Whether this involves reaching out to government and helping shape the outcome of Brexit negotiations, or preparing your business for whatever approach is (or isn’t) agreed, you need to advance your plans now, before it is too late. Inaction carries real risks. Businesses should not be lulled into a false sense of security: – In the hope that Brexit may not actually happen: the great majority of politicians are committed to respecting the result of the referendum; or – Because the UK’s future relationship with the EU and the rest of the world remains uncertain: this will persist for years but, once it becomes clear, it will be too late to influence it. Ultimately, there will be winners and losers from the Brexit negotiations; those that offer clear, informed and substantiated negotiating positions to UK government will be viewed as credible interlocutors and will be best positioned to influence both current and future government policy. Therefore, understanding the impact of Brexit on your sector and your business has never been more important to help plan for the future business environment; to manage risks and maximise opportunities; to make clear to your workforce and investors that you are prepared; and to work for the outcome that best meets your needs. Dechert has a team ideally placed to help, with offices in London, Brussels, Dublin, Frankfurt, Luxembourg and Paris. In addition to deep UK and EU legal expertise, our team has practical and policy experience – including of trade negotiations – developed at the European Commission and Council, the World Trade Organization (WTO) and a range of UK bodies including the prime minister’s office, the cabinet office, the Bank of England, HM Treasury, the foreign office, and the attorney-general’s office. Through this, we have an understanding of how the UK and EU institutions operate in practice, the main personalities involved and access to ensure that our clients communicate their positions at the optimum time, to a receptive audience, that maximises the prospect of a successful outcome. Attorney advertising. Prior results do not guarantee a similar outcome. SUMMER 2017 United Kingdom Elections European Union French elections Withdrawal agreement Negotiations begin Free Trade agreement (FTA) UK wants to begin Third Country FTAs UK informal discussions United Kingdom Great Repeal Bill and other bills European Union German elections Free Trade agreement (FTA) EU only prepared to negotiate when withdrawal agreement has made ‘sufficient progress’ Transitional agreement Subject to progress on FTA, but required in any event European Union Italian elections Third Country FTAs Transitional agreements Free Trade agreement (FTA) EU only prepared to negotiate when withdrawal agreement has made ‘sufficient progress’ Transitional agreement Subject to progress on FTA, but required in any event United Kingdom Great Repeal Act; Parliamentary ratification of withdrawal agreement European Union Parliamentary ratification Withdrawal Agreement Conclude sent for ratification Free Trade agreement (FTA) UK wants to conclude; EU claims no conclusion possible before Brexit Transitional agreement Conclude? 29 March 2019 Brexit occurs; Transitional agreement info force, continues until FTA in force; Third Country FTA formal negotiations can begin Summer 2019 Brexit transition/implementation; European Parliament elections 2020 First FTAs expected to conclude 2022 Next UK general election Negotiating Brexit: The next two years and beyond AUTUMN 2017 JANUARY-JUNE 2018 AUTUMN 2018 2019 AND BEYOND Dechert LLP Page 4 Brexit: The Countdown How should UK businesses develop a Brexit strategy? – Reviewing and identifying aspects of your business that rely on, or assume the applicability of, pan-EU arrangements such as EU rules of origin and customs procedures, passporting for financial services, EU-wide licences, etc. – Understanding the actual (or likely) position of the UK, the EU Governments and EU institutions on the contents of the exit agreement, as well as the ambitions for the future UK-EU trading relationship. – Establishing what the UK’s baseline obligations in the WTO and other international bodies means for your business. – Identifying EU laws which currently impact both your operations and that of your wider industry. – Identifying the nature and extent of interactions with pan-EU agencies. – Considering a government relations strategy (whether directly or through an industry group). Identify key proposals or considerations. Make these reasoned, evidence-based, granular and ambitious, while taking account of political realities. Respond to government consultations. – Considering the impact on your supply chains and customer base. – Looking at the nuts and bolts of your business including your data protection obligations; contractual terms; employment rights; intellectual property plans; and ongoing litigation. Specific areas to consider: Tariffs and customs: Consider how the introduction of tariffs on goods traded between the UK and the EU, and between the UK and countries with which the EU has (and may soon have) a free trade agreement, would affect your business and supply chains. Where should the UK government strike a balance between exercising discretion to revise the standards applicable to your products to suit UK interests and, on the other hand, maintaining equivalence with EU standards in order to retain mutual recognition and avoid the need for conformity assessment by EU bodies? Review how you would manage the introduction of customs declarations, inspections, import value-added tax (VAT) payments and (where applicable) licensing and other requirements on UK-EU trade, including compliance with rules of origin requirements. How far do you want the UK to make improvements to the Union Customs Code to suit its national interests, for example by relaxing the criteria for qualification as an Authorised Economic Operator, at the risk of losing mutual recognition of UK customs standards by the EU? Contractual arrangements: Businesses should review their existing contracts and amend the standard terms to account for when the UK ceases to be an EU member state. Consider if your contract relies on EU regulation applicable to contractual arrangements (Rome I)? How and where will the contract will be enforced? Does your contract assume the UK is an EU member state and make references to the EU? Does your contract rely on or assume free Dechert LLP Page 5 Brexit: The Countdown movement within the EU? Is your contract subject to English law or Scottish law, including EU law? UK businesses may wish to adjust their usual Material Adverse Change (MAC) clause to include a bespoke Brexit clause. Such provisions could anticipate the emerging negotiations between the UK and the EU, placing breaks in contracts should an unforeseen or undesirable change in the legal framework be agreed. Data protection. The new EU General Data Protection Regulation will come into force throughout the EU in May 2018 and will be incorporated into UK law. In parallel, a new Data Bill is being considered by the UK government during the next parliamentary session. Businesses should consider their compliance with the new EU Regulation particularly in terms of data rights, cross-border and intra-group transfers and the role of your data protection officer to avoid the anticipated new fines regime. In the long term, the ability of UK businesses to transfer personal data between the EU and the UK will depend on whether the European Commission deems the UK protection of personal data to be adequate post-Brexit. Employment and free movement: The UK prime minister has made it clear that the UK will ‘regain control of its borders’ in Brexit negotiations, but has pledged to protect EU nationals already working in the UK. UK businesses need to think carefully about the terms of recruiting staff from EU member states, whether they will be able to continue to do so with ease, and whether they are likely to find all the relevant skills from the domestic workforce. They will also need to consider UK staff seconded to EU Member States, which may require additional administrative duties in the long term. Environmental law: A significant number of the UK’s environmental laws are derived from European Union environmental law and policy, as well as international agreements. Companies should be prepared for the possibility of regulatory changes in the years that follow Brexit. Intellectual property: Owners of any sort of IP should take steps to ensure that their rights, both in UK and in EU, will continue to be protected after Brexit. EU Trade mark and registered design right owners should consider applying now for UK trade marks, in the event that pan-EU rights cease to extend to the UK. An EU registered design right is likely to be saved albeit as a domestic UK design right, but EU patents are unlikely to continue to be offered UK protection. Litigation and arbitration: London’s position as one of the world’s leading arbitration centres is unlikely to change – in fact, there may be an opportunity for London to become the go-to neutral forum to resolve intra-EU disputes. UK businesses should be aware however, that Brexit could reinforce the UK’s intra-EU Bilateral Investment Treaties (BITs), reducing investors’ enforcement risk. Businesses intending to make significant investments in countries with which the UK has intra-EU BITs are well-advised to consider structuring their investment so as to benefit from the protections that the UK’s BITs could have to offer. Dechert LLP Page 6 Brexit: The Countdown How Dechert can help We have already helped industry bodies, companies and governments to develop their positions; to define clear priorities, red lines and concrete bespoke proposals; to translate this into an advocacy strategy that best fits their needs; and to plan for the different potential outcomes to be faced on 30 March 2019. Our team’s previous experience, not only in the UK government and European institutions, but in the products and advocacy we have undertaken since the Brexit vote, offers clear benefits for Dechert’s clients and has ensured that many are now in a strong position whatever shape the Brexit negotiations will take in the future. When necessary the team can also call upon both local and internationally-based sectoral experts across Dechert to identify potential steps during the forthcoming negotiations that may help to minimize any risks associated with Brexit while also maximizing opportunities for clients. Three particular areas we recommend: – Conduct rigorous gap-analysis: based on an understanding of the likely Brexit options, identifying in detail the issues that businesses will face, where further research is required and where key risks and opportunities lie. – Define priorities and red lines: the objectives should be ambitious while taking account of political realities, based on rigorous analysis and hard data that will stand up to scrutiny. – Design and implement an effective engagement strategy: develop policy papers and detailed draft treaty language for use with decision-makers in the UK and EU governments and institutions. Dechert LLP Page 7 Brexit: The Countdown Richard Tauwhare Senior Director, London International Trade and EU Law +44 20 7184 7350 email@example.com Andrew Hood Senior Director, London International Trade and EU Law +44 20 7184 7315 firstname.lastname@example.org Roger Matthews Senior Director, London International Trade and EU Law +44 20 7184 7418 email@example.com Miriam Gonzalez Partner, London Co-Chair, International Trade and EU Law +44 20 7184 7892 firstname.lastname@example.org Richard Frase Partner, London Financial Services and Investment Management +44 20 7184 7692 email@example.com Alec Burnside Partner, Brussels Antitrust/Competition +32 2 535 5433 firstname.lastname@example.org Anne MacGregor National partner, Brussels Antitrust/Competition +32 2 535 5425 email@example.com Peter D. Astleford Partner, London Financial Services and Investment Management +44 20 7184 7860 firstname.lastname@example.org Marianne Schaffner Partner, Paris Intellectual Property +33 1 57 57 80 60 email@example.com Doug Getter Partner, London Corporate +44 20 7184 7425 firstname.lastname@example.org Our Brexit team in London, Brussels and Paris Mark Stapleton Partner, London Tax +44 20 7184 7591 email@example.com Charles Wynn-Evans Partner, London Labor and Employment +44 20 7184 7545 firstname.lastname@example.org Page 7 Dechert is a global law firm. Focused on sectors with the greatest complexities, legal intricacies and highest regulatory demands, we excel at delivering practical commercial judgment and deep legal expertise for high-stakes matters. In an increasingly challenging environment, clients look to us to serve them in ways that are faster, sharper and leaner without compromising excellence. We are relentless in serving our clients – delivering the best of the firm to them with entrepreneurial energy and seamless collaboration. 07.17 dechert.com © 2017 Dechert LLP. All rights reserved. This publication should not be considered as legal opinions on specific facts or as a substitute for legal counsel. It is provided by Dechert LLP as a general informational service and may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome. This publication uses actors to portray fictionalized events and scenes. We can be reached at the following postal addresses: in the US: 1095 Avenue of the Americas, New York, NY 10036-6797 (+1 212 698 3500); in Hong Kong: 27/F Henley Building, 5 Queen’s Road Central, Hong Kong (+852 3518 4700); and in the UK: 160 Queen Victoria Street, London EC4V 4QQ (+44 20 7184 7000). 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