issue three Brexit July 2016 A legal perspective In this Issue: Introduction 1 Impact of a Brexit on Irish Corporates and Irish Businesses 2 Financial Services 4 Asset Management / Funds 6 Equity and Debt Capital Markets 8 Energy 10 Competition, State Aid and Telecommunications Law 12 Intellectual Property, Data Protection and Information Technology 14 Litigation 16 Employment 18 Pensions and Employee Share and Other Incentive Plans 20 Ireland–UK: Imports and Exports 22 Tax 23 Protection of the Environment 24 What Happens to EU Law Post-Brexit? 26 UK-EU Legal Relationship Post-Brexit 28 In the Long Term 29 McCann FitzGerald Brexit Group 30 1 | mccann fitzgerald ¼ july 2016 Introduction On 23 June 2016, by a relatively close margin (52% to 48%), voters in the United Kingdom indicated in a referendum that the UK should leave the European Union. However, no alternative legal or political treaties and/or arrangements were put to the voting public in the referendum. Therefore, as one commentator put it: “The referendum was a vote against something but it wasn’t a vote for anything.” The referendum was advisory and no legal or regulatory consequences flow exclusively from the result of the referendum itself. However, the UK Prime Minister, Theresa May, has committed to respect the result. Therefore, this Legal Perspective anticipates that Brexit will be implemented: the UK will “leave” the EU, even if the timing and bewildering logistics of it doing so are as yet unknown. As predicted by many, including McCann FitzGerald, the vote to leave has resulted immediately in economic, legal and regulatory uncertainty. We also know that the outcome of the referendum will have a major impact on domestic politics not just in the UK but also in Ireland, in the rest of the EU and in many other parts of the world for some time to come. From a business perspective, the consequences are significant. There is a real concern that if demand for goods and services falls and investment is deferred or abandoned then real damage will result to large companies and to SMEs alike. There may also be a damaging loss of competitiveness caused by currency devaluation or volatility. However, there may also be some advantages for Ireland – especially in financial services – and Ireland can offer solutions for businesses that are operating in the UK and elsewhere, in the new environment. Nonetheless, the route ahead is uncharted yet seems certain to be long and arduous. This Legal Perspective examines the implications of Brexit for Irish companies and businesses which seem likely to arise from a changed relationship between the EU and the UK and Ireland and the UK. We consider the possible changes to the legal and regulatory environment in different sectors and work areas. We also make suggestions regarding the preparations that businesses should or might make now and prior to Brexit taking effect in 2018 or thereafter. The timing and bewildering logistics of Brexit are as yet unknown 2 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Therefore Irish corporates and businesses should review their business models and arrangements in order to identify weaknesses and possible concerns, legal and business risks and opportunities and steps that should or ought to be taken in the aftermath of the ‘Leave’ vote. To assist, in the remaining sections of this Legal Perspective briefing we look at different legal areas and some industry sectors to both identify and, as best we can in these uncertain times, address the key legal uncertainties and risks that arise. The starting point is to establish a review team to prepare a plan (or the outlines of a plan) and to have as a primary aim the identification of the principal aspects of the company’s business that will be affected most by Brexit. Impact of Brexit on Irish Corporates and Irish Businesses ¬ Primary task: what part(s) of our business will be affected most by Brexit? ¬ How reliant is our business on UK or UK-based counterparties? ¬ How many of our UK or UK-based counterparties are, in turn, reliant on EU business, support, grant aid or counterparties? ¬ Will a change in the UK regulatory environment affect, interrupt and/or expose our business? ¬ Will our funding or funding sources need to be revised? ¬ Might our cost of funding be impacted? ¬ What is our position in relation to sterling? And will we need to change our currency exposure(s)? ¬ Will any material contracts require reworking or revision? ¬ Might Brexit ‘trigger’ any provisions of the company’s existing contracts (such as a material adverse change clause)? ¬ Do we need to review investment decisions taken or consider future investment decisions differently? ¬ What, if any, employment, visa, etc impact(s) could there be for us? ¬ What sector-specific issues are there for us? It is generally accepted that Brexit poses the most significant challenge that the Irish economy and Irish business have faced in decades. General Questions for the Review Team The starting point is to identify the aspects of the company’s business that will be affected most by Brexit 3 | mccann fitzgerald ¼ july 2016 Anticipating the legal and regulatory effects of Brexit is like forecasting the longterm weather: there are so many variables that we can only generalise. We do not have any sense of what new legal, constitutional, regulatory, tax and economic regime(s) and relationships might be created in place of today’s arrangements or the timeframe in which changes would be implemented. There is no meaningful precedent. The remainder of this Legal Perspective briefing examines specific areas which might require legal and/or regulatory consideration. However, we recommend that your review team (including, at least for this purpose, your general counsel) reviews transactions involving English law and UK-based parties and considers at least the following matters: ¬ Market access: might your business require new, alternative or additional authorisations, licences, etc? ¬ Banking and lending: you should review loan and credit documentation, security and guarantees ¬ Derivative transactions: in the short term following the ‘Leave’ vote, do you anticipate having to provide collateral where values have fallen dramatically? In the longer term, the non-application of the EU directive on financial collateral arrangements could raise many issues ¬ Financial services, asset management, funds: possible significant changes to both the structure of transactions (as a result of the loss of passport rights) and documentation reflecting revised and/or new legal and regulatory framework(s) ¬ Mergers and acquisitions: although underlying company law may not change very much, the competition law regime would change and this could be important in a number of deals. There may also be a risk of future dual regulation rather than mutual recognition ¬ Companies and corporate transactions: underlying law may change a little but areas such as employment, pensions, health and safety, IT and data protection should all be considered ¬ Employment: will non-UK nationals employed in the UK, and UK nationals employed in the EU, have continuing rights to work in the other jurisdiction? ¬ Commercial dispute resolution: as the UK will no longer be a part of the EU some parties may review governing law, jurisdiction and arbitration provisions when entering into new contracts with cross-border elements ¬ Environment and energy: the EU energy and environmental directives and regulations will no longer apply to the UK or UK businesses. The impact on existing and future contracts may be considerable ¬ Restructuring and insolvency: this is a particularly difficult area. The Insolvency Regulation will no longer automatically have direct effect in the UK and, while it is likely that it would be replaced with a similar legislative regime, that would require change to both UK law and EU law Impact of Brexit on Legal Questions for the Review Team Irish Corporates and Irish Businesses (continued) 4 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Financial Services The UK financial services industry is the most exposed of all UK industry sectors to Brexit. There may be short and medium-term gains for Irish financial services but the longer-term position is uncertain and somewhat insecure. Credit institutions/banks Brexit may impact on banks in diverse ways. In particular, it may be that a UK bank: • no longer is able to offer its services in an EU Member State or operate as an EU established branch, or • needs to establish an EU-regulated subsidiary to avail of the existing freedom to conduct business in the EU (passporting right). Among other things, this may mean transferring senior staff members to an EU Member State and putting in place outsourcing arrangements between the subsidiary and the UK parent company. Depending on the degree of divergence between UK and EU financial services legal and regulatory requirements post-Brexit, it might also mean complying with two (very) different legal and regulatory regimes simultaneously. A non-EU bank which currently relies on a UK-based subsidiary to operate freely in other EU Member States may need to consider relocating that subsidiary to a continuing EU Member State if it wishes to continue to benefit from the passporting rights which give it this business freedom. However, a UK bank would still be able to offer loans to Irish SMEs (as indeed may any non-EU bank) as lending to corporates is not (of itself ) an authorised activity in Ireland. This may also be the case in other EU jurisdictions. Brexit also means that an Irish or other EU bank seeking to provide banking services into the UK should consider establishing a separate UK subsidiary as the existing crossborder freedoms would not operate unless the UK chooses to permit such flexibility. Some commentators believe that the UK leaving the EU could lead to lower UK economic growth and investment, higher unemployment and inflation, and a devaluation in sterling. Some other commentators disagree with this. However, there is little disagreement that the UK financial services industry, which makes a huge contribution to the UK’s economy and trade balance and is a key source of the UK’s tax revenue, is the most exposed of all industry sectors in the UK. There is growing evidence that Brexit threatens the UK’s position as perhaps the leading international financial centre in the world and already – even before the UK formally leaves the EU – weakens its attractiveness to overseas investors. As is broadly acknowledged, the UK plays an active role in the EU decision-making process in the area of financial services and Ireland and its financial services industry have benefitted greatly from the UK’s active role. Undoubtedly Brexit will affect EU policy and decisions in this area and, although its precise impact cannot be known at this stage, the future consequences for Ireland’s financial services industry are of concern. There may be short and even-medium term gains but the longer-term position may be not merely uncertain but also somewhat insecure. We now consider some relevant areas and likely issues. Brexit may impact on banks in diverse ways “ ” 5 | mccann fitzgerald ¼ july 2016 Investment firms Under MiFID II, post-Brexit a UK investment firm should still be able to provide investment services to eligible counterparties and certain professional clients within the EU once it is registered with the European Securities and Markets Authority (ESMA) and as long as the UK – as a “third country” – continues to apply prudential and business conduct requirements equivalent to those applicable in the EU. A UK investment firm should also be able to offer services to retail clients and other professional clients when permitted to do so by an individual EU Member State. However, some Member States are likely to require a UK investment firm to establish a branch in their jurisdiction and obtain prior authorisation before seeking to provide such services. Where a UK investment firm establishes an authorised branch in an EU Member State, that branch should be able to passport throughout the EU to eligible counterparties and certain professional clients, as long as the UK retains a legal and supervisory framework that is broadly equivalent to that applicable in the EU. The authorised branch will also need to comply with certain information requirements under MiFID II. The passporting right will not extend to retail and other professional clients. Payment service providers Brexit may also mean restricted EU market access for UK payment service providers. It is likely that, following Brexit, certain UK payment service providers will need to become authorised in an EU Member State if they wish to continue doing business in the EU. However, once authorised, those payment service providers would then benefit from passporting rights throughout the remaining Member States of the EU. Insurance Following Brexit, a UK-established insurance firm will no longer be able to passport into a continuing EU Member State, on either an establishment or a services basis, in order to underwrite risks or commitments in that host Member State. As in the case of a credit institution, in order to avail of the passporting right, a UKestablished insurance firm would need to establish a subsidiary within the EU, which could then passport to other EU Member States. EMIR The European Market Infrastructure Regulation (EMIR) reflects international rules regarding clearing, trade reporting and risk mitigation. Consequently, post-Brexit, the UK will need to continue to adhere to these rules – it will have a strong economic incentive to do so. It seems likely that UK Central Counterparties (CCPs) will be treated as “third country CCPs” meaning that they would have to be recognised by ESMA if they wish to continue offering their services to EU-based financial institutions. Before granting such recognition, ESMA would need to be satisfied that the UK regulatory regime is equivalent to that of the EU. This would not necessarily be a straightforward process, especially in light of the protracted and controversial negotiations surrounding the equivalence decisions for US CCPs. Different issues for different providers Although Brexit may raise unique issues for some financial services providers, the biggest risk for every provider will be UK companies’ loss or restriction of their access to the EU single market. While in some cases the applicable regulatory framework provides for EU market access by third country service providers, this depends on the relevant third country having equivalent regulations in place. In other cases, the relevant legislation does not contemplate any framework for third country access. In such areas, and in areas where the UK’s regulatory regime is not considered equivalent, a financial services provider will need to consider establishing an EU subsidiary to ensure access to EU markets. This applies to both UK firms, and third country firms which are currently passporting from the UK. Similarly, EU firms wishing to access UK markets will need to consider establishing a UK subsidiary in order to do so. …the biggest risk for every [UK] provider will be UK companies’ loss or restriction of their access to the EU single market “ ” Financial Services (continued) 6 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Asset Management / Funds Brexit raises a range of potential issues for the investment funds industry. Can Ireland provide some solutions? For new UK funds established post-Brexit, the option of being authorised as a UCITS may no longer be available, thus restricting in a material way their distribution anywhere outside of the UK. Even if the UK (as one might expect) were to attempt to put in place bilateral arrangements with the EU permitting it to establish UCITS-type vehicles (full compliance with the UCITS Directive would, we imagine, be a pre-requisite), there is no guarantee that this could be done and, even if it were achieved, there may still be a period of time during which the option is not available and the issues mentioned above will still be relevant for both existing and new UK funds. UK-authorised UCITS Brexit creates uncertainties for UKauthorised UCITS. These include: ¬ UK UCITS may no longer be capable of benefitting from UCITS distribution passport ¬ UK UCITS may be characterised as alternative investment funds ¬ In the absence of ‘grand-fathering’ arrangements, it is not clear what the impact on investors in such UK UCITS might be: – might they be restricted in making further investments in the UK fund? – might they even be forced to redeem their holdings in the UK fund? ¬ Depending on the investor type, even if an on-going distribution passport is available, the internal governance requirements of the investor may require it to redeem its investment (eg a pension fund will often be required to invest only in funds authorised as UCITS and, postBrexit, it seems likely that a UK fund would not be able to meet this requirement). Post-Brexit Distribution Issues Ability of UK asset managers to provide investment management services within EU It seems likely that the UK will be treated as a “third country” with the following consequences for UK asset managers: ¬ No automatic right to passport investment services to clients in the EU: - Passport rights will be dependent on whether UK firms can meet “equivalence standards” ¬ Equivalence difficulties: - would need to retain existing – and replicate future – EU legislation - UK implementation may not be deemed to be equivalent - ESMA will determine what equivalence is, and will do so without any UK input ¬ Investment firms will be faced with having to comply with UK as well as EU legislation, which may well diverge over time or, at a minimum, be applied inconsistently. Brexit creates uncertainties for UKauthorised UCITS. “ ” 7 | mccann fitzgerald ¼ july 2016 Location of UK-authorised management companies of EU-authorised UCITS Existing UCITS legislation requires that UCITS management companies are domiciled in the EU. Therefore it is far from clear that, post-Brexit, UCITS management companies could continue to be based in the UK. AIFMD Under the EU’s AIFMD regime, UK entities authorised as alternative investment fund managers (“AIFM”) may market EU funds to professional investors pursuant to a panEEA passport. Post-Brexit (as is the case for any current non-EU AIFM or non-EU AIF): ¬ UK AIFMs that wish to raise capital within the EU will no longer automatically benefit from this advantage; and Note: for an Irish AIFM, all EU AIFs (whether UK AIFs which redomicile to an EU Member State or AIFs in any other EU jurisdiction) to which such entity is the appointed AIFM will have the benefit of the AIFMD distribution passport. In addition, it is likely that any Irish UCITS ManCo or Irish AIFM will have the ability to perform the same investment management services currently performed pursuant to a MiFID licence held by a UK investment manager. Irish Solutions ¬ even if the EU were to permit UK AIFMs to have access to EU markets, it is likely that this would be on the basis of compliance with AIFMD but in circumstances in which the UK would not have any opportunity to influence what AIFMD would require of such UK firms. Cost of compliance We cannot foresee any reduction in the cost of regulation for UK fund providers/fund managers post-Brexit. Indeed, it seems to us that costs may increase to ensure compliance with both domestic regulation and EU legislation. ¬ If investors require UCITS products and Brexit means existing UK UCITS can no longer be deemed UCITS, it may be possible to redomicile an existing UK UCITS to Ireland or establish a new UCITS in Ireland which will then have the benefit of the UCITS distribution passport. ¬ For a UCITS ManCo based in the UK which needs to retain the ability to act as ManCo to UCITS (either existing UK UCITS which need to redomicile to an EU Member State or a UCITS domiciled in another EU jurisdiction), it may be possible to establish an Irish UCITS ManCo capable of passporting its services as a UCITS ManCo to UCITS established in any EU jurisdiction. ¬ For an AIFM based in the UK which needs to retain the ability to act as AIFM to AIFs (whether existing UK AIFs which need to redomicile to an EU Member State or EU AIFs in any other jurisdiction), it may be possible to establish an Irish AIFM capable of passporting its services as AIFM to AIFs in any other jurisdiction. ¬ Even post-Brexit, it seems likely that existing UK investment managers will be deemed capable of continuing to perform discretionary portfolio management in respect of Irish funds via a delegation from a third party Irish UCITS ManCo or Irish AIFM or a delegation from an Irish UCITS ManCo or Irish AIFM newly established by the relevant UK investment manager. Asset Management / Funds (continued) 8 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Equity and Debt Capital Markets Brexit may have a substantial impact on business confidence, affecting corporate finance transactions in significant ways. Business as usual? The direct impact of Brexit on existing deals may be modest or negligible. Contracts remain enforceable and parties’ obligations and rights thereunder are, mainly, unaffected. Given that the UK withdrawal agreement will be negotiated over (at least) a two-year period, many existing transactions will complete before Brexit is implemented. However, many commercial loans are for a three to five-year term and bonds often have a longer maturity. Therefore Brexit may become a live issue for some existing facilities. Also, it would be naïve to assume that this would mean “business as usual” for the Irish corporate finance sector. The insecurity and financial market volatility following the ‘Leave’ vote are well known. This means that Irish business activity with firms in the UK may be reduced for a period. In addition, many Irish companies may be reluctant to do business in what would be, in a number of respects, a new market in the UK. Single market for capital Depending on the post-Brexit arrangements between the UK and the EU, UK-based companies might no longer, as of right, have unrestricted free access to the EU single market through the “single passport”. Instead, depending on the nature of the negotiated exit, the UK might only have restricted “third country” access, or continued access to EU markets but without the ability to vote on relevant EU legislation. This uncertainty regarding post-Brexit arrangements seems likely to hinder the UK’s ability to act as a hub for raising capital and will call into question the suitability of UK-based investment banks to provide certain services in the EU. It also is likely to affect the EU’s Capital Markets Union project: Brexit may fragment capital markets in Europe between London as an international financial centre and the postBrexit EU, particularly if the UK is no longer a member of the EU Single Market after withdrawal. There will be implications beyond the UK. Irish firms could face difficulties in accessing equity and debt capital finance from UK-based corporates, investors and investment banks. However, it seems likely that the existing exemption from withholding tax on payments of interest by Irish “section 110” vehicles will remain, under the Ireland-UK double taxation treaty. Equity and debt capital markets The offer and trading of equity and debt securities is facilitated by a harmonised EU regulatory regime, comprising the Prospectus Directive, the Transparency Directive and the Market Abuse Regulation. Under the regime, a single prospectus may be used to offer and list securities across multiple EU jurisdictions. Following Brexit, this ability to ‘passport’ prospectuses may be lost, with any prospectus required for an offer or listing in the UK requiring approval from the UK regulator and any prospectus issued by a UK issuer requiring approval from each EU Member State in which the securities are to be offered or listed. This would lead to difficulties and increased costs for Irish companies with regard to offering their shares in the UK and vice versa. Irish investors may suffer as a result. Contractual provisions Problems are already arising in respect of financing documentation and terms that contemplate Brexit. Uncertainty exists and many borrowers and lenders are unsure 9 | mccann fitzgerald ¼ july 2016 whether they should be requesting Brexitrelated termination rights. Depending on the law governing a contract, new law regulating Brexit might supersede existing contractual provisions or, alternatively, uniquely negotiated contractual provisions might unintentionally override what would otherwise be useful legislation that comes to regulate Brexit. Therefore, for the present parties should be cautious about adopting terms that provide for Brexit until there is at least some clearer picture of the form that the negotiated post-Brexit arrangements between the UK and the EU will take. For example, it is not clear what effect Brexit would have on ‘material adverse change’ and ‘event of default’ clauses. It may be that a party would not be able to rely on Brexit as triggering such clauses in a contract that was concluded pre-referendum. Either way, a lender in a new transaction may wish to consider retaining its ability to rely on a ‘material adverse change’ clause, depending on the form that a negotiated Brexit takes (despite knowledge of Brexit when the transaction was entered into). Neither is it clear what impact there will be post-Brexit by the parties choosing English law to govern their agreement: the postBrexit arrangements for jurisdiction of courts and the enforcement of judgments is also uncertain. In light of this uncertainty, parties to current agreements might think it prudent to choose the law of a Member State that intends to remain a member of the EU, such as Ireland, to govern their agreement. Further, equity and debt issuers should disclose risk factors related to Brexit in their prospectuses, where an issuer’s business or transaction structure would be negatively affected by certain forms of post-Brexit UKEU relationships (see further below). Ultimately, like a long-term weather forecast, nobody can be sure what Brexit will bring. Much depends on the legislation that will be enacted and the agreements that will be made to give effect to Brexit. However, it seems likely that Brexit will impact current financing transactions in terms of timing and through a reduction in general business confidence to enter into deals. Even before the UK referendum the selling documentation in some capital markets transactions included risk factors regarding the possibility of a Brexit. Since then, the risks seem more certain but not any more clear. Language such as this may become common: “A referendum on UK membership of the European Union (held on 23 June 2016) advised the UK Government to “Leave” the EU (a “Brexit”). The form that Brexit takes, and the legal and regulatory consequences of Brexit, cannot be known until the negotiations to give effect to Brexit are concluded. However, the referendum has led to significant new uncertainties and instability in financial markets and has affected the issuer’s risk profile. These uncertainties, and the legal form and the legal and regulatory consequences of Brexit, may have material adverse effects on the issuer’s business, financial condition, results of operations and prospects. In addition, it is unclear at this stage what the consequences will be for the issuer, the manager, the sponsor or any other transaction party when Brexit is implemented.” Brexit Risk Factors Ultimately, like a long-term weather forecast, nobody can be sure what Brexit will bring. “ ” Equity and Debt Capital Markets (continued) 10 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Energy Brexit will result in the loss of a pioneer of liberalisation from the EU energy market. The UK is probably the largest influencer in terms of setting out the plan and delivering on the energy market. So [from outside the EU] we can’t help shape it – shape it in the best way for the UK consumer and UK businesses. That would be a loss because you would be going into an area of uncertainty - amber rudd, then uk secretary of state for energy and climate change, 3 february 2016. “ ” EU energy policy EU energy policy and regulation is built on three pillars: competitiveness, security of supply and sustainability. These are to be achieved through: • a fully integrated internal energy market with open supply and generation markets, regulated access to networks and separation of energy production from distribution; • enhanced, and increasingly regulated, solidarity amongst Member States in respect of security of supply; and • energy efficiency and decarbonisation (currently focused on the 2020 package). See boxes on the opposite page for more detail. The UK has been a pioneer in liberalising its energy markets and its involvement in shaping EU energy policy will be missed. Uncertainty will prevail The shape of the post-Brexit landscape will be crucial. If the UK joins the EEA, it will remain within the EU market and subject to EU legislation. There may be some possibility that the UK might benefit from limited derogations recognising its specific situation, although this possibility seems more remote in the case of a participant which has already been a full member of the EU. If it does not join the EEA, the UK will presumably negotiate bi-lateral agreements with the EU and/or EU Member States in respect of, amongst other sectors, the energy sector. The competitive nature of the UK energy market and its existing trading position within the EU energy market would seem, in principle, a good basis for bilateral agreements between it and the EU / EU Member States regarding energy. If, however, the UK were to be minded to adopt an á la carte approach to the building blocks of the EU energy market (for example, any of the 2020 requirements or other EU climate change measures), that could prompt the imposition of tariffs and duties on energy products at the border with the UK. In such circumstances, the effectiveness of the kind of market and infrastructural developments outlined below is likely to be adversely impacted in so far as they apply between the UK and the rest of the EU. That would obviously be significant for Ireland which – see opposite page – has invested heavily in energy interconnection with the UK and in the Single Electricity Market. However, it is worth noting the view of Alan Barrett* (and of other Economic and Social Research Institute personnel) that it is unlikely that tariff restrictions will be introduced: they take comfort in this context from the free trade in electricity between Russia (the energy policies of which are not equivalent to those of the EU) and Finland. Any weakening of the links between the UK energy market and the EU energy market may also lead Ireland to prioritise its current consideration of other interconnector links with the EU market (in particular EirGrid’s review with Rte, the French grid operator, of interconnection with France). * “Scoping the Possible Economic Implications of Brexit in Ireland” Alan Barrett and others. ESRI Research Series Number 48 November 2015. 11 | mccann fitzgerald ¼ july 2016 Proposed New EU Energy Security Package It is particularly important for Ireland to optimise the energy interconnector capacity between it and GB. Focus on Interconnection Interconnection key to integration Currently Great Britain has 4GW of electricity interconnection capacity (2GW with France, 1GW with the Netherlands and 1 GW with the island of Ireland) and is encouraging the development of further interconnection capacity by way of a “cap and floor” regime. It also has gas interconnectors with Belgium, Netherlands and the island of Ireland. In recent years, GB has typically imported electricity and gas from Continental Europe and exported them to the island of Ireland. From the perspective of its own security of supply and the maintenance of competitive energy prices, the UK has an incentive to ensure its interconnectors with the EU operate efficiently and that it develops further interconnection with the EU. It is particularly important for Ireland to optimise the energy interconnector capacity between it and GB. In recent years, the majority (more than 90%) of Irish gas demand, including for the purposes of electricity generation, has been met by UK imports transported via the gas interconnectors between Scotland and Ireland. Even at its peak, production from the Corrib gas field (which came on stream in late December 2015) will not fully replace the demand for UK imports. The gas interconnectors are important not only to Ireland’s security of supply: linking the GB and Irish gas markets in the most efficient manner also benefits competition within each market. Similarly the efficient operation of the 500MW electricity interconnector between GB and Ireland benefits competition in the GB and Irish electricity markets, while the development and efficient operation of the long-planned electricity interconnector between Northern Ireland and Ireland will have important benefits for security of supply in Northern Ireland and the operation of I-SEM, the integrated single electricity market. The EU’s emphasis on the development of regional markets and greater interconnection between Member States and the increasing regulation of energy trading across interconnectors is designed to make a fully integrated internal energy market a practical reality, and also to bolster security of supply. For example, at present EU Member States are working to align their national electricity markets with a common European ‘Target Model’ for cross-border capacity allocation and congestion management. The Single Electricity Market in Ireland and Northern Ireland is not consistent with the Target Model and a significant project is underway to develop the Integrated Single Electricity Market (I-SEM). These changes are intended to maximise the efficient use of the electricity interconnectors between the UK and Ireland. In February 2016 the European Commission presented a new proposed energy security package which envisages: • a solidarity principle that, as a last resort, neighbouring Member States will help ensure gas supplies to household and essential social services in a severe crisis • a shift from a national approach to security of supply planning, to a regional approach • the European Commission will undertake a mandatory ex-ante check of intergovernmental agreements signed by Member States with third countries which are relevant to EU gas security, for compatibility with EU law “ ” Energy (continued) 12 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Competition, State Aid and Telecommunications Law Basic economic principles underpinning competition law should preserve the similarities between Ireland and the UK. However, Brexit may lead to a significant increase in regulatory costs for cross-border business. Enforcement of competition Law In 2004 the EU decentralised the investigation and enforcement of EU competition law, meaning that national authorities have primary responsibility for EU as well as domestic competition law enforcement. As a practical matter, this means that competition law rules across the Member States have been harmonised. Moreover, universal economic principles underpinning enforcement apply in mature competition law jurisdictions. This commonality of principles and objectives suggests that, post-Brexit, UK and EU competition law will not diverge much, if at all. That said, a core aim of EU competition law is the development of the single market and, post-Brexit, this will no longer apply in a UK context. Therefore certain currently prohibited parallel import restrictions between Ireland and the UK may become lawful post-Brexit. Cartel enforcement, including cartels with transborder effects, is unlikely to diminish. Nor, obviously, will the need to contemplate possible multi-jurisdictional immunity applications in cross-border cartel cases. Competition litigation London has become a popular jurisdiction of choice for private competition litigation in which plaintiffs seek damages as a follow-on from regulatory investigations or as standalone cases. Unless a bilateral UK-EU agreement is reached, post-Brexit the Brussels I Regulation (see also the section on Litigation) which co-ordinates international litigation on matters such as jurisdiction and enforcement, will no longer apply to the UK. In addition, it seems likely that European Commission decisions against cartels will no longer be binding in the UK, weakening the position of people bringing follow-on actions. Merger control The current pan-EU regime for merger control provides parties to transactions that have a “Community dimension” a “one-stop shop” for notification and review of their deal. Mergers falling below certain thresholds may be reviewed by the relevant national competition authority (eg the UK Competition and Markets Authority (“CMA”)). If the UK leaves the EU without joining the European Economic Area (“EEA”), this “one-stop shop” system would no longer apply in the UK. It is likely that a large merger involving an Irish company with ties to the UK would likely be reviewed by both the European Commission and the UK CMA, necessitating two notifications and potentially conflicting review procedures (the UK merger regime remains a voluntary system). Post-Brexit, co-ordination between the EU and UK authorities on procedural and substantive merger control rules will be critical. Conflicting approaches on matters of substance could otherwise cause significant divergence across UK and EU markets if, for instance, EU and UK authorities were to reach different views on a notified merger. 13 | mccann fitzgerald ¼ july 2016 State aid EU State aid rules (set out in Articles 107 to 109 of the Treaty on the Functioning of the EU) restrict Member States from granting subsidies or other economic advantage (including selective fiscal treatment) to firms. State aid rules apply to EEA countries, but in the case of EEA countries the rules are enforced by the European Free Trade Association Surveillance Authority rather than the European Commission. If the UK leaves the EU without joining the EEA, post-Brexit EU State aid rules will cease to apply in and to the UK. Instead, the UK could be constrained only by less stringent World Trade Organisation rules on state subsidies. This would potentially allow the UK to give subsidies (including special and advantageous fiscal treatment) or other advantages to multinational corporations in return for relocating to the UK. Telecommunications law The so-called “regulatory framework” governing telcos (particularly fixed line incumbents) across Europe is almost entirely a creature of EU law. If the UK leaves the EU without joining the EEA, then over time the post-Brexit regulatory environments in the UK and the EU may diverge. The UK would no longer be obliged to follow EU laws governing telecommunications, digital content, radio spectrum management etc. EU roaming rules would no longer apply to devices roaming between the UK and the EU, potentially exposing customers travelling between Ireland and the UK to far higher bills. Post-Brexit, the UK might “ ” give subsidies (including special and advantageous fiscal treatment) or other advantages to multinational corporations in return for relocating to the UK. Competition, State Aid and Telecommunications Law (continued) 14 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Currently Irish businesses that operate in or export to the UK benefit from the predictability of IP, data protection and IT law regimes that are very similar, sharing a common law and EU law background. However, post-Brexit important differences may emerge in these areas, some of which may require immediate action while others will merit longer term planning to identify and exploit advantages and address challenges arising from such divergence. Unless specific UK-EU bilateral agreements are put in place to address these matters, the principal initial consequences of Brexit taking effect seem likely to be: Patents: Currently a person seeking to protect patent rights across Europe can file a European Patent in the European Patent Office (designating chosen contracting States to the European Patent Convention, which is not an EU instrument). Individual national patents can also be filed. The proposed introduction of a Unitary Patent would have made it possible to obtain patent protection valid in all participating States (currently all EU Member States except Spain, Poland and Croatia) and to take part in the proposed Unified Patent Court. Brexit has serious consequences for the proposed Unitary Patent and Unified Patent Court: it seems highly unlikely that the UK could participate in the proposed scheme if it ceases to be a member of the EU. This will inevitably impact on the timing of the introduction of the scheme and indeed calls its viability into question. If the Unitary Patent scheme proceeds without UK involvement, then businesses seeking patent protection in the UK would have to rely on a national UK patent or a European Patent designating the UK. Intellectual Property, Data Protection and Information Technology The Supplementary Protection Certificate (“SPC”) system (which provides for the extension of the duration of a patent right in certain circumstances) is based on EU Regulations, so post-Brexit will cease to apply in the UK. It seems likely, in particular due to the commercial importance of SPCs in the pharma and life sciences sectors, that the UK will implement national legislation to provide for equivalent protection in the UK, at a minimum for existing UK and UK designated European Patents. Trade Marks: The European Union Trade Mark (“EUTM”) system will no longer apply in the UK. A holder of an EUTM (which provides registered trade mark protection throughout the EU) will not have registered trade mark protection in the UK, unless they obtain, by converting their existing EUTMs or otherwise, corresponding national UK trade marks. Designs: The Community Design Right (“CDR”) system (which is similar to the EUTM system) will no longer apply in the UK. As in the case of EUTMs, Irish holders of CDRs will need to consider whether to obtain additional UK design protection. Copyright: Both the EU and the UK have considered amending copyright law recently and it would seem that they have divergent views regarding some changes that should be made. Post-Brexit, it seems likely that UK copyright law will diverge from EU copyright law. This may have far-reaching implications, but particularly on the EU’s “Digital Single Market” project, which is intended to, among other things, facilitate more crossborder e-commerce activity in the EU. Irish businesses that are focussed on exploiting copyright content may require different approaches to operating in the UK. Intellectual Property Uncertainty in wake of Brexit referendum Post-Brexit, important differences may emerge in the areas of intellectual property law, data protection and IT law. 15 | mccann fitzgerald ¼ july 2016 The current EU data protection regime is due to be overhauled in 2018 by a new package of EU legislation consisting of a General Data Protection Regulation (the “GDPR”) (which will be directly applicable in all EU Member States) and a new Directive covering data protection in relation to law enforcement. These changes are expected to increase the regulatory impact of data protection law, introducing new and more demanding obligations and more onerous sanctions for non-compliance. If, post-Brexit, the UK remains a member of the EEA, the GDPR probably will apply in the UK when it comes into force. However, if UK leaves the EU and does not join the EEA, UK data protection law is likely to diverge from EU data protection law. To date, UK Government comments on the GDPR suggest that, if it has the option, it will not amend the UK Data Protection Act to mirror the GDPR. If post-Brexit there is a material divergence between UK law and the GDPR (when it comes into force), the consequences will include: • businesses that have operations in the UK and in Ireland will be subject to different data protection regimes simultaneously; • data-centric businesses (and particularly multinational entities): - based in the UK might consider moving to Ireland or another EU or an EEA territory, or establishing a new presence in an EEA territory in order to fall within the scope of EU data protection law and minimise issues that arise from transferring personal data outside the EEA; or - based in another EEA territory (including Ireland) might consider moving to or establishing a presence in the UK to seek to avail of what might be perceived to be a more ‘business friendly’ data protection regime, particularly if they were to believe that this would not be prejudicial to their business operations in the EEA; • in a worst-case scenario, cross-border data flows between Ireland and the UK becoming subject to the same issues which currently apply to transfers of personal data outside the EEA to territories that are not recognised as having adequate data protection law regimes (such as the United States). Data Protection IT law touches on a variety of areas including IP, data protection, e-commerce, telecommunications, consumer protection and cyber security. As is the case in Ireland, much (but not all) of the relevant UK legislation is EU-derived and based on harmonising EU Directives, with some directly effective EU Regulations. As part of the EU proposal to introduce greater harmonisation in these areas and thereby create a “Digital Single Market”, much of this EU legislation is earmarked for reform over the next five years. It seems likely that, post-Brexit, the UK will fall outside any such Digital Single Market, with the result that UK law in these areas (which is currently similar to that of other Member States but which is not fully harmonised) will diverge from EU law. This will result in challenges for Irish businesses that operate in the UK and may merit transfers of business functions to Ireland to avail of legislative advantages or to avoid legal drawbacks stemming from divergences between the UK and EU legal and regulatory regimes. Information Technology Intellectual Property, Data Protection and Information Technology (continued) 16 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Mutual recognition of judgments Brussels I Recast (Regulation 1215/2012/EU) is the key EU instrument in civil litigation, enabling a civil or commercial judgment given by a court in any EU Member State to be ‘passported’ to each other EU Member State using a standard-form certificate. Civil or commercial judgments do not need to be formally recognised by a court in another EU State before being enforced there. Therefore, an English commercial judgment can be enforced directly against a defendant’s assets in Ireland, without the need for action in an Irish court to recognise the judgment, and vice versa. • Post-Brexit, civil and commercial judgments of UK courts will no longer benefit from the “passport” right to automatic enforcement in the EU. Rather, it is likely such judgments would be subject to the same preenforcement scrutiny for recognition as are third States’ judgments. This could reduce the attractiveness of London as a venue for international litigation where multijurisdictional enforcement is likely to be needed. • The UK could join the Lugano Convention (among the EU States, Norway, Switzerland and Iceland) which allows mutual enforcement of civil and commercial judgments, but requires court-approved recognition. However, it is not clear whether the UK would be willing, or would be welcome, to join the Lugano Convention. • There is no bilateral arrangement for mutual recognition of civil judgments between the UK and Ireland. If the UK were not part of the EU or Lugano Convention, enforcement of a UK judgment in Ireland or of an Irish judgment in the UK would have to rely on common law rules, which are more restrictive and require various conditions to be satisfied prior to recognition. Litigation Provisional measures in aid of litigation The frequently used Article 35 of Brussels I Recast empowers the court of a Member State to order provisional or protective measures (such as an injunction) in support of litigation in another EU State. If a fraudster in the UK misappropriates and transfers money to a bank account in Ireland, the Irish court can order a Mareva injunction freezing the Irish bank account pending the trial of UK proceedings. Without Brussels I Recast, the Irish court has no such power. The courts of England and Wales have such a power, so there would be an inconsistency: assets could be frozen in England in aid of proceedings in Ireland, but (without a change in Irish primary legislation) not vice versa. The ability to co-ordinate urgent cross-border asset-freezing action, which is critical in certain cases, could be inhibited in cases involving the UK and EU States with rules like Ireland’s. Potential for more jurisdiction disputes and parallel litigation Brussels I Recast sets out fundamental rules on how civil and commercial jurisdiction is divided or prioritised among the courts of EU Member States. There is always a mechanism in cases involving litigants in two or more EU States to decide which EU State’s courts may exercise jurisdiction first, and the others suspend any proceedings until the courts of that State have decided whether to act. Brexit will entail greater risks of parallel litigation of the same dispute and of conflicting judgments. Effectiveness of choice of jurisdiction agreements Similar considerations arise here: Brussels I Recast includes a single harmonised set of rules on enforceability of choice of jurisdiction Principal Risks Although not immediately obvious, a Brexit could impact dispute resolution. Increasingly, commercial disputes have cross-border dimensions. A significant achievement of the EU has been the introduction of harmonised rules regarding key aspects of cross-border litigation proceedings. Unless bilateral UK-EU agreements are negotiated for the post-Brexit era, some of this may now be undone. 17 | mccann fitzgerald ¼ july 2016 Trouble ahead? A Brexit might mean: ¬ No longer a ‘passporting’ right to automatic enforcement of judgments ¬ As between Ireland and UK: would have to rely on common law rules for enforcement ¬ Inconsistency between the powers of Irish and English courts ¬ Potential for disputes regarding jurisdiction and enforceability ¬ Parallel litigation ¬ Balance of risk in commercial contracts could change in unintended ways ¬ Taking of evidence could be impacted ¬ Potential upset to cross-border enforcement and claims ¬ Loss of criminal mutual assistance measures ¬ Changes to contractual provisions Ancillary Matters Choice of law Brexit would mean that the UK would no longer be part of the Rome I and Rome II Regulations, regulating choice of law in contractual and non-contractual claims. While this might not create immediate problems in cross-border litigation, it could well create difficulties around how choice of law provisions would work in cross-border contracts and other legal relationships. This risk could be significant in contractual cases, given the frequency with which parties have chosen English law. Following the referendum, parties negotiating a commercial contract should now consider potential problems with their choice of jurisdiction and choice of law. Significant commercial risks could arise even for prereferendum contracts with a UK dimension (eg a party domiciled in the UK, choice of UK jurisdiction or choice of English law) which already exist at that time of Brexit. The balance of commercial risk in those contracts could change in ways that the parties didn’t intend. Therefore we recommend that all such current contracts are reviewed for possible changes to their legal effect following the referendum and post-Brexit. Further, it might no longer be safe to rely on opinions given pre-referendum for crossborder contracts which explicitly or implicitly assume that the UK is part of the EU: such opinions should also be reviewed. Taking evidence EU Regulation 1206/2001 provides for mutual co-operation among EU Member States in taking evidence in civil or commercial cases. It is used frequently, eg where a case in court in London needs key evidence from a witness in Ireland who cannot or will not attend in London, a simple process is used whereby the Irish court summons the witness and takes his or her evidence on behalf of the London court, often by videolink into the London court itself. Requests for evidence between the UK and Ireland would remain possible post-Brexit under existing UK and Irish legislation, but the procedure is discretionary (and the requested court may refuse); it also is more cumbersome, and the evidence available is often more limited. Cross-border enforcement and claims Several other EU measures support crossborder litigation and dispute resolution, including the European Enforcement Order, the European Order for Payment and the European Small Claims Procedure. The European Small Claims Procedure is increasingly significant as cross-border online consumer activity grows. It allows a consumer to lodge a claim online in the EU Member State in which he or she purchased the item or the defendant is based and it removes layers of cost and administrative difficulty in pursuing small claims. Online businesses, particularly in retail, might become incentivised to locate online consumer trading hubs outside the EU (eg in the UK post-Brexit), to insulate themselves against cross-border consumer claims. Being seen as a destination for such hubs might be attractive to the UK in inward investment terms, but it could also create significant controversy and difficulty from a consumer protection perspective. Use of criminal mutual assistance measures Several EU instruments regulate cross-border enforcement of orders freezing property or evidence, and recognition of confiscation orders, which are often invoked in conjunction with civil remedies as part of the recovery strategy in cases involving commercial crime (such as fraud and pirating of IP rights). PostBrexit, many of these measures would cease to be available as between the UK and the other EU Member States. clauses but, post-Brexit, UK rules may diverge from the EU norms. This could lead to conflicting decisions of UK and EU courts (eg if one applied a rule treating the jurisdiction clause as valid and the other applied a different rule treating it as invalid). Some parties that are negotiating crossborder contracts involving a UK element or with England as the preferred jurisdiction are already considering including an arbitration clause as it is unlikely that Brexit will have significant effects on the cross-border enforceability of an arbitration award. Litigation (continued) 18 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Employment In very few areas has EU law played such a significant role as in the area of employment law. In that respect, employment law in Ireland and in the UK currently is closely similar – even identical – in many areas, making it easier to manage common businesses across the UK and Ireland. However, Brexit brings uncertainty and change... Post-Brexit, businesses in Ireland will no longer be able to assume that a similar employment law regime applies in the UK. Business should not assume a common set of laws Post-Brexit, businesses in Ireland will no longer be able to assume that a similar employment law regime applies in the UK. This will impact on a number of important areas of employment law, especially for multinational businesses. Brexit will break the connection between UK employment law and EU legislation and increasing divergence seems likely thereafter. This could occur immediately if the UK government chooses, but more likely it will be a gradual shift as new EU legislation emerges which the UK is not required to – and then does not – adopt or follow. Also, the role of the Court of Justice of the EU (“CJEU”) in relation to the UK would cease, which would affect the interpretation and application of those EU-derived UK laws that remain. Mergers and acquisitions The Transfer of Undertakings Regulations, which afford automatic transfer rights to employees transferring with business and business assets, are a highly significant factor in certain mergers and acquisitions, as well as in outsourcing arrangements. Other EU legislation gives employees similar representation rights in, for example, cross-border mergers. There will be a material impact on business transfers if these regulations and laws no longer apply (or are varied significantly) in the UK, so that a different regime applies in the UK compared with Ireland. Such changes might include reduced employment rights on a transfer and reduced information and consultation requirements. Information and consultation EU legislation in relation to works councils, as well as EU collective redundancy legislation, provides for extensive information and consultation with employees in particular circumstances. Any post-Brexit disapplication, amendment of, or reduction in, these requirements will impact on organisations having businesses in both jurisdictions. It may very well be that such organisations (and, indeed, in other European countries) will choose to apply current information and consultation processes post-Brexit, but nonetheless the legal requirements may well change therefore will require some consideration and attention. Remuneration In recent years the EU has introduced significant regulation of remuneration in the financial services sector (including under MiFID, AIFMD, UCITS V and Solvency II). The Capital Requirements Directives (III and IV in particular) have been controversial in the UK, especially arising from the ‘bonus cap’ under CRD IV. What seems likely to be the disapplication of these directives in the UK post-Brexit would allow UK institutions both greater freedom to determine how much to pay in bonuses, and greater flexibility in how these are paid, albeit subject to whatever domestic UK regulation might replace these EU-derived constraints. This may have an impact for financial services employees in Ireland where more stringent EU regulation will continue to apply. “ ” 19 | mccann fitzgerald ¼ july 2016 Without a bilateral arrangement, it is likely that Brexit will lead to restrictions on the free movement of workers. Working time Over the years the UK has challenged and sought derogations from some of the requirements of the Working Time Directive in terms of maximum working hours, and has provided for the “contracting out” of certain working time provisions. Working time law has also been extended significantly by the CJEU, including in relation to the rights and entitlements of employees to holiday pay during sick leave, as well as over-time in reckoning annual leave. Discrimination law EU law has driven a huge extension of the protective laws in relation to discrimination between categories of workers, for a wide range of equality matters beyond the traditional (such as gender and race), to apply also to fixed-term workers, part-time workers and agency workers. Discrimination law has also been developed extensively at EU level. Post-Brexit, UK law may well move in a different direction, curtailing the more expansive EU approach, accentuating differences between the UK and the EU protective regimes. Free movement of workers Without a bilateral arrangement, it is likely that Brexit will lead to restrictions on the free movement of workers. An Irish firm with any personnel who work in the UK may be subject to greater restrictions, while staff seconded to the UK from an EU Member State (and vice versa) may also face greater controls. In either event, a business’s ability to allocate resources flexibly within the organisation in the respective jurisdictions “ will be affected. ” Employment (continued) 20 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Cross-border pension schemes (operated between Ireland and the UK under the IORPs Directive) It seems likely that post-Brexit consequences and issues will include: ¬ Considerably reduced ease of establishing new Ireland-UK cross-border schemes ¬ On a practical level for an Irish business and trustees operating a cross-border scheme, there will be a concern regarding the level of protection of benefits for employees and beneficiaries. The possibility of future dilution of protections under the pension law of the UK may discourage employers establishing and operating a cross-border scheme even if it continues to be possible to do so. ¬ Even if they had to take risks for their UK employees in a UK-based pension scheme, would it be feasible to take that risk for employees based in Ireland? Would the alternative be to cease operating cross-border and instead have separate schemes in each jurisdiction? Institutions for Occupational Retirement Provision Directive (IORPs) The objective of the IORPs Directive is to provide a prudential framework for the operation of pension funds based on Pensions and Employee Share and Other Incentive Plans harmonisation and mutual recognition. It also enables the establishment of a cross-border pension scheme in one EU Member State that manages the pension benefits of employees in a number of Member States. The relative impact of Brexit will be influenced by the extent to which, post-Brexit, the UK ‘dilutes’ the pension legislation that it has to date adopted to reflect the IORPs Directive. The investment of scheme assets, the funding of defined benefit schemes, the insolvency of schemes and employers, discrimination and preserving benefits all will be particularly important in this regard. Regulatory authorities: what approach(es)? The approach of Irish regulatory authorities (such as the Revenue Commissioners, the Pensions Authority, the Pensions Ombudsman and the Department of Social Protection) is uncertain and could have an impact. It will also be an issue that, as seems inevitable, the decisions of the Court of Justice of the EU will no longer apply in the UK. Brexit may even affect an Irish pension scheme that does not operate cross-border: ¬ Revenue’s approach to transfer payments to UK pension arrangements may alter, so that (for example) payments to pensioners who have become UK residents may be affected Brexit may impact some occupational pension schemes, employee share plans and pension products. Resolving the potential issues should be part of the UK-EU withdrawal negotiations and a priority for the UK in terms of its policy decisions and legislative changes. The relative impact of Brexit will be influenced by the extent to which, post-Brexit, the UK ‘dilutes’ the pension legislation that it has to date adopted to reflect the IORPs Directive. Pension investments may be affected by the post-referendum market volatility, depending on the investment strategies that have been adopted. Any adverse impact of a Brexit on a sponsoring employer could be an issue. 21 | mccann fitzgerald ¼ july 2016 ¬ Employers and trustees may have arrangements with pension consultants, investment managers, advisers, financial institutions, administrators, life offices and so forth, that have relied on such bodies being able to ‘passport’ from the UK into Ireland, a regulatory status that might not continue post-Brexit ¬ Pension scheme administration may be affected by any data protection changes made under the laws of the UK ¬ Approved pension products being provided by financial institutions ‘passporting’ into Ireland may be affected There is precedent from the 1990s when Irish and UK pension law had diverged so much that it became impossible for Irish Revenue and UK Inland Revenue to apply reciprocity in approving pension schemes. Irish businesses that had operated Irish pension schemes with employees based in the UK (or vice versa) established a new scheme in one country for its employees there and maintained the old scheme in its country of origin for its employees. There was an interim period for change and eventually the IORPs Directive facilitated a new regime of cross-border schemes. Irish Revenue Commissioners - Precedent Employee share and other incentive plans The impact of Brexit on employee share plans and other incentive plans may not be as marked as for pension schemes because the tax and regulatory regimes applying to such plans are different and there is no crossborder aspect to the plans. Nonetheless, it is possible that any changes to the laws relating to prospectuses and data protection could impact such schemes. The regulatory issues identified above in relation to consultants, administrators and financial institutions ‘passporting’ into Ireland might also be relevant to such plans. Pensions and Employee Share and Other Incentive Plans (continued) 22 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Relationship between the UK and Ireland The Irish food and drinks sector is heavily dependant on the UK as a trading partner; much more so than as an industry partner in general. The UK accounts for roughly 41% (or €4.4bn) of Ireland’s total food and drink exports. Imported produce from the UK amounts to roughly 46% of total Irish imports. This strong relationship between Ireland and the UK is heightened by the fact that Ireland is the only country that shares a land border with the UK. Only 27% of food and drink produced in Northern Ireland remains there: approximately 21% of food and drink manufactured there is exported to the Republic. Brexit threatens this unique relationship. Possible re-introduction of borders and customs controls The principal impact on the food and drinks industry in Ireland may be the reintroduction of custom procedures, borders and possibly even tariffs, post-Brexit. While the extent of any procedures and tariffs will depend on the post-Brexit UKEU agreements that are negotiated, there can be little doubt that even in a best-case scenario trade costs would increase. For example, rules-of-origin checks are required when Norway exports goods into the EU, notwithstanding that Norway is a member of the EEA. Import licences are also required under EU law to import certain food products that originate outside the EU, such as beef, veal and milk. It is likely that, post-Brexit, these rules will apply to the UK and seem likely to lead to increased costs where Ireland continues to trade as heavily as it currently does with the UK. Physical border checks, and the physical inconvenience and timecost that they entail, are also possible. Ireland-UK: Imports and Exports The stakes are high. Brexit is likely to create problems for imports and exports of goods, with the overall result being increased costs for consumers. These increased costs would not only result in higher prices for Irish consumers but they might also put upward pressure on Irish export prices and damage our ability to compete in the UK market. Agriculture and fisheries The UK plays an important role in decision-making in EU agriculture policy and that has a big ‘knock-on’ effect on the Irish food industry. The UK also carries 12.3% of the vote of the Council of Ministers and Brexit will entail adjusted voting majorities in the Agriculture and Fisheries Council. The absence of our close ally could have a negative effect on important outcomes for Ireland. Also, post-Brexit UK trade deals with non-EU States could put Irish exports to the UK at a disadvantage if competitors from (for example) Brazil, New Zealand, South Africa and the US have preferential access to the UK market but without the compliance and regulatory costs deriving from EU production standards. Research and development Brexit could also have a significant impact on future research and development in the food and drink industry. The UK is a significant contributor to the European Research Area and has been a major player in the Horizon 2020 programme which, among other things, conducts key research in the food and drink industry. The consequences of Brexit for the food and drink industry would depend ultimately on the policies that the UK might pursue post-Brexit and the agreements that it would enter into with the EU, but there can be little doubt that it will bring significant change and uncertainty to a vital area of Ireland’s economy. Shifting Regulatory Landscape Under EU rules the UK’s trade policy with non-EU countries is restricted. However, the UK would be free to look to non-European suppliers in the event of a Brexit. Fierce competition in the meat industry from New Zealand and Brazil could see Irish produce suffer. Another important consideration for this industry is the principle of mutual recognition. This is at the heart of the EU’s single market and it means that a Member State must allow produce to be marketed or sold if it has been validly marketed and sold in another Member State, ie one EU Member State cannot force another Member State to comply with the first Member State’s own technical standards. However, postBrexit this principle would no longer apply to food or drink exported to the UK and the UK would be free to demand that Irish produce meet the UK’s unique certification standards. Significant costs could arise from having to comply with two different regulatory regimes in the EU and in the UK. 23 | mccann fitzgerald ¼ july 2016 Disproportionate impact in Ireland? The impact of Brexit on Irish companies will depend on the post-Brexit agreements that are negotiated between the UK and the EU and future UK tax changes. If the UK leaves the EU and does not agree arrangements with the EU permitting it to remain within the common market and to continue to benefit from existing EU directives, there may be a greater impact on companies resident in Ireland than on companies resident in other competing jurisdictions. Currently, Ireland and the UK are in a common market and no border controls or customs duties arise on exports or imports between the two countries. Therefore a key question is whether any such trade barriers will be introduced. If they are, the costs of trading with the UK will increase. Where custom duties apply, the cost of importing goods increases. To the extent that goods are imported from or via the UK, Brexit will impact on the values that would be declared for customs purposes. Further, additional customs declarations and procedures will be required if the UK leaves the common customs area (which permits the free circulation of goods within the EU). Loss of benefits of Common Market Free movement of goods and of services are two of the core freedoms of the EU. The EU has implemented a range of measures (directives and regulations) that establish the EU as a common market. The benefits of such EU legislation include eliminating additional tax burdens associated with a re-organisation of a group within the EU, easing the making of payments between companies that are members of such groups within the EU and the payment of royalties between such companies. Such measures apply to companies based in EU Member States and it is unclear whether, post-Brexit, the UK will continue to benefit under these rules. Ireland has a comprehensive tax treaty Tax Brexit does not have an immediate significant impact, but may do so as events unfold… Advantage to the UK if State Aid Rules Disapplied? Post-Brexit, the UK may not be subject to EU State aid rules. Accordingly, the UK might be in a position to offer tax and other incentives to businesses based in the UK which could result in a more difficult competitive environment for Irish businesses operating in the UK. A reduced rate of UK corporation tax may also be a factor (see main article). VAT Irrespective of the source of supply in the EU, there is a common set of VAT rules. Post-Brexit, the UK VAT rules may well diverge from those of the EU. Any UK departure from EU rules would have implications for Irish business. An administrative burden would also arise if, as seems likely, the UK ceases to be part of the current arrangements applicable to intra-EU acquisitions. % with the UK so the payment of interest and royalties to the UK should continue to be possible without tax arising. The Parent Subsidiary Directive facilitates the payment of dividends between EU members of a group without additional taxes arising. Irish domestic law provides an exemption from Irish dividend withholding tax where the recipient is a resident of a country with which Ireland has a tax treaty (or is a Member State of the EU). As Ireland has a comprehensive tax treaty with the UK, no additional tax burden should arise in relation to the payment of dividends between Irish and UK companies. Currently, the UK does not levy dividend withholding tax on the payment of dividends and, thus, Brexit should not affect the payment of dividends from the UK to Ireland. However, if the EU introduces a withholding tax on dividends paid to a non-EU entity, this position may change. It is likely that the benefits of having a UK-based holding company for a European group will diminish. Court decisions Currently, the UK is bound by decisions of the Court of Justice of the EU, several rulings of which have restricted the application of certain UK tax laws. Post-Brexit, the UK may re-apply some of those currently restricted tax provisions, to increase the tax burden of companies engaged in business in the UK. Corporation Tax The rate of corporation tax in Ireland – 12.5% on trading income and 25% otherwise – is a factor in many investment decisions by businesses. The recently stated intention of the UK Government is to reduce the UK rate of corporation tax below 15%, perhaps even pre-Brexit. This may present a challenge to Ireland’s success in attracting foreign direct investment (“FDI”). However, feedback from FDI companies shows that the low rate of corporation tax in Ireland is merely one of a bundle of attractive features of investing here, and continuing and assured access to the EU market will remain a key differentiator. 24 | mccann fitzgerald ¼ brexit - issue three - a legal perspective The scale of the impact [of Brexit] will largely depend on the terms of the UK-EU withdrawal agreement… Protection of the Environment For Ireland, the only EU Member State that has a land border with the UK, any new or revised legislative or regulatory regime in the UK postBrexit could impact the investment decisions of both the State and private businesses. There may also be wider implications for the future of environmental law and regulation in the EU as a whole. From a financial perspective, it is obvious that a requirement to comply with two different regulatory regimes (which could diverge significantly over time) would lead to an increase in compliance costs. The scale of the impact will largely depend on the terms of the UK-EU withdrawal agreement and the measures the UK puts in place to manage the transition from an EU legislative and regulatory regime to a new UK regime. Those outcomes may be influenced by the current legislative and policy audit that the House of Commons Environment Committee has been undertaking since October 2015. Air/Climate Post-Brexit, the UK will no longer be required to implement EU agreements on climate change policy and renewables. There would therefore be scope to amend current targets, including the current 20% target for renewables by 2020 and the target of a reduction in greenhouse gases by 20% of 1990 levels by 2020. However, while specific EU targets may be revisited, the overarching obligations under international treaties on climate change, including recent COP21 commitments, would not change. Post-Brexit, the UK need not participate in the EU Emissions Trading Scheme (“ETS”). This raises questions as to how the UK would regulate carbon-intensive industries and how this will impact on the existing carbon market. Obviously, the cost of carbon and the ability to trade carbon affects the costs of energy production. This could affect Ireland and interconnection between the Irish and UK markets and, possibly, the wider EU market also. (See also Energy on page 10.) It is likely that Brexit will prompt changes and divergences in the legal and regulatory environmental regimes in the UK and in Ireland/the EU. The detail and timing of change until UK-EU negotiations conclude. Water The main policy drivers for the protection, improvement and restoration of freshwater and marine environment are legislated at an EU level, eg the Water Framework Directive, the Urban Waste Water Treatment Directive and the Marine Strategy Framework Directive. Doubts arise as to the extent to which, post-Brexit, the existing legislative and regulatory framework will remain in place and to what extent it could impact on the trans-boundary relationship between Ireland and the UK. Industrial operations Large-scale industrial operations are governed by the EU Industrial Emissions Directive which establishes a licensing regime, and regulates emissions, industry-by-industry. As part of this regime, best practice industry standards known as Best Available Techniques Reference Documents (“BREFs”) are issued by the European Commission: these inform the emissions standards in various industry sectors and those standards in turn determine asset life and the nature of industrial process across such sectors. Unless the UK adopts these industry standards, post-Brexit UK industry need not comply/rely upon BREFs. A divergence of approach could arise between Ireland, the UK and other EU Member States and, if UK projects are constructed and permitted to a different standard, this would impact industrial operations in Europe. Chemicals The REACH Regulation, which regulates the manufacture, importation and downstream users of chemicals within the EU, is directly applicable in every Member State. Post-Brexit, the manufacture of chemicals within the UK will fall outside REACH, although REACH would still apply to any chemicals that are placed on the EU market by any UK company. “ ” 25 | mccann fitzgerald ¼ july 2016 ¬ Will Brexit prompt an overhaul of environmental legislation in the UK and will the UK take the opportunity to reform, reduce or relax any environmental requirements (such as EIA) that are considered to be a brake on development? ¬ As EU Court of Justice decisions will no longer bind the UK post-Brexit, will the interpretation of legacy EU-derived environmental laws in the UK diverge from interpretations in the EU? ¬ How will the seemingly likely lack of a harmonised approach to environmental regulation between the UK and the EU impact on Ireland as a near neighbour? Environmental impact assessment and habitats The EU has a long-standing comprehensive environmental impact assessment (“EIA”) and biodiversity regime. Together, the EIA Directive and the Habitats Directive establish a comprehensive and transparent assessment process that must be undertaken prior to any grant of development consent for a plan or project within a Member State, where certain thresholds are exceeded. They provide for trans-boundary consultation procedures in relation to developments that have a potential impact on a neighbouring jurisdiction. It seems likely that, where proposed major cross-border infrastructural development is being undertaken within Ireland or the UK (such as the Ireland-France and the Ireland-UK interconnector projects), Brexit may affect the nature of the assessment and the level of consultation that is required. Post-Brexit, the scale and appropriateness of an EU-mandated EIA (including a cross-border assessment), and of a UK assessment may diverge over time. This may cause difficulties and uncertainties for developers at many points of the assessment and permit process for a relevant project. Waste The reduction, reuse, recycling, recovery and disposal of waste is governed by the EU Waste Framework Directive which also sets down the policy drivers for the concept of waste reduction and resource efficiency within the EU. Other directives regulate specific waste streams, such as the trans-frontier shipment of hazardous waste. While the UK will remain a party to certain international treaties on the transport of waste, if post-Brexit the UK were to relax obligations under its waste law then the lack of a harmonised approach to the regulation of waste across Europe may have an impact on Ireland, as the UK’s nearest neighbour. Impact of a Brexit on Ireland – Questions to Consider Post-Brexit, the scale and appropriateness of an EUmandated EIA…, and of a UK assessment…, may diverge over time. “ ” Protection of the Environment (continued) 26 | mccann fitzgerald ¼ brexit - issue three - a legal perspective The 23 June 2016 referendum was advisory and no legal or regulatory consequences flow exclusively from the referendum itself. However, we have noted in the Introduction that the UK Prime Minister, Theresa May, has committed to respect the result that the UK should “leave” the EU. This begs numerous questions regarding the timing and the bewildering logistics of the UK doing so. To leave the EU, the UK must follow the withdrawal mechanism set out in Article 50 of the Treaty on the Functioning of the European Union (“TFEU”), which envisages a two-year withdrawal process. A UK withdrawal in any other manner would be a breach of international law. The Article 50 withdrawal mechanism will be started by the UK formally notifying the European Council that the UK has decided to withdraw from the EU. The timing of the giving of that notice is up to the UK. There are conflicting opinions as to whether the What Happens to EU Law Post-Brexit? decision to serve an Article 50 notice is an executive (ie governmental) or a legislative (ie parliamentary) function, the latter requiring new legislation in the UK. The Article 50 notice will trigger a two-year period of negotiation (with the consent of all parties, extendable, once only, by a further year) between the UK and the European Council to prepare a withdrawal agreement. The agreement would cover the arrangements for withdrawal and may (but need not) take account of the framework for the UK’s future relationship with the EU. The European Parliament would have final ‘sign-off ’ on the terms of the withdrawal agreement. UK withdrawal would take effect – ie TFEU and the Treaty on European Union would no longer apply to the UK – on the date that the withdrawal agreement comes into force or, failing that, two years after the notification or after any agreed extension expires. How will Brexit be effected, and what will it mean for the UK, Ireland and the other remaining Member States? The Withdrawal Mechanism It is likely that withdrawal will be effected by the repeal of material parts of the UK’s European Communities Act 1972. If it is without saving provisions, the repeal will result in vast amounts of UK law (derived from EU law) and directly effective EU law ceasing to have effect. Previous sections of this Legal Perspective have illustrated how much of the law that is derived from the EU is hugely important to the UK economy: for example, it sets technical standards for all types of goods, it provides consumers and workers with substantive rights, it creates regulatory What Would Happen in the UK? regimes for utilities and for financial services, it provides rights for businesses, etc. It is difficult to see how the UK could withdraw from the EU without introducing transitional provisions to maintain in force – at least on a temporary basis – most of this vast body of law. A further complication may arise from the possible need – in some policy areas only – to make separate provision and separate transitional arrangements in respect of Scotland, Wales and Northern Ireland, each of which has an assembly that, to a greater or lesser extent in each case, exercises devolved powers. The UK Prime Minister has committed to respect the referendum result. 27 | mccann fitzgerald ¼ july 2016 How it Works at Present and What Repeal Might Mean Treaty: The primary source of EU law is the TFEU. Its provisions bind the Member States (eg State aid rules), and certain provisions can be relied upon by individuals in national courts (eg the free movement provisions and the prohibition on abuse of a dominant position). Post-Brexit, the UK will no longer be bound by the Treaties nor would UK citizens be entitled to rely on rights conferred by the TFEU. If the UK wishes to maintain certain provisions it could do so by primary legislation (ie an Act of the UK Parliament). Regulations: These are a variety of secondary EU legislation which forms part of the domestic legal system when adopted and without the need for national implementing measures (eg the Regulation on roaming on public mobile communications networks within the EU). Upon the UK repealing its European Communities Act 1972, these would fall away. It seems likely that, post-Brexit, UK law will make transitional arrangements for certain or all EU Regulations to continue to have the force of law in the UK (perhaps with some modifications), for a period of time. Directives: These also are a variety of secondary EU legislation. A Directive does not automatically have the force of law upon adoption by the EU: it requires the Member States to incorporate the terms of the Directive into each of their national legal systems by a legislative act. In the UK, Directives are typically implemented by way of secondary legislation (a statutory instrument) made under the European Communities Act 1972. The likely repeal of that Act will result in all of the statutory instruments enacted under it ceasing to have effect. It seems likely that UK law will make transitional arrangements for the continuing application of statutory instruments under the UK 1972 Act (perhaps with some specified modifications) if it is repealed. EU legislation impacts the domestic legal systems of Member States as follows: UK withdrawal from the EU will not immediately impact EU law obligations that have been implemented in UK law by primary legislation, but there are, in fact, comparatively few such cases. However, it is likely that such UK law will be reviewed against the criteria of then-prevailing UK policy and, as appropriate, be either amended, repealed or (by default) confirmed. In addition, much EU legislation assigns/designates roles to EU institutions in relation to legislation (eg monitoring, decision-making, etc). Brexit would require new bodies or the appropriate UK Secretary of State to assume these roles. Beyond this, a far wider review will be required of all EU Regulations and UK statutory instruments that implement EU law to determine which of them remain relevant to then-prevailing UK policy and which should be maintained in some form or other, or discarded. Post-Brexit, the UK will no longer be bound by the Treaties nor would UK citizens be entitled to rely on rights conferred by the TFEU. “ ” What Happens to EU Law Post-Brexit? (continued) 28 | mccann fitzgerald ¼ brexit - issue three - a legal perspective UK-EU Legal Relationship Post-Brexit WTO Unless special arrangements are agreed, the UK will be a “third country” vis-avis the EU, in the same way as the US or China is. The UK would be subject to basic WTO-negotiated trade tariffs for goods and commitments on market access for certain service sectors. Under the WTO “Most Favoured Nation” rules, the EU could not provide the UK with better trade tariffs than it provides to other WTO members (other than through a free trade agreement). UK citizens working in the EU would not have any automatic right to work and reside there, and vice versa. UK businesses would not have any automatic right to establish in another EU Member State. European Economic Area: the ‘Norwegian Option’ This would involve the UK joining the EEA (comprising the EU Member States plus Norway, Liechtenstein and Iceland, but not Switzerland which is a member of the European Free Trade Association (“EFTA”) only). Membership of the EEA would enable the UK to participate in the EU’s single market and to avail of the EU’s four fundamental freedoms (free movement of capital, goods, services and people). However, the ‘costs’ for the UK would be the implementation of most EU laws, compliance with the EU’s competition law and State aid rules and a substantial contribution to the EU budget (likely to be not much less than that of the UK as a full EU Member State). Of course, while subject to EU single market legislation and the judgments of the Court of Justice of the EU (“CJEU”) in relation to such legislation, EEA members do not have any real say in the EU legislative process. Swiss Option: EFTA and Free Trade Agreements Switzerland is a member of EFTA but also has many bilateral trade agreements with the EU giving it access to much of the single market. This is at the ‘cost’ of Switzerland having to implement many EU laws and to permit free movement of persons. Switzerland does not have any decision-making powers in respect of the formation of the EU legislation that Switzerland must implement, having merely a consultative role in the process. However, Switzerland does not contribute to the EU budget. It would be difficult for the UK to replicate the Swiss model, as the EU has expressed dissatisfaction with the complex bilateral EU-Switzerland arrangements and they are under review. Customs Union The EU has customs union arrangements with Turkey, Andorra and San Marino. The EU-Turkey customs union is the leading example, but it was entered into in the context of talks on Turkish accession to the EU. In legal terms, an EU-UK customs union might consist of the EU and UK agreeing to have common external customs tariffs visa-vis third countries and to remove customs tariffs for goods as between the EU and UK. It might also contain provisions in respect of free movement of services, although this is not a feature of the Turkish arrangement. Such an arrangement would restrict the UK as regards tariffs for goods from third countries. Free Trade Agreement This approach would involve the UK negotiating various free trade agreements with the EU in the areas in which it wishes to liberalise trading relations. While this would permit the UK to pursue its own agenda, it could take a considerable period of time to achieve the desired level of market opening, and inevitably would involve compromises and trade-offs. The UK needs to shape its post-Brexit world, but there are many stakeholders in it doing so. Not least are the remaining EU Member States with which the UK will have to develop new legal and trade arrangements. There is no certainty or consensus as to what forms those relationships will take. ¬ Are any of the existing models appropriate for a country that is the EU’s second largest economy and the fifth largest economy in the world? ¬ How will the UK preserve its existing trade with the EU? ¬ How ‘match-fit’ is the UK to undertake such a broad range of complex trade negotiations, in a concentrated timeframe? Questions Arising 29 | mccann fitzgerald ¼ july 2016 In the Long Term Economic and political developments since the 23 June UK referendum demonstrate clearly the uncertainty and risk that Brexit poses for the economies of Ireland, the UK and the wider EU. Indeed, pre-referendum predictions that Brexit will have adverse global impacts already seem accurate. We have mentioned elsewhere in this Legal Perspective that the referendum was advisory and that no legal or regulatory consequences flow exclusively from it but that the UK Prime Minister, Theresa May, has committed to respect the vote to “leave” the EU, even if the timing and bewildering logistics of it doing so are as yet unknown. It is often said that markets dislike uncertainty. However, events following the 23 June referendum indicate that Brexitrelated uncertainty will be a continuing feature of the economic, political, social, legal and regulatory environments of Western Europe for years to come. Ultimately, new or adjusted relationships will be forged between the UK and the remaining EU Member States (including Ireland) (see UK-EU Legal Relationship Post-Brexit on previous page). However, we do not at this point know the broad nature of those new relationships, much less the detail of them. Indeed, in current circumstances they seem to be unknowable. We will update our clients, our publications and our analysis as better information becomes available. The Article 50 negotiations (when they occur) will cast up a vast range of complex issues. It may be that the number of issues is more than even the large and experienced civil service of the UK can deal with effectively in the two-year negotiation period so that the UK may seek to prioritise The impact on some sectors will be marked, affecting investment and trading in significant ways. certain areas of post-Brexit UK-EU relations in the negotiations (should the EU choose to facilitate this approach). The breadth of the issues to be addressed is almost matched by the breadth of the possible outcomes. Rarely before in modern times have there been so few certainties about something so significant as the future of UK-EU relations. It is extraordinary yet true that there is not even a single understanding of what “Brexit” actually means: apart from the UK “leaving” the EU, the form of that exit and of postBrexit relationships are unknown. A UK general election within the next year seems possible and speculation that there may be a further UK referendum to endorse or reject whatever exit deal the UK negotiates with the EU no longer seems fanciful: while the Article 50 procedure is irreversible, in a matter of such high stakes surely even that could be adjusted if thought to be necessary (although any treaty change would require a referendum in some Member States, such as Ireland). A leader article in The Economist (2 July 2016, “Adrift”) notes that “Breversal” is conceivable. It seems that the markets – and the people of the EU and further afield – will have to reconcile themselves to a protracted period of uncertainty yet businesses need to make such contingency plans as they reasonably can. Whether or not we are ‘cursed’ to do so, we certainly are living in interesting times. The Article 50 negotiations (when they occur) will cast up a vast range of complex issues. “ ” Leadership Team 30 | mccann fitzgerald ¼ brexit - issue three - a legal perspective Mark White Partner, Head of Investment Management Group ddi +353-1-607 1328 email mark.white@ Patricia Lawless Partner, Head of Energy & Natural Resources ddi +353-1-607 1361 email patricia.lawless@ John Cronin Partner, Finance ddi +353-1-607 1284 email john.cronin@ Maureen Dolan Partner, Head of Pensions & Incentives ddi +353-1-607 1288 email maureen.dolan@ Philip Andrews Partner, Head of Competition, Regulated Markets & EU Law ddi +353-1-611 9143 email philip.andrews@ Adam Finlay Partner, Technology & Innovation ddi +353-1-607 1795 email adam.finlay@ Hugh Beattie Partner, Investment Management Group ddi +44-20-7621 1000 email hugh.beattie@ Iain Ferguson Partner, Investment Management Group ddi +353-1-607 1414 email iain.ferguson@ Seán Barton Partner, Head of Dispute Resolution & Litigation ddi +353-1-607 1219 email sean.barton@ Alan Fuller Partner, Head of Corporate ddi +353-1-607 1372 email alan.fuller@ Josh Hogan Partner, Finance ddi +353-1-607 1720 email josh.hogan@ McCann FitzGerald Brexit Group We have established a cross-sector group that advises and represents Irish and international business clients on the legal, regulatory and tax implications of Brexit. 31 | mccann fitzgerald ¼ july 2016 Ronan Molony Partner, Corporate ddi +353-1-607 1204 email ronan.molony@ Peter Osborne Consultant, Finance and Corporate, Head of Legal Information and Know How ddi +353-1-611 9159 email peter.osborne@ Gary McSharry Corporate Partner, Head of New York Office ddi +1-646-952 6003 email gary.mcsharry@ Terence McCrann Partner, Head of Employment ddi +353-1-607 1336 email terence.mccrann@ Darragh Murphy Partner, Investment Management Group ddi +353-1-607 1433 email darragh.murphy@ Michael Ryan Consultant, Head of Tax ddi +353-1-611 9130 email michael.ryan@ Aidan Lawlor Partner, Head of Corporate Finance ddi +353-1-607 1450 email aidan.lawlor@ This document is for general guidance only. It should not be regarded as legal advice or as a substitute for the taking of such advice. Before acting on any of the matters discussed, we would be pleased to assist or advise you. 32 | mccann fitzgerald ¼ brexit - issue three - a legal perspective © McCann FitzGerald, July 2016 Email Principal Office Riverside One Sir John Rogerson’s Quay Dublin 2 D02 X576 Tel: +353-1-829 0000 New York Tower 45 120 West 45th Street 19th Floor New York, NY 10036 Tel: +1-646-952 6001 London Tower 42 Level 38C 25 Old Broad Street London EC2N 1HQ Tel: +44-20-7621 1000 Brussels 40 Square de Meeûs 1000 Brussels Tel: +32-2-740 0370