As negotiations continue, so do business preparations. Change is almost inevitable but the extent, nature and timing is uncertain. How can such change be addressed in one-off transactions (e.g. M&A) and in on-going relationships (e.g. key contracts)? This Hogan Lovells Commercial Update uses insight gathered since the referendum to update our previous guidance on Brexit Clauses and Brexit M&A. For further insight into the points summarised here (including drafting recommendations), or to discuss particular scenarios, contact Peter Watts or Helen Kimberley.
Brexit Ready? People Data Comply?
Brexit means change but timing and nature are uncertain. Every company should analyse scenarios, prepare impact assessments and put in place tangible response plans. You need to know that the people you deal with have done this.
Brexit will almost certainly reduce ability to move between the UK and EU. The detail will be determined by transitional and on-going arrangements and post-Brexit immigration policies on each side of the border.
Data movement is increasingly important. The UK has been within a single EU data zone. That may continue but Brexit could result in restrictions on data movement which have not been anticipated when data has been gathered to date.
Brexit will likely have a range of regulatory impacts. Existing licences, authorisations and certifications may no longer be adequate. Other UK and EU Regulations may diverge over time.
Every business is impacted by its own agreements and innumerable other contracts in its supply chain and routes to market. Impacts can include potential termination triggers or breaches.
Brexit will likely trigger changes in operating procedures from certification to customs. Complex businesses rely on IT. Brexit will likely require system changes potentially on accelerated basis.
Diligence a copy of Target's Brexit preparedness plan (and consider a warranty confirming that steps required by the plan have been taken). Request a warranty that all potential impacts of Brexit on Target are disclosed.
Diligence details of non-UK EU nationals working in Target's UK operations (and the reverse) and the movement of Target's workers between the UK and EU. Consider a warranty or indemnity confirming the answers.
Diligence extent to which Target currently relies on moving data between UK and EU. Consider warranty that data permissions will allow continued movement even if UK no longer aligned with EU data regime.
Diligence all EU based regulation applicable to Target's UK operations and seek a disclosure warranty of EU based licenses, authorisations and certifications held. Include indemnity protection for risk areas identified.
When undertaking diligence of key contracts, assess potential impact of key Brexit scenarios. Consider warranty that any material impacts of Brexit on supply chain, customers or downstream market are disclosed.
Enhance systems diligence to assess potential impact of Brexit. Diligence how change provisions in Target's IT contracts would deal with cost and timing of Brexit induced change.
Include requirement to provide copies of, or access to, updates on Brexit preparedness and notification of awareness of a potential impact. Consider obligation to take all necessary steps to address Brexit issues.
Include obligation to ensure immigration status of all relevant personnel. Ensure force majeure clauses are not triggered by inability to have necessary staff due to immigration changes.
Include obligation to gather data with permissions which allow transfer between UK and EU even if data regimes diverge. Ensure force majeure not triggered by regulatory changes which restrict transfer or use of data.
Ensure compliance obligations and applicable laws definitions are robust to deal with Brexit related change (including responsibility for associated costs). Ensure force majeure not triggered by Brexit illegality.
Ensure your own contracts appropriately manage Brexit risk. Focus particularly on termination, change, pricing, territory and force majeure. Consider and address Brexit impact of key sub-contracts.
Include obligation to ensure all systems will operate compliantly notwithstanding Brexit. Consider requiring counterparty to provide all necessary help to enable you to modify systems to accommodate Brexit.
Alicante Amsterdam Baltimore Beijing Birmingham Boston Brussels Budapest Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jakarta Johannesburg London Los Angeles Louisville Luxembourg Madrid Mexico City Miami Milan Minneapolis Monterrey Moscow Munich New York Northern Virginia Paris Perth Philadelphia Rio de Janeiro Rome San Francisco So Paulo Shanghai Shanghai FTZ Silicon Valley Singapore Sydney Tokyo Ulaanbaatar Warsaw Washington, D.C. Zagreb
Our offices Associated offices
"Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. The word "partner" is used to describe a partner or member of Hogan Lovells International LLP, Hogan Lovells US LLP or any of their affiliated entities or any employee or consultant with equivalent standing. Certain individuals, who are designated as partners, but who are not members of Hogan Lovells International LLP, do not hold qualifications equivalent to members. For more information about Hogan Lovells, the partners and their qualifications, see www. hoganlovells.com. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney advertising. Images of people may feature current or former lawyers and employees at Hogan Lovells or models not connected with the firm. Hogan Lovells 2017. All rights reserved. 11764_CM_1017