Brexit Contract Checklist

Posted: 10th February 2021
Author: Christopher Buck
Reading Time: 4 mins
How might your commercial contracts be affected by the end of the Brexit transition period, and what can you do to protect your position?

On 30 December 2020, the UK government and the European Commission signed the EU–UK Trade and Cooperation Agreement (TCA) which now governs the trade relationship between the UK and the EU following the end of the transition period on 1 January 2021. The following checklist sets out some of the key provisions of a commercial contract that will need to be considered.

Contractual Provision

Considerations
Definitions
 The UK is no longer an EU country and so references to the EU or the European Economic Area (EEA) will not include the UK. To define a territory, references to the EU or EEA will need to expressly state that this includes or excludes the UK. Another option would be to list each individual jurisdiction separately.

 
References to EU Law
 The TCA is an international treaty. Retained EU law is EU legislation up to 31 December 2020 and which will continue to apply in the UK. References to EU law should to be amended to ‘Retained EU law’ or EU law which forms part of UK domestic legislation.

 
Tariffs and Quotas
 There will be no import tariffs or other customs duties or quotas on imports of UK-origin goods into the EU or EU-origin goods into the UK. The TCA contains rules of origin which outline the criteria to determine a product’s origin. Potential issues may arise in relation to products made in the UK or the EU, but which use materials from outside the UK or the EU.

 
GDPR and Data Protection
 EU GDPR has been incorporated into UK data protection law. Data transfers from the UK to the EEA are not restricted. The EU has agreed to delay transfer restrictions from the EEA to the UK for at least another 4-6 months. Therefore, businesses can continue to transfer personal data from the EEA to the UK during this period.

 
Termination / Suspension Events
 The end of the transition period may create financial hardship and uncertainty for a business, making performance of a contract difficult or impossible. The possible Brexit impacts include: increased risk of insolvency for some businesses; a contract is no longer needed due to Brexit; and unpredictable market conditions. It is unlikely that these situations will be covered by a general force majeure clause. Consider including express clauses into a contract to include:

·         termination on shorter notice;

·         a right to terminate for convenience; or

·         link termination rights to performance factors, for example service levels/KPIs.

 
Change Control
 Change control or variation procedures refer to clauses which govern how and in what circumstances a contract may be varied or amended. The possible consequences of Brexit are that current contractual obligations become unenforceable or that there are increased costs to ensure compliance with contractual obligations due to changes in the law. Incorporate clauses into contracts to allow changes to be made to the contract to ensure compliance with changes to the law and include provisions to regulate how the cost of any changes will be met, for example pricing adjustments.

 
Consents and Permissions
New consents, permissions or licences may be needed to supply goods or provide services under a contract. For example, there will be a need for export and import declarations and other administration for cross-border trade. It will need to be made clear in the contract which party is responsible for obtaining and filing any additional documentation. There may also be a requirement for product conformity assessments to ascertain whether a product can be sold in both the EU and UK.

 
TUPE
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE 2006) implements EU law. However, the impact of Brexit on TUPE is likely to be limited given that TUPE is a widely used mechanism in the UK.

 
Governing Law and Jurisdiction
 UK contract law is largely unaffected by Brexit. Nevertheless, it is still important to incorporate a clause that states the contract is governed by the exclusive jurisdiction of the courts of England and Wales.

 

Click here for a downloadable PDF version.

For legal advice and assistance, contact Christopher Buck, Associate Partner & Corporate Solicitor, at Franklins on 01908 660966 or email christopher.buck@franklins-sols.co.uk.

Disclaimer: The information provided on this blog is for general informational purposes only and is accurate as of the date of publication. It should not be construed as legal advice. Laws and regulations may change, and the content may not reflect the most current legal developments. We recommend consulting with a qualified solicitor for specific legal guidance tailored to your situation.