The negotiations on Britain’s exit from the EU have begun. Brexit will have a strong impact on trade relations with the UK. Moreover, a number of regulations that have facilitated the enforcement of rights in Britain and ensured the mutual recognition of judicial decisions will lapse.
As a result, numerous enterprises and banks will relocate their headquarters or central divisions to the European mainland. Notably the Rhine-Main region will become even more important as a financial and economic hub. The EU Commission is also currently probing the possible transfer of euro clearing and derivatives trading to the EU territory. Several thousands of new jobs are expected to be created in the Rhine-Main region. This tendency is already being felt in terms of a rising demand for office and residential properties.
Before and after Brexit, German and British companies and banks will have to deal with manifold and complex legal issues:
As far as financial market regulation and banking supervisory law are concerned, banking and financial services institutions, payment and e-money institutes, fund initiators/managers and insurance companies will be faced with crucial questions regarding their pan-European business. Following Brexit, how will those entities do business in Europe when the “European passport” no longer exists and cross-border services are restricted? Will it be necessary to set up new establishments in EU member states and apply for further icences? Which group-wide internal restructurings are advisable at this point in time? And what steps should be taken by third-country financial undertakings currently still using the UK as a European (regulatory) hub?
From a corporate law perspective, Brexit will end the freedom of establishment for UK legal entities. This entails serious consequences for companies with a British legal form (Limited, Plc, LP or LLP) and headquarters in Germany. After Brexit, for example, theshareholders of a Limited would in future be subject to personal and unlimited liability for all of their company’s accounts payable. Any such companies should therefore take precautions in due time by initiating restructuring measures as long as Brexit has not yet materialised.
The same is true of any enterprises organised as European entities (SE, SCE, EEIG). As these must have their registered office in an EU member state, a timely relocation should be considered.
Whilst Brexit will not affect the provisions of German labour law as such, it is likely to directly impact any cross-border deployment of personnel under the aspect of the law of residence as well as in regard to employment and social security law details. Potential issues include the drafting of recall clauses in foreign assignment contracts, aspects of posted workers’ social insurance, the composition of the European Works Council, or possible changes to the European Directive on Business Transfers (which has already been implemented in the UK). Due to the expected changes to the free movement of workers, foreign assignments to the UK will have to be prepared even more meticulously in the future.
As for current long-term commercial agreements with UK parties, premature termination or modification of contracts will have to be considered (e.g. due to broadly defined force majeure clauses, MAC clauses or, in individual cases, frustration of contract). For new post-Brexit contracts with UK partners one must bear in mind that the previous legal framework no longer exists, in terms of both substantive law and governing law. Future contract design will also hinge on how the UK-EU relationship will be organised in the future (EFTA membership, EEA, Norwegian or Swiss model, association agreement, etc.).
Brexit also means a lot of insecurity in the IP/IT area. Much will depend on the outcome of the Brexit negotiations. To counteract possible gaps in EU intellectual property rights, applications for national IP rights in the UK should be considered in due time. From the perspective of data protection law, data transfers will be subject to stricter regulations as after Brexit the UK will be treated in the same way as any other non-EU country.