BREXIT - 28.02.2020

Amend your contract terms post-Brexit?

Now that the UK has left the EU, attention is focused on the negotiations around our future relationship. But are there any changes you should be making now to the terms in commercial contracts?

Implementation period

Although the UK left the EU on 31 January 2020, we are now in a transition period until 31 December 2020. During this period, EU law will continue to apply in the UK, and the EU and the UK will treat the UK as if it was still a member state. Previous legislative measures taken by the government in anticipation of a no-deal Brexit, including hundreds of Brexit-related statutory instruments and arrangements to on-shore EU legislation into UK domestic law, have been delayed. Subject to the future relationship negotiations, these measures should now come into force at the end of the transition period.

Tip 1. Carry out an audit to determine which of an organisation’s key contracts are likely to be most affected by Brexit. Focus on updating/renegotiating these contracts first.

Tip 2. After the transition period the UK government is likely to start to change or repeal some of the EU derived legislation. When negotiating new contracts, it’s important to include clauses that deal with possible changes to applicable law. These might take the form of provisions which allow you to renegotiate the contract, e.g. to increase the price or make changes to standards or timings, or even rights to terminate the contract if it becomes untenable to perform.

References to EU legislation

Whether or not you need to update a reference to a piece of EU legislation in a document, e.g. GDPR , depends on when that reference will apply.

Tip 1. If the reference will only ever apply during the transition period, you don’t need to make any changes. For example, the reference may only appear in warranties given up to a fixed date. If that date is during the transition period, when EU law continues to apply in the UK, the reference will continue to be correct.

Tip 2. If the reference to the EU legislation is expected to continue to apply after the end of the transition period, you should update the reference so that it refers, for example, to relevant legislation “as it applies in England and Wales from time to time” . This will help to ensure the reference continues to be fit for purpose after 31 December 2020.

Territorial scope

Although relevant arrangements between the EU and the UK provide that references to the EU or EEA in EU or UK legislation will be treated as including a reference to the UK, those provisions do not apply to references to those terms in private contracts. Tip. If your contracts define “Territory” as the EU or EEA, you should update that reference to include the UK. For example, rather than just the EEA, the contract could refer to “the combined area of the UK and the EEA” .

Governing law and jurisdiction

The existing regulations on the law governing contractual and non-contractual obligations will apply to contracts concluded before the transition period ends. Tip. For contracts which are expected to extend past the transition period, ensure that they will be governed by the laws of England and Wales and subject to the exclusive jurisdiction of the courts of England and Wales.

Ensure new contracts include provisions which allow you to renegotiate their terms to deal with any possible changes in the law after 31 December 2020. If the contract refers to the EU or EEA, update it to make it clear whether or not it should include the UK going forward.

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