The Implications of Brexit
29 March marked the official start of the two-year negotiations period for the formal exit of the United Kingdom from the European Union.
Baker Botts lawyers in Europe and the UK have examined many of the major legal and regulatory issues which are on the table in the Brexit negotiations.
We have provided their individual perspectives on how the negotiations might proceed and the implications of those negotiations for businesses around the world.
Georg Berrisch, Brussels-based Partner
“Brexit is happening. It will not only affect EU and UK companies but any U.S. company that does business in the EU or the UK. The implications differ depending on how a company has structured its operations in Europe and the sector it is operating in.”
“Each company needs to assess the issues it is likely to face and prepare the necessary changes to its operations. And companies need to do this fast, as the clock is ticking. After midnight 29 March 2019, the UK will have left the EU. The fact that there is great uncertainty as to what outcome the Brexit negotiations will produce is no reason to delay these preparations. Nor should companies rely on the UK Prime Minister’s statements that the UK is seeking a two-year transition period as there is no guarantee that such a period will eventually be agreed.”
Catriona Hatton, Brussels-based Partner, and Co-Chair of the Antitrust Practice
“The main issue for U.S. and other companies in terms of antitrust is the extra burden imposed by parallel filings and investigations in Brussels and London, as well as potential divergence between the two agencies in their decisions. In merger review, as well as in cartel and unilateral conduct investigations, companies lose the benefit of what is currently effectively a one-stop-shop review by the EU for large cross-border matters. Subjecting companies to investigations by both the European Commission and the UK’s Competition and Markets Authority (CMA) for the same matter can create inconsistent demands and increase risks of divergent outcomes.”
“For mergers alone, the CMA anticipates a 40-50% increase in the number of filings as post-Brexit, it will no longer rely on Brussels for a central one-stop-shop review. Deals which are signed but not closed at the time of Brexit are likely to be subject to some transitional arrangements which should make clear at what point additional UK filing obligations kick-in.”
“Meanwhile, Brexit will likely make the London Courts a much less attractive option for private damages actions following a breach of EU antitrust rules.”
Hamish McArdle, London-based Partner
“The process of the UK’s withdrawal from the EU looks set to be complex and time-consuming, with early stage negotiations on key EU demands still raising uncertainties on the position of the two sides and the likely timetable. What Brexit means for the oil and gas sector is therefore not at all clear. We do know that if the UK does not agree new trade arrangements within the remaining eighteen month window, WTO rules may apply. These provide a common framework for trade in goods and services between WTO member countries.
This has been advocated by some in the UK; although there are deep divisions within the main UK political parties on what trade relationship the UK should secure with the EU. Falling back on WTO rules may curtail free movement of goods (a key issue for companies operating in the energy sector), and could impact the import and export of petroleum and goods and services that support the oil & gas industry.
Businesses in the sector would likely then face increased costs and time pressure within existing supply chains, which all suggests that the upstream oil & gas sector should prioritize at this early stage the assessment and mitigation of such risks.”
Patents and the Unified Patent Court (UPC)
Neil Coulson, London-based Partner
“Most companies and business owners are still not certain what the Brexit endgame will be. But it will happen and when it does, U.S. and international companies need to know the range of impact Brexit will have on the intellectual property landscape involving copyright, trademark, design, patent and data privacy, and other issues.
The most pressing question is whether the UK will participate in the Unified Patent Court (UPC) after leaving the EU. That will depend on whether the UK government ratifies the agreement establishing the long-planned UPC and if the system starts before Brexit, whether the UK stays in afterwards. To add further complication, there is a constitutional challenge to ratify the EU’s new Unified Patent Court currently getting weighed by a German court.
This initiative throws the UPC timetable back several months which could further delay the effort to set up a single Europe-wide patent system. The future of the UPC and the Unitary Patent (UP) system remains in the air, and companies need to prepare for all eventualities: no UPC/UP, UPC/UP without the UK, or UPC/UP as originally intended with the UK part of the scene. Whatever the outcome, patenting and litigation strategies need to be carefully formulated with all possibilities in mind.”
Sheena McCaffrey, London-based Special Counsel
“The UK faces a trade-off between retaining access to the Single Market and restricting free movement of labor.”
“A range of policy options, regulations and institutional factors including residency requirements, trade agreements and visa quotas may play out in different ways. Britain is one of the main channels through which many U.S. companies trade in Europe, and the exit arrangements agreed between Britain and the EU will affect decisions U.S. employers may make about where to base employees. Obviously, as negotiations progress U.S. employers will need to keep their arrangements under review.”
Source: Baker Botts