Do you need to revise your contracts in the post Brexit world?

In a post Brexit world do your contracts need to be reviewed and amended? If so, what are the likely areas that need to be considered and adjusted?

Commercial contract trends

In an increasingly uncertain world and economic outlook, we find that many clients are reconsidering  their commercial agreements.  To help you keep current, a few of the most copmmon issues we are dealing with included :

• Do your GDPR provisions need updated?
• Are your agency and distribution agreements on the mark?
• Is referring to the EU now appropriate under your contracts?
• Exclusions and termination rights where you cannot deliver and comply with a contract due to circumstances beyong your control
• Changes to consumer protection requirements.

How up to-date are your GDPR provisions?

The position on data protection is that the current UK legislation is based on that in the EU so there are two separate but similar regimes because the UK legislation (now generally referred to UK GDPR) is based on EU GDPR.  So what effect is Brexit having on GDPR issues?

 GDPR and data protection trends

Compliance will be an issue in both the UK and the EU with the risk of enforcement action from both the ICO and other EU Data Protection Authorities.  What is going to be more of an issue as we move forward is whether the UK will be regarded as providing adequate protection for EU data.

Here you need to consider the GDPR rules on transfers of data within the EU and outside of the EU.

Will agency and distribution agreements need reviewing and amending?

There are particular features that may be impacted in relation to agency and distribution agreements.   Usually such commercial agreements are territory specific so particular care needs to be taken when defining the Territory. Are you considering for example:

• Is the UK specified separately from the EU where necessary in the commercial contracts?  So does a distribution or agency agreement has as its specified territory the EU including the UK or does it just say the EU so it potentially will not cover the UK in future or on renewal.  How would your business be impacted if, say, the UK were carved out as a separate territory not included in the agreement?   Without care you could find that your market for selling the relevant products is decreased.
• Have you covered off additional customs declarations and new/increased tariffs?
• Are the governing laws appropriate now that the UK is not the EU.  If you are using different contracts for EU and UK it may make sense for the governing law to be changed too.

Potentially there could be changes to agency and distribution agreements in the future.

• UK Competition law could diverge from the current EU Competition law so that distribution agreements can be for longer periods (typically they are limited to 5 years’ duration to fall within an EU Competition law block exemption);
• The UK could change the law on Commercial Agency arrangements so that there was no requirement to compensation on termination of an agency agreement relating to the sale of goods. The reason why we may see changes is because compensation was not something that was typical in the UK for this sort of agreement before our legislation was aligned to the EU.

Do your jurisdictional clauses need revamping?

English contract law and principles are unchanged following Brexit – so if the contract says it is governed by English law (or other UK law) the way the agreement is interpreted will remain the same.

Going forward there may be a preference for an exclusive jurisdiction clause so that a case has to be decided by the English courts (rather than by a court in another country, if the other party is based in the EU or elsewhere).

What is less clear is how easy it will be to enforce a judgement of an English court in another country in the EU.  One way around this problem is to include a binding arbitration/dispute resolution/mediation clauses which by-passes the need for enforcement of the judgement via a foreign court.

Are your contract references to the EU now appropriate?

Whereas in the past, goods could be moved freely across the countries within the EU, now there will be different requirements where goods cross borders and compliance functions may need to be split off into EU and UK and this will impact on costs and possibly the availability of resources.

Another thing you will need to check is whether there any references in your commercial contracts to the EU and, if so, are they still be appropriate?  Should the reference now be to the EU and the UK and should any reference to compliance to relevant laws be to UK law or to both UK and EU law?

What changes are expected for consumers?

 Currently the UK and EU are broadly aligned on the principles of consumer law. However changes are on the way for consumers within the EU New Deal for Consumers, which aims to update and strengthen some directives previously introduced (in the EU including the UK) – so with more regulation of the digital sector, by imposing fines for non-compliance (up to 4% of a trader’s annual turnover) and strengthening rights of consumers across the EU to enforce their rights by providing for class actions in EU Member States and including more transparency particularly in relation to online selling so that where a user “pays” for digital services by providing data rather than money he or she will have rights along the lines of those a paying customer would have.

The legislation for the UK leaving the EU commits the UK to continue with main principles of these for online trading in the future in terms of fairness and information which must be provided but as the UK has left the EU before the Omnibus Directive comes into force it remains to be seen how far the UK will wish to introduce its own legislation along the lines of the changes in the EU. So the requirements for transparency about price, additional costs – delivery and shipping, when cancellation is available without the customer having to give a reason, what happens about returns and refunds and information as to be given in terms of the ordering process will remain the same but it is not clear whether the other changes in the EU will be implemented with similar legislation in the UK and whether ongoing regulatory alignment in this area may form part of trading arrangements in future.

The UK has also recently had its own review on consumer and competition regulation which suggests that the UK may also be making changes in future to reflect the growth of the digital sector and online selling.  We will need to see what changes this will bring.

However, whether or not the UK aligns to updated requirements for selling to EU consumers, UK businesses will have to comply with the EU updated laws if they are selling in the EU so this will be something businesses selling across the EU needs to address, so for those selling to the UK and the EU it may make sense to up their game and comply with the new EU standards as they come in until UK future requirements become clearer.

If you need any help with any commercial contract questions please do get in touch.