How will Brexit affect existing contracts or the preparation of new contracts between commercial entities in the UK and Europe in your opinion? Any examples?

Published 12 October 2018 by AQUAN Rechtsanwälte

As a typical German, I'm not really optimistic because there's a great repeal bill in the UK which will reduce EU law, and I don't know which parts will remain in domestic UK law.

It all depends on the political side. If there's a hard Brexit there will be political pressure in Britain to push even further away from the EU, so the best thing we can hope for on contracts is that Brexit will trigger Force Majeure or Material Adverse Change clauses. I'm not so sure though, because if I look at German or English case law, the courts are really very restricted in how they can use the Force Majeure clause. Is a change of law in a member state really a Force Majeure? I'm not too sure.

In Marks & Spencer Plc v BNP Paribas Securities Service Trust Company (jersey) Ltd [2015] the UK Supreme Court held that a court should only intervene where a term has been considered so obvious that it went without saying.

The territorial scope of contracts is one of the major points for me on this topic. This is especially true for license agreements and the different treatments you put on the territory of the European Union. That is no longer true for England, Wales, Scotland or Northern Ireland. Clients have to make sure that such licensing clauses in contracts are renegotiated for the UK and added into new contracts.

This is the same for copyright laws. My firm AQUAN just applied for protection of its copyright in the UK. We did it like we do in Switzerland, with a separate registration for our copyright.

Another big thing is GDPR. I hope that the UK will stay in the framework of European data protection and everything will be fine. If not, the UK will no longer be a safe harbour, and we will see a lot of problems for M&A transactions.

Tariffs and taxes have always existed, but for a long time there weren't tariffs and taxes between the UK and Germany. It's not yet clear who should bear the tariffs and taxes, and we don't know what will happens and how long it will take. I have recently heard that the British and French governments are hiring a lot of people, because of potential problems with tariffs and business contracts. There is still no solution for the Irish-NorthernIrish border.

The exchange rate is another concern and some US firms are already refusing to sign contracts in Sterling because it's not stable enough anymore.

Insolvency also has problems, because we have European insolvency law which won't apply anymore after Brexit. I am not really hopeful that the Force Majeure or Material Adverse Change clause will apply, so we can might see some frustration there.

My advice is that if a business has the chance to renegotiate, they should do it and put in a special termination clause in case of Brexit.