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?
New legal trends emerging in commercial contracts
The world of commercial contract law is changing in response to many current influences. The net effect is many will be reconsidering clauses in their commercial agreements. To help you keep current we have mentioned a few of the more topical clauses you need to think about new the new world order.
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?
Have you appointed your GDPR representative?
There may be an obligation to appoint a representative for GDPR purposes in EU. For example, a UK company who processes personal data of European individuals relating to selling goods or services must appoint an EU representative for data protection purposes. The point idea is that this representative will act a contact point for the local data protection authority in the relevant country and for any individuals who want to raise issues as to how their personal data is being used. Whether a company is intending to offer goods and services in another EU country is more complex and involves looking at factors to determine whether the goods or services are being targeted to the relevant country (e.g. local language option, delivery there, addresses or phone numbers in the region, ads to that region etc). Similarly, an EU company that is processing personal data of individuals in the UK because it is directing its selling activities into the UK will also need to appoint a representative for GDPR in the UK to act as a contact point here.
Do you provide adequate protection under the GDPR requirements?
Following on from the point above, 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.
GDPR for data transfers within the EU
It is believed that the UK GDPR rules currently give adequate protection. This means that data flows in and out of the EU will continue without the need in most cases to negotiate new agreements or clauses or to put in place additional protection.
GDPR on data transfers outside of the EU
The position is adequate protection needs to be drafted into commercial contracts where personal data is to be transferred to countries which are not in the EU/EEA and are not deemed to offer adequate protection. The US is not regarded as adequate for EU GDPR purposes and the work arounds that were offered by the US in the past – safe harbour and the EU-U.S. Privacy Shield – have both been determined to be ineffective. US government surveillance means that data transferred to the US is unlikely to be regarded as satisfying the adequacy requirements any time soon.
If you are transferring, storing or processing personal data in the US (and who isn’t!) or in other non-EU non-adequacy decision countries care is needed. Commercial contracts involving data flows need clauses covering adequate protection for the personal data that is being transferred or stored. This is going to mean negotiation for the inclusion the EU Model clauses into your contracts if you want to remain compliant with GDPR and UK GDPR. This is something we can help with.
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. 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. 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. Although there could be some divergence in the longer term for offline shopping, we predict that this is unlikely in the near future for online shopping.