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Stuart PadghamPartner, Irwin Mitchell

Dan WebsterPartner, Irwin Mitchell

In-house Division seminar: Theimplications of Brexit for in-houselawyers

Governing Law clauses

• Governing law of contractual obligations: covered byRome I

– Post Brexit, the UK would likely revert to the Contracts(Applicable Law) Act 1990

– Very similar provisions - there should be no major changes

• Nevertheless, even if equivalent measures are put inplace, the UK Supreme Court and ECJ may interpretissues differently

• This may cause a divergence in interpretation

Governing Law clauses

• Governing law of non-contractual obligations: coveredby art. 14 of Rome II

– Rome II allows parties to choose the governing law

– Such agreements may no longer be valid in the UK postBrexit

– Rome II also states that the applicable law is that of thecountry where damage occurs or is likely to occur

– Before Rome II: the Private International Law(Miscellaneous Provisions) Act 1995

– The law applicable was that of the country in which a tortoccurred (such as misrepresentation)

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Clauses referring to“English Law”

• Where “English law” is the governing law of a contract,this is currently construed as “English law includingapplicable EU law”

• Post-Brexit, it will likely change to “English law as inforce from time to time”

• This may change the meaning of an existing contract

• In the absence of some EU law provisions, somecontracts may be substantially different and/orimpossible to perform

Other areas of concern

• Termination clauses (including force majeure, materialadverse change and frustration)

• Territorial provisions

• Pricing

• Incoterms

Impact on finance documents (1)

• As contractual arrangements they are subject to thesame issues as above but generally Brexit should havelimited direct effect:

– Governing law/Jurisdiction clauses

• change of law construction provisions in LMA documentation

• one-sided exclusive jurisdiction clauses

– Minimal direct references to EU-derived legislation instandard form documentation with certain limitedexceptions:

• Centre of main interest (COMI)

• VAT

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Impact on finance documents (2)

• Article 55 BBRD bail-in clauses

– Borrowers which are in-scope entities should demandexpress inclusion?

• Impact on enforcement of Security Documents

– Enforceability of judgments?

– Continuation of financial collateral regime?

– No automatic recognition of insolvency regimes?

The need for passporting / atransitional arrangement

• MIFID II/CRD Passporting

– High risk under current legislation of not being resolvedprior to Brexit as either:

• The Commission needs to confirm that the UK regulatoryregime is equivalent to that in the EU which would bepotentially time-consuming and subject to political risk andthe CRD equivalency regime is undocumented OR

• The relevant UK lender will need to be licensed under theregulatory regime of each EU state it operates in (separateregime for non-bank finance companies?)

– Therefore a transitional arrangement is likely to beessential

Potential impact of no passportingor transitional arrangement (1)

• Serious potential impact on corporate loans from UKlenders to EU borrowers

– Lender may be performing an illegal activity and riskingsubstantial fines and criminal liability

– Lender may be able to demand mandatory prepayment onthe basis of illegality

– Borrowers need to consider if there is any direct UKlending to EU subsidiaries. If so, should it demand that thelending is transferred to an EU subsidiary, refinance orrestructure its debts?

– Does the documentation allow lenders to perform theirlending obligations through affiliates?

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Potential impact of no passportingor transitional agreement (2)

• Potential Termination Event under hedging documents

– Illegality Termination Event under 1992 and 2002 ISDAMaster Agreements between EU and UK counterparties ifno MIFID II transitional arrangements put in place (a twoway termination right)

• General reduction in liquidity and competition in both UKand EU banking markets resulting in poorer credit termsand less credit availability

Indirect effects

• Risks of eventual legislative divergence triggering lenderprotections:

– Increased costs

– Tax gross-up

• Impact on banking covenants/events of default

– Consideration of general effect of Brexit on borrowerbusiness triggering default

• Material adverse change?

• Breach of financial covenants?

• (If regulated) unlawfulness default?

Stephen McCartneyDirector of information governance and dataprotection officer, Royal Mail Group

In-house Division seminar: Theimplications of Brexit for in-houselawyers

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Brexit and the General DataProtection Regulation

Implications for your organisationFebruary 2017

So where are we at?

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• GDPR formally adopted on 4 May 2016 (Star Wars day,coincidentally)

• Comes into force on 25 May 2018

• Lots of stuff still unknown – exceptions to the law, whetherthe ICO can continue to be pragmatic, how this affect EU-based subsidiaries.

• But we know where to start.

What does Brexit mean for GDPR?

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So what do you need to be thinkingabout post-Brexit?• Get on with your general preparations for GDPR

• It is definitely coming into force in the UK!

• But in particular, start thinking about how Brexit maychange:

Transfers of data between the UK and the EU

Lead regulator?

Representative in the EU

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Overseas transfers

So what is the problem?

• Current law and GDPR places a barrier on transferring personaldata outside the EEA with adequate protections

• If, as seems likely, the UK leaves the EEA, then it will be treatedas a third country by the EU for the purposes of data transfers

• For companies that work across the EU, or have partners andsupply chains across the EU that rely on the free flow of data,this could be a problem

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What is the UK Government view?

• UK Government White Paper on Brexit makes it clear a key aimis to ‘protect the stability of data transfers between EU MemberStates and the UK’

• The UK Government also makes it clear that it intends toimplement GDPR in full, and will keep GDPR after Britain leavesthe EU.

• The White Paper mentions that the EU can recognise dataprotection standards in non-EU countries as being essentiallyequivalent, but does not go as far as talking explicitly about‘adequacy’

• The Minister, Matt Hancock, was asked specifically about anadequacy decision on 1 February 2017, but refused to committhe UK to an adequacy decision

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What are the scenarios?

• The UK Government is obviously hoping to achieveadequacy

• But barriers remain:• The European Commission may have objections to an adequacy

finding for the UK because of UK surveillance laws

• The CJEU may be asked to decide if an adequacy decision islawful

• The UK Government may object to an adequacy decision as thisleaves it open to jurisdiction of the EC and CJEU

• The UK Government may seek to roll data flows into the broadertrade agreement it hopes to achieve with the EU

• The EC, EP or any member state may object to free data flowsbeing in the agreement

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If not adequacy, then what?

• Transfers may still continue in certain cases.

• Companies with Binding Corporate Rules may be able tocontinue with data flows within their company or group,

• Those companies whose BCRs were approved by the ICOmay want make sure they don’t have to go through theapproval process again.

• Model Clauses may still be used for data flows betweencompanies

• The possibility exists for an EU-UK version of PrivacyShield, but this would be open to oversight from the CJEU,much like the US-EU arrangements.

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Lead regulator?

• So the UK will no longer be part of the EU, and will beconsidered a third country

• ICO will not technically be part of the European DataProtection Board, so won’t be able to participate in theconsistency mechanism, or lead investigations

• In this scenario, companies that work across the EU will nolonger be able to rely on the ICO being their lead regulatorfor any issue that arises in their company in the EU

• So you need to think about how you deal with this

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Identifying your ‘lead authority’• Forget about forum shopping! GDPR does not allow it.

• Whatever decision you take can be overturned by EDPB,so must be robust

• Guidance from A29 gives some rules of thumb:Where are decisions about the purposes and means of theprocessing given final ‘sign off’?

Where are decisions about business activities that involve dataprocessing made?

Where does the power to have decision implemented effectively lie?

Where is the Director (or Directors) with overall managementresponsibility for the cross border processing located?

• Designating a representative in a well thought through leadjurisdiction will help, but again, this is no guarantee

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What if I am targeting services, but nodecision-making happens in EU?• This is a difficult one.

• If there is no decision-making in the EU then there is no “mainestablishment”.

• No main establishment means no access to one-stop-shop or alead authority.

• You have to deal with all of them.

• Do you consider a restructure to have decision making within theEU?

• Despite one-stop-shop, companies are required to deal with alllocal DPAs on complaints, and the politics of the EDPB will meanany gains to be had from a one-stop-shop might be marginal

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Representative

• If you do not have a ‘main establishment’ in the EU, but areprocessing data on EU citizens, you will have to designatea representative in one of the EU countries you are activein to deal with the DPAs across the EU.

• The representative should be mandated in writing by thedata controller

• Acts on the controllers behalf in the EU in ensuringcompliance with the Regulations

• The representative is subject to enforcement proceedingsin the event of non-compliance by the controller

• Does not apply to occasional, small-scale processing orpublic bodies

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Summary

• The UK implementing GDPR and offering to keep it doesnot mean Brexit has no effect on your GDPR preparations

• You need to think about how you might protect flows ofinformation between the EU and the UK should anagreement or adequacy decision not be reached.

• You also need to think about how you will influence thelead authority decision if you were going to rely on the ICOas your lead authority.

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Any Questions?

Madeleine RichardsHead of legal and business affairs, ITVMember, Intellectual Property Committee, TheLaw Society

In-house Division seminar: Theimplications of Brexit for in-houselawyers

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3 Great Repeal Bill Questions

• Universal Issues for IPR and other Legislation:

– The Government has proposed to repeal the EuropeanCommunities Act 1972 via ‘the Great Repeal Bill’…

• 1. Which EU laws will be transposed via the Great RepealBill?

• 2. Will the transposing be comprehensive enough?

• 3. Following completion of negotiations, how will we treatCJEU judgments and deal with divergence of interpretationover time?

Beware the Blackhole…

• 24pt Arial

– 22pt Arial• 20pt Arial

– 18pt Arial

• 24pt Arial

– 22pt Arial• 20pt Arial

– 18pt Arial

Patents

– Currently a bundle of national Patents accessed via acentral application process

• But NB Supplementary Protection Certificates are regulationderived

– Therefore legislation needs looking at to avoid shortening thelife of these patents

– Unitary Patent and Unified Patent Court

• Standardised system to simplify patent registration andhopefully reduce cost of patents

• Considered economically beneficial and potentially hugepatent market

• UK has said it will ratify but nb may be occasional referral toEurope

• UPC is treaty derived but UP done under regulation

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Trade marks & RCDs

– Very harmonised under the European Union Trade markRegulations

• European Union Intellectual Property office manages this

– Runs in parallel to our national trade mark registration system butfor brands with international presence would use a EUTM

– Post-Brexit likely to be increased reliance on our national system

– Will there be a process whereby EUTM holders can convert theirTMs to national marks within the UK?

– Questions around representation for lawyers and whether theremay be increased costs if firms need to be appointed both in theUK and Europe (for multi-national companies this will mean twoportfolios managed in tandem – national and European)

Copyright

– Least harmonised currently BUT NB Digital Single Marketproposals

– In UK look to Copyright Designs and Patents Act 1988 “CDPA”

– Important there is clarity and resolution around how we will treatCJEU judgments in the future as there is a lot of direction fromthe CJEU on Copyright Directives which exist in CDPA

– Digital Single Market proposals attempt to harmonise: what willthis mean for DSM?

– Some DSM Regulations could be problematic if introduced

– Others which having already been introduced if taken away willgive rise to potential clearance issues (e.g. Portability)

– Finally: Exhaustion – goods placed on the market in one part ofthe EU cannot be prevented from circulating freely within the EUhence IPRs cannot be used to prevent movement of good -legislation will need to address when we are not a MS.

Conclusion

And….

1)Hope that legal certainty is prioritised for business, economic andconsumer benefit;2)Take a view on what registrations you hold as to whether they are UK orEuropean and which markets you deal in;3)Watch this space with the UPC;4)Watch this space with Digital Single Market but be alive to the issuesproposals may present;5)Government should quickly identify legislation where bilateralagreement/reciprocity required from Europe as this will form part of anytrade deal negotiated.

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Ian AndersonChief legal officer, Hull City Council

In-house Division seminar: Theimplications of Brexit for in-houselawyers

EU Procurement and Brexit

Ian Anderson (Lawyers in Local GovernmentLead, Procurement and Partnerships)

Background Pre- EU primary function of Procurement Rules wasensuring Integrity and Value for Money in relation toexpenditure of public funds, limited legislation;

EU Procurement Law provided a clearer framework fortesting these concepts and greater opportunity forchallenge to decisions within the procurement process;

Largely embraced by UK who were influential in thedevelopment of 2015 EU Procurement Directives

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EU Procurement Directives 2015 Enabled the limitation of access to tender processes toSocial Enterprises

Introduced a Light Touch Regime for Health/Social Careprocurement

Support for in-house Council companies/public sector topublic sector trading arrangements

Promoted opportunities Small and Medium Enterprises togain access to public contracts (eg requiring explanation fordecisions for large contracts not being broken down intoindividual lots)

Supported developing concept of contract evaluationincluding Social Value

Public Services (Social Value) Act2012:

placed a tangible value upon the social benefits thatcan be delivered through procurement, by explicitlyidentifying and valuing those benefits within theprocurement process and monitoring their deliverythereafterEffectively articulated provided the opportunity toreduce the overall cost of public service provision byreducing demand for the delivery of public services

European Economic Area Agreement

In addition to membership of the EU, the UK is a member ofthe European Economic Area Agreement Theoretically the UK could leave the EU but continue as amember of the European Economic Area Agreement (cf Norway,Iceland, Liechenstein)Would mean that would be required to comply with EUProcurement Directives, but have no role in their formulation;Would also mean that would continue to be required to acceptfree movement of labour and significant contributions to EUbudget;

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European Free Trade Agreement(EFTA)

If the UK chose to leave the EEA as well as the EU the UK couldtheoretically apply to become a member of the EFTA alongsideNorway, Iceland, Liechenstein and Switzerland; However, membership of EFTA little different to membership ofthe EEA and presently requires acceptance of free movement oflabour and significant contributions to EU budget;Would mean that the European Court of Justice/EuropeanCommission would have no role in hearing legal challenge cases; Complaints instead go to the EFTA Surveillance Authority/Court,however, in practice EFTA follows ECJ rulingsMay not be welcome as UK is larger than the other parties to theagreement;

WTO/GPA UK could therefore seek Membership of the WTO GPA;

While the UK is a member of the World Trade Organisation (WTO) in its ownright, WTO Procurement is regulated through the WTO Government ProcurementAgreement (GPA)

UK membership of the WTO GPA is through the EU not in its own right;

To become a member of the GPA requires agreement of the EU and other GPAparties; potential exists for EU to delay UK membership pending resolution ofnegotiations re EU Treaties;

Implications of GPA: Where the rules are adopted into a trading relationship,minimum standards in terms of transparency are applied and any national awardprocedures must be applied equally to the Countries within the GPA;

the minimum standards are less restrictive than the existing rules, however, musttreat suppliers from states who are also signatories to the Treaty, no lessfavourably than domestic suppliers;

“Bespoke Arrangements” EU has agreed to access to EU markets beyond the WTO GPAagreement subject to Bespoke arrangements in a number ofinstances;

Market Access beyond GPA limits has been granted to some statessubject to:

compliance with acceptable award-procedure models eg theWTO’s Agreement on Government Procurement (GPA)

reciprocal Procurement Rules which accord with EUProcurement Rules

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Anticipated Outcome:

UK applies for and gains membership of WTOGeneral Procurement Agreement Bespoke arrangement under which UKcontinues to apply Procurement Rules which alignwith EU Procurement Rules to facilitate improvedaccess to EU markets;

Questions

Karen Baxter

PartnerLewis Silkin LLP

Employment & Immigration

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Business as usual?

• Many EU protections pre-existed in the UK

– e.g. equal pay, discrimination laws, right toreturn from maternity leave

– accepted as good practice

• Workers’ rights will be “fully protected andmaintained” through the Brexit process(Prime Minister’s speech, 17/01/2017)

Business friendly changes?Business friendly changes?

• Holidays / Working Time under the Working TimeRegulations 1998– current: holiday accruing on sick leave, holiday pay

based on all aspects of remuneration, max 48 hours pw

– future: limiting rights to accrue/carry over holiday,holiday pay based on basic pay only, removing the capon weekly working hours

• The Agency Workers Regulations 2010– most likely to be removed

Business friendly changes?Business friendly changes?

• The Equality Act 2010– Cap on compensation

– Permitting positive discrimination

• Rights to parental / family leave– Mixture of EU and domestic rights

– UK maternity leave / pay moregenerous

– Burden on business, but littlepolitical appetite for changes

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Business friendlyBusiness friendly changes?changes?

• TUPE

– Permitting the harmonisation of terms of employment

• Legal precedent

– How far will UK courts departfrom ECJ precedent followingBrexit?

• Judgments of the ECJ likely toremain persuasive, even if notbinding

• Need to preserve legal certainty

End of freedom of movement

• Free movement to end for new EU migrants to the UK assoon as Article 50 is invoked

• From that point, EU citizens travelling to Britain:

– Will no longer to have the automatic right to staypermanently in the UK

– Will be subject to migration curbs:

a new visa regime

restricted access to benefits

End of freedom of movement

What will replace the Immigration (EEA) Regulations 2006?

• Points-based system extended to EEA nationals

• Exemption for EEA bankers and highly skilled businesspeople

• London visa

• Sector and possibly region-specific scheme for industrieswith lots of low-skilled workerse.g. Seasonal AgriculturalWorkers’ Scheme (SAWS)

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End of freedom of movement

What can you do now?

• Immigration audit

• Identify those staff subject to future control

• Make contingency plans