Brexit and New Role of the General Counsel

There are clearly some areas of law and legal documentation that need to be reviewed ahead of Brexit. The General Counsel has the duty to advise the board of ongoing changes – here are some areas of focus that have emerged thus far in the evolution of Brexit negotiations.

While the exact terms of the Brexit “divorce” between the United Kingdom and the EU will take some time to be determined, there are some aspects of company law that are certain to see changes.

The General Counsel has the duty of advising the board on such issues, but with the pace of change heating up as the Brexit negotiations continue, perhaps some focal points should be noted.

Governing law and jurisdiction

Many international companies place contract jurisdiction under UK courts and British law. International companies choose English law more often than any other law as the governing law. And they choose to settle their disputes more often before English courts than before other courts.

This may change after Brexit, although UK lawyers don’t believe it will.

“We do not foresee meaningful changes in the status of English law or the enforceability of English court judgments as part of any Brexit implementation. Indeed, we believe English law will remain a strong and stable system for contractual arrangements concerning the UK, Europe and the world, and see no compelling reason to broadly eschew English law for these purposes or the English courts for resolving disputes,” said London law firm Shearman & Sterling.

Nonetheless, the enforcement of judgments across borders in Europe will change. A judgment in a British court that your company wishes to see applied in France would require considerably more procedural steps once the UK leaves the Union.

The UK will cease to be a party to the Brussels I Recast Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters when it is officially no longer part of the EU. This will mean that EU Member States’ courts would no longer apply the jurisdiction rules contained in the Brussels I Recast Regulation to disputes involving a defendant domiciled in the UK, and the enforcement of judgments rendered in the UK will no longer be governed by this Regulation.

Review existing agreements

Brexit may have the consequence of affecting rights and obligations under existing contracts, other agreements and permits, licences and authorisations.

For example, companies that have a large number of commercial contracts with EU organisations should perform an audit of these contracts. Brexit brings vast changes to international business conditions, and regardless of whether EU entities are concerned, those conditions may oblige a change of position.

While the whole board should certainly begin assessing the effect that Brexit may have on your rights and obligations under the relevant agreements, the General Counsel should lead such an effort. Obviously, such changes should be taken into account when negotiating new agreements.

For example, trade barriers between the EU and the UK are almost certain to increase. There is expectation by experts for both tariffs and non-tariff barriers if no trade deal is achieved between the two parties.

Without a trade deal, the costs of cross-border goods and services will increase significantly, from new tariffs alone, according to researcher Civitas.

“Tariffs are not the only factor that could damage in the absence of a comprehensive trade deal. Regulatory and other non-tariff barriers (NTBs) could increase the cost of trading goods between the EU and UK and make it harder for exporters selling goods in either direction. These NTBs become increasingly significant as tariffs are reduced.”

Since these costs will increase, it is important to assess the commercial impact this will have on your agreements and if, in light of this increased cost, your position under any agreements needs to be revisited.

When negotiating future contracts, there are other factors to consider; for example, you may wish to consider the extent to which prices should include or exclude any new taxes, duties or other similar levies that the UK’s or remaining EU member states’ governments may introduce after Brexit takes effect,” noted London-based law firm Bird & Bird.

For companies that are in services industries, changes to the rules regarding the free movement of persons across borders may have an effect on existing agreements. The freedom of UK nationals to travel within Europe and indeed for those in Europe travelling to the UK seems likely to be impacted by Brexit. For service industries, which have previously been able to operate onsite in any EU country, the costs of obtaining visas and permits should be considered in light of existing agreements.

Obviously, permits, authorisations and licences issued by the UK that were valid across the EU may no longer be valid, just as those issued by any of the other 28 Member States may no longer be accepted by UK authorities.

Legal advice

The status and protection of legal advice, including that of general counsels, may also change. Now would be a good time for companies to review their procedures for protecting legal advice in relation to particularly sensitive areas, such as maintaining privilege logs for competition law advice. It will be important to ensure those procedures are assessed in light of Brexit and will continue to protect documents and other materials that may be vulnerable to disclosure in an EU competition investigation or other proceeding before an EU institution.

“For the purposes of EU competition law and investigations by the EU institutions, including the European Commission, only advice from external EU/EEA-qualified lawyers is privileged. This means only that advice is protected from disclosure in EU antitrust, merger control, cartel or State aid investigations. Post-Brexit, advice from UK-qualified lawyers would have to be disclosed to the European Commission in an investigation,” warned London-based law firm McGuireWoods.

Improved communication with Diligent Board Portal

For the General Counsel, who must keep the board up-to-date on these rapidly evolving changes, efficient communication is critical.

Diligent’s Board Portal not only provides a secure and efficient environment for such communications, but its tools support greater efficiency, consistency and trackability that helps boards execute necessary tasks. You will be able to reach all of the board members as often as you need to without concerns about platforms, operating systems, etc.

Diligent’s Board Portal provides this kind of structure and framework, complemented by a rich resource library full of sample documents, to assist board members in continual engagement, not just at meetings, but also between them, so that informed communication is always possible.

To learn more about Diligent’s Board Portal, please contact us here.

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