Practical Law's Brexit summary: a watching brief

Practical Law editors consider the implications of Brexit for their respective practice areas.

Practical Law
Contents

The following summaries include by necessity some speculative comments. But it is possible at this stage to highlight the areas most governed by EU law, such as financial services and environment (including those that are due to implement or apply EU directives and regulations), as well those that are less directly influenced, such as arbitration and private client. We can also point out where areas are being immediately affected by market conditions. In due course, we will be producing new content and adapting existing content to track the evolving legislative process.

For the time being, the one certainty is that the UK continues to be a member of the EU and so EU law continues to apply until the exit negotiations are finalised. However, what we do not know is to what extent, during the negotiation period, the relevant governmental departments will have the capacity to deal with implementation of the directives required to be transposed in the near future, and whether developments during the negotiation period may affect some of these areas. If not addressed, there could be consequences for the enforcement of, and reliance on, EU law against the UK if it did not implement or apply the relevant EU legislation.

Key to the success of this process will be the arrangements made for any replacement regime or transitional provisions, including those applying to ongoing European Court of Justice (ECJ) cases involving the UK (and, indeed, to the status of ECJ decisions post-Brexit).

In due course, the UK will no doubt seek to review (and where appropriate, repeal or amend) legislation that underpins its membership of the EU during the withdrawal period and following its exit. It has been suggested that this task could take five to ten years, and that areas such as private international law (including governing law, jurisdiction, enforcement of judgments and service of proceedings) would be likely to be a low priority and an area which the UK government may not have the capacity or resources to address until the latter stages of this legislative review period.

We set out below, in alphabetical order for ease of reference, the view of the possible implications for Practical Law practice areas. (For a diagrammatic representation of what the different levels of Brexit impact may be, based on current EU law influence, see Brexit hierarchy of practice areas; and for a brief explanation of the EEA, see Background on the EEA and other opt-out options.)

Arbitration

Business Crime & Investigations

Commercial

Competition

Construction

Corporate

Data protection

Dispute resolution

Energy

Employment law

Environment

Family

Finance

Financial services

Intellectual property and information technology

Life sciences

Media & Telecoms

Pensions

Planning

Private Client

Property

Public sector

Restructuring and Insolvency

Share Schemes & Incentives

Tax

 

Arbitration

The general consensus is that, in the short term, Brexit is unlikely to have any noticeable impact on London's status as a leading arbitration centre. The legal framework remains the same and arbitration agreements that provide for an English seat of arbitration will still be valid and enforceable. From a legal point of view, London's popularity as a seat of arbitration is unconnected with the UK's membership of the EU.

The same probably holds true for the longer term too, from a legal standpoint. Part of London's popularity as an arbitration centre stems from the perception of an arbitration-friendly infrastructure, in the form of the Arbitration Act 1996 and the supervision of the English courts. In addition, arbitral awards made in London will remain enforceable as the UK will still be a signatory to the New York Convention (which is nothing to do with the EU). In fact, the availability of that enforcement regime (as opposed to the uncertainty as to the enforcement of court judgments under the Brussels Regulation) may make arbitration a more attractive dispute resolution option for commercial parties.

From a purely legal perspective then, there is no reason why London as an arbitration seat should decrease in popularity. However, if Brexit brings with it the decline of London as a financial business centre, this may in turn encourage parties to look towards other seats of arbitration, such as Switzerland, or further afield in Asia.

See Article, The potential consequences of Brexit on arbitration ( www.practicallaw.com/7-630-3554) .

 

Business Crime & Investigations

A broad range of offences, enforcement and investigation procedures may be affected by Brexit and have an impact on Business Crime and Investigations practitioners.

Offences. The following offences derive from EU directives:

  • Consumer protection offences (the Consumer Protection from Unfair Trading Regulations 2008 implement the EU Unfair Commercial Practices Directive).

  • Food safety offences (the Food Safety and Hygiene (England) Regulations 2013 provide for the enforcement of certain provisions of Regulation (EC) (178/2002)).

  • Environmental offences (a significant proportion of environmental legislation in England and Wales originates from EU law, which is directly applicable or implemented through national legislation) (see also, Environment).

Data protection offences may be unaffected but the UK would cease to belong to the EU "safe data" zone (see Data protection).

Cybercrime. Tackling cybercrime may be affected but remains a focus at national level, including work currently underway in the Cabinet Office and the recommendations of the National Crime Agency's Cyber Crime Assessment for 2016. Brexit calls into question whether the UK will implement the Directive on security of network and information systems, although it seems unlikely that the UK would want to have lower standards than the EU (see also, Cybersecurity).

Anti-money laundering (AML). UK legislation to implement the Fourth Money Laundering Directive (MLD4) via new Money Laundering Regulations should be in place before June 2017. When the UK leaves the EU, it will be able to vary its anti-money laundering architecture from the EU model. However, the UK is signed up to the Financial Action Task Force (FATF). The FATF Mutual Evaluation of the UK is due to take place in 2018 and any deviation in UK AML standards could have a negative impact.

Investigations. It is likely that Europol will no longer include a UK representative, and this could mean losing access to the European security database (Schengen Information System (SIS II)). The UK law enforcement agencies will no longer have the automatic right to joint investigation teams, for example. The UK will also not have to follow the Framework Decision on Organised Crime, although it has largely been put in place. In addition, the European Arrest Warrant (EAW) may no longer be effective across UK borders.

EU measures such as the EAW make it easier to return fugitives to face trial or to serve their sentences in the prisons of the member when already convicted there. Brexit may mean a return to less effective methods of co-operation. EU member states will not extradite their citizens to the UK unless there are reciprocal rights and obligations imposed upon the UK. The current regime of extradition under an EAW takes an average of three months, compared to ten months for a non-EU jurisdiction, according to UK government statistics.

The European Council adopted the European Investigation Order Directive (EIO), which was intended to facilitate cross-border evidence gathering in criminal cases. The EIO was intended to enable one EU member state to obtain evidence which is located in another and was to replace the existing mutual legal assistance (MLA) regime for cross-border evidence sharing in EU member states; this is now unlikely to be implemented. As a result, MLA is likely to be negatively affected and new agreements may have to be negotiated with each territory. Enforcement of confiscation and restraint orders across UK borders may be significantly affected.

Sanctions. A further significant area is sanctions, since a sizeable number of UK administered economic sanctions, export controls and wider trade restrictions, including those with respect to Russia, are implemented under EU Regulations. Post-Brexit, the UK may issue sanctions as an individual nation. In addition, the UK will still be part of the UN, and may take account of and endorse EU and US and Office of Foreign Assets Control measures.

 

Commercial

EU law has a significant effect on the following areas of commercial law: advertising and marketing, agency, consumer, distribution, e-commerce, outsourcing, product liability and labelling and supply of services. Confidentiality will be potentially affected by the new Trade Secrets Directive (see Intellectual property and information technology). Most of this law is firmly embedded in UK law, and we think that it is likely that the UK government will keep or re-enact the relevant legislation, although there would be obvious scope for divergence over time. Recently implemented EU law might be more open to challenge, such as the contentious new plain packaging rules for tobacco products.

Generally, contract law (except in the area of consumer rights) consists of legal principles developed and maintained by English courts. As such, it will broadly be unaffected by Brexit. However:

  • There are potentially complex implications for the conflict of law rules and the conduct of disputes for cross-border contracts. (See Dispute resolution.)

  • The rules on interest on late payment are derived from the Late Payments Directive 2011. However, these rules have been implemented in the UK as primary legislation, so there is unlikely to be any change in the immediate future.

That said, Brexit may have a profoundly disruptive effect on many commercial contracts due to its potential to affect the commercial bargain underlying those contracts. For instance, cross-border trading relationships that are sensitive to currency exchange rate fluctuations, or to changes in taxes and tariffs. Parties to contracts that are no longer economically viable should review their contractual (and common law) termination rights to see how quickly they can bring the contract to an end, or whether the contract offers opportunities to renegotiate the commercial terms: see further, Checklist: Reviewing commercial contracts in the context of avoiding financial difficulties ( www.practicallaw.com/8-386-8536) .

It is often the case in financially uncertain times that force majeure and material adverse change provisions come under the spotlight. As ever, whether they are triggered will depend on the exact drafting of the contract and the application of the rules of contract interpretation. The market consensus seems to be that it is relatively unlikely that force majeure clauses will be triggered in the absence of wording specifically contemplating Brexit or a reasonably analogous event. References in the clause to government-imposed change might be helpful in this context. It might be easier to argue that financial consequences of Brexit constitute a material adverse change, but not every contract includes a material adverse change provision.

Changes in the underlying legal landscape may affect other contracts. For instance, if the UK loses its passporting rights into EU member states, it may no longer be legal to perform particular financial services contracts or broadcasting contracts. The parties to affected contracts would need to review what, if any, provision the contract makes for this eventuality, and, if the contract is silent, whether the contract could be considered to be frustrated or void for illegality. Note that a contract is not frustrated simply because it becomes more expensive to perform.

In relation to new contracts, the prospective parties should consider how the contract might be affected by the UK's departure from the EU, and seek to provide accordingly in the contract to the greatest extent possible. Essentially, the parties would need to define a Brexit-related trigger event (in itself, a complex task) and specify what consequences would flow from that.

See Article, Brexit: potential implications for contracts and disputes ( www.practicallaw.com/0-623-0660) .

 

Competition

The EU competition rules (Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU)) will continue to apply post-Brexit to agreements or conduct of UK companies that have an effect within the EU. However, there is likely to be a significant impact on the UK competition regime, as follows:

Merger control. Currently, mergers that fall within the UK and EU Merger Regulation notification thresholds need only be notified to the European Commission (the Commission). This "one-stop shop" will disappear in the UK post-Brexit. Instead, transactions will have to be notified to the Commission if the EU Merger Regulation thresholds are met and a separate review by the Competition and Markets Authority (CMA) will also be necessary if the Enterprise Act 2002 thresholds are met. UK merger notification is currently voluntary; it may be that the increased workload for the CMA could lead to the introduction of a mandatory merger notification system by the UK government, although this is speculation at this point.

Antitrust. The impact will mainly be seen in relation to the enforcement of competition law by the UK authorities. The substance of UK competition law mirrors that of EU competition law and there is unlikely to be any major legislative change to that substance. However, section 60 of the Competition Act 1998 requires the UK authorities to ensure that any questions arising in relation to competition within the UK are dealt with in a manner that is consistent with the treatment of corresponding questions arising under EU law. This obligation will be removed, leading to potential divergence. As UK companies active in the EU will remain subject to EU competition law post-Brexit if their conduct has an anti-competitive effect in the EU, this may lead to parallel investigations in the UK. Currently, the Commission has jurisdiction to investigate potential competition law infringements that have an impact on trade in the EU or EEA, and if it does so, the CMA will not investigate the matter.

Block exemptions. Agreements that are covered by either a Commission individual or block exemption under Article 101(3) of the TFEU, or would be covered by a Commission block exemption if the agreement had an effect on trade between EU member states, are automatically exempt from the Chapter I prohibition of the Competition Act under a parallel exemption. Examples of such block exemptions are the vertical agreements block exemption, technology transfer block exemption and the R&D and specialisation block exemptions. The operation of this parallel exemption will fall away and the government may take the opportunity to adopt UK block exemptions that are different from the EU ones (for example, without the strong single market focus of the EU rules).

Other implications. There may be changes to the way private enforcement actions are taken. The UK is seen as a claimant-friendly jurisdiction for private damages follow-on actions of Commission infringement decisions. The status of such decisions post-Brexit will need to be looked at. If the UK continues to be a member of the EEA, they could still be binding on UK courts.

It is likely to be all change for the regulators, with the CMA ceasing to enforce EU rules in the UK and the Commission losing its enforcement powers in the UK.

And on the practice of law itself, following Brexit, lawyers qualified solely in England and Wales, Scotland or Northern Ireland will no longer be enrolled in an EU member state Bar or Law Society and so their advice will presumably not attract EU professional legal privilege.

EEA trade model? Also key to how competition law may develop will be the model that the UK eventually adopts for its future relations with the EU. If the UK joins the EEA, the EEA Agreement provisions on competition, which are modelled on the EU equivalent provisions, will apply. There tends to be transposition on an ongoing basis of all EU regulations and directives in the competition field through decisions of the EEA Joint Committee and Notices, Communications and Guidelines are usually re-adopted for the EEA States by the EFTA Surveillance Authority.

See also, Article, Impact of Brexit on UK competition law: plus ça change…? ( www.practicallaw.com/8-629-5266)

 

Construction

Following the Brexit referendum result and subsequent political events, the UK construction market has seen much turbulence. Market "chatter" affects different sectors in different ways. For example, the prime residential market in London may be affected to a greater degree than a local housing market in rural Wales. On more major projects, requiring public or private sector finance, much will depend on the health of the wider UK economy in the near and medium term, in particular as what were EU funding routes are revised or withdrawn. The market outlook seems likely to suffer from this uncertainty and volatility for some time to come. In addition, aside from financial concerns, any tightening of rights of freedom of movement will affect the UK construction industry's ability to attract workers.

Many scenarios following Brexit allowed for trade in goods to continue, even if on different terms, perhaps in some form of common market. As such, if EU or EU-style regulations continue to be required, the regulation of construction products (including the environmental regulation of products) would remain on the same or similar terms. Of course, other possible models exist and may now be more likely than in the days immediately following the referendum result. Those models would require more radical change. However, while the Construction (Design and Management) Regulations 2015, governing health and safety on construction sites, are derived from EU law, it could well be that a post-Brexit government would have little initial appetite to impose radical health and safety change on the industry.

See Blog post, Brexit strategy: the EU referendum and construction contracts.

 

Corporate

The implications in this area are as follows:

Company law. There will be minimal impact on company law. There are some provisions of the Companies Act 2006 (CA 2006) which have derived from EU law (including shareholder rights and disclosure of information), but it is very unlikely that the CA 2006 will be subject to material review or amendment following Brexit. It is possible that the government may take the opportunity to remove restrictive EU-derived provisions to reduce the regulatory burden on companies.

M&A. It is not anticipated that the current laws and regulations governing this area of corporate practice will be significantly affected by Brexit. However, due to the current volatility of the markets, possible changes in other areas and uncertainty as to the ultimate shape and impact of Brexit, M&A activity could be affected for some time to come. Several commentators have noted that Brexit could bring about both risks and opportunities, which will vary depending on the company and sector. Practical Law Corporate will monitor public M&A activity through What's Market.

Other points to note include:

  • M&A: we see some scope for:

    • Negotiations and disputes in relation to deals that have been signed but have not yet closed (for example, as to whether MAC clauses have been triggered).

    • Reassessment of unannounced deals, leading to their postponement, abortion or, possibly, acceleration.

    • Impact on due diligence reporting, with specific and discrete attention being given to Brexit-related risks.

    • Negative impact on deal flow if there is a protracted period of difficulty in raising acquisition funds either privately or on the public markets.

    • Use of "Brexit clauses" to permit one party to extract itself from conditional deals in carefully defined circumstances.

    • Increased use of deferred and contingent consideration structures (notably, earn-outs).

    • Use of other mechanisms for adjusting sale terms, for example, those on which post-completion services are to be provided.

    • A period of uncertainty pending clarification of the post-Brexit merger control and antitrust environments (see Competition).

  • Public takeovers: it is not expected that there will be significant changes to the UK's Takeover Code following Brexit. For a discussion on the potential impact of Brexit on UK takeovers, see Public M&A: Trends and highlights from the first half of 2016 ( www.practicallaw.com/4-630-8685) .

  • Cross-border mergers: the Cross-border Merger Regulations established a framework for cross-border mergers between UK companies and those governed by the law of another EEA state. Depending on the outcome of the negotiations, it is possible that UK companies will not be able to use this framework.

Equity capital markets. This area is heavily influenced by EU legislation, in particular, the Prospectus Directive, Transparency Directive and Market Abuse Regulation. In terms of market trends, there is also likely to be a short-term reduction in capital market deal flow. In particular, we may see a reduction in IPOs and secondary issues (tracked on What's Market). Companies looking to IPO may be inclined to consider alternative stock exchanges to those in London. The London Stock Exchange is usually a popular dual listing option, but post-Brexit, dual listings in other jurisdictions may be preferred. Domestically, AIM may be able to weather Brexit better than the Main Market at least in the short term; there is some evidence to support this in the IPO statistics for the period leading up to Brexit (see What's Market).

Other issues. The impact of Brexit is likely to be reported on by issuers in going concern and viability statements together with additional risk disclosures required as part of their annual reporting requirements (we will be tracking this in What's Market).

Depending on market conditions, we may see an increase in company redomiciliations.

And, as a footnote, the government has announced the establishment of a new department, the Department for Business, Energy and Industrial Strategy.

 

Data protection

This area is dominated by the UK implementation (or otherwise) of the EU General Data Protection Regulation (GDPR), which will become applicable in EU member states with effect from 25 May 2018, and therefore before the end of the two-year negotiation period for Brexit. In addition, the European Commission has recently adopted the EU-US Privacy Shield which enables the transfer of personal data for commercial purposes from EU member states to the US (see Legal update, European Commission adopts EU-US Privacy Shield ( www.practicallaw.com/5-630-8656) and In-house blog, EU-US Privacy Shield: a feast for crows).

The position of the Information Commissioner's Office (ICO) is that with so many businesses and services operating across borders, "international consistency around data protection laws and rights is crucial both to businesses and organisations and to consumers and citizens" (see Legal update, ICO publishes statement following Brexit vote ( www.practicallaw.com/0-630-1841) ).

The Department for Culture Media & Sport (DCMS) has issued a statement that if the UK remains within the single market, EU rules on personal data might continue to apply fully in the UK, but in other scenarios, all EU rules might be replaced with national ones. It seems unlikely that the DCMS will know the answers before the withdrawal negotiations get under way, but once the way forward is known, it says that it will have to react quickly. The DCMS's view on the importance of consistency in data sharing across national borders aligns with that of the ICO on the basis that any country that wishes to share data with EU member states or handle EU citizens' personal data will need to provide an "adequate" level of data protection. On the EU-US Privacy Shield, the DCMS said that it is not quite clear how this will affect the UK as again, it will depend on the exit model adopted, but the UK will need a satisfactory understanding with the US of the rules to be applied (see Legal update, DCSM view on Brexit, the GDPR and EU-US Privacy Shield ( www.practicallaw.com/7-630-5869) ).

So the question is, what would the UK need to do to provide a consistent approach to data protection? The view favoured by the DCMS and the ICO and most data protection lawyers is that the UK would need to comply with the GDPR in order to demonstrate adequate protection. Companies with multinational operations in the EU will need to comply with the GDPR in any event as they will handle EU citizens' personal data. Also, in view of the expanded territorial scope of the GDPR, UK-based businesses which offer goods or services to, or monitor (for example, profile) individuals within the EU, will have to comply with the GDPR (for example, on online businesses).

See also, Article, Brexit and the implications for data protection: will that be the rock or the hard place, Sir? ( www.practicallaw.com/5-627-4048)

 

Dispute resolution

As an EU member state, the UK is a party to a framework of EU legislation which sets out the rules that courts in EU member states will apply to determine the governing law of a contract and of tort claims and their jurisdiction over disputes. This framework also provides the procedure for serving legal proceedings as between member states and the mechanism for enforcing a judgment from a court in one member state in other member states. This area is therefore likely to be directly affected by Brexit, although it remains to be seen to what extent.

See Article, Brexit: potential implications for contracts and disputes ( www.practicallaw.com/0-623-0660) .

English insurance contract law is less likely to be affected, with the possible exception of legal expenses insurance; in particular, the Insurance Companies (Legal Expenses Insurance) Regulations 1990 implement the Legal Expenses Insurance Directive.

The impact of Brexit may also be felt indirectly in relation to funding for current civil litigation projects in England and Wales; it is possible that funding for projects such as the online court may be in jeopardy.

 

Energy

The key concern for energy lawyers will be to minimise any disruption to existing funding streams and commercial arrangements for energy projects due to Brexit. Similarly, they will want to ensure that new projects are structured and financed in a way that can weather post-Brexit changes to the regulatory or incentives regimes, without the need for continual renegotiation.

On the regulatory side, how easy those objectives will be may depend on whether the UK continues with, or retreats from, further energy union with the EU. Many of the early measures designed to harmonise the electricity and gas markets across the EU were already aspects of the UK's liberalised market structure. However, more recent measures to further develop the EU's internal energy market have not necessarily been a good fit for the UK.

Opportunities may arise for the industry to maintain or re-establish the technical, commercial and regulatory arrangements most suited to investment in UK generation assets, networks or new storage capacity. However, that will need to be balanced with the potential disruption to additional electricity interconnection projects with the EU and the Single Electricity Market already established between Northern Ireland and the Republic of Ireland.

For the incentives regimes, we have already seen signs that the UK will maintain its position on carbon reduction, but it is possible that the government may alter the strategies favoured for decarbonising energy use within the electricity, heat and transport sectors.

As with all sectors, there are likely to be winners and losers, but the energy industry is used to dealing with change and has the structures and expertise in place to deal with it. While energy lawyers will necessarily be poised to deal with the inevitable disputes and renegotiations that will arise, they should also be looking forward to working with those developers and investors who can react and adapt quickly to the post-Brexit environment to take advantage of the opportunities it may bring.

One further point to note is the absorption of the Department of Energy & Climate Change into the new Department for Business, Energy and Industrial Strategy.

See Article, Brexit: Q&As on the implications for the energy sector ( www.practicallaw.com/w-002-7414) .

 

Employment law

The impact of Brexit on employment law is, on the face of it, likely to be limited. Although a significant proportion of UK employment law is derived from the EU, it is unlikely that there will be wholesale changes following Brexit. However, the government may take the opportunity to amend some areas to reduce regulatory burden on companies, including:

  • Amending or repealing the Agency Workers Regulations 2010.

  • Introducing a cap on compensation for discrimination similar to that for unfair dismissal.

  • Amending TUPE to make it more business friendly (for example, by making it easier to amend terms following a TUPE transfer).

  • Addressing the issue of whether employees accrue holiday while off sick.

  • Removing the cap on maximum weekly working hours.

The greatest practical implication for employers is the likely change to the right of freedom of movement following Brexit. There are currently large numbers of EU nationals living and working in the UK. A pragmatic arrangement may be for existing EU migrants to be able to stay in the UK (possibly until a certain date or for a limited period) on the basis that UK nationals working in the EU can do the same. Many EU nationals working here may be able to obtain permanent residence, or even British citizenship. Alternatively, EU nationals may be able to obtain permission to work in the UK in the same way as, for example, US nationals can do at the moment.

See Article, Brexit: implications for employment law in the UK ( www.practicallaw.com/2-623-3441) .

 

Environment

The impact of Brexit on environmental legislation may be significant. Almost all environmental legislation in the UK derives from the EU, although there are notable exceptions (for example, the Climate Change Act 2008, which sets legally-binding targets for the UK to reduce its carbon emissions). It would be an enormous task to unpick UK environmental legislation to separate out and rewrite legislation that implements EU legislation. However, there are several important points to note:

  • Depending on the trading arrangements agreed between the UK and the EU, it seems likely that the UK will need to comply with product-related environmental legislation (including relating to chemicals, ecodesign, product energy efficiency, labelling and producer responsibility). This legislation may need to be rewritten for the UK, even if the substance of the regimes remains the same.

  • Some environmental regimes originated in the UK, although the UK legislation now implements EU legislation. It seems likely that the UK will keep the substance of these regimes, even if it has to rewrite the actual legislation (particularly where the UK legislation simply requires compliance with EU legislation). This includes, for example, the regime for regulating emissions from industrial installations (under the Industrial Emissions Directive 2010, also known as the IPPC regime).

  • Some areas of law are governed by international conventions and treaties (for example, transboundary shipment of waste). Often, the EU and the UK are both signatories to those conventions, so the UK will continue to be subject to those international regimes, even if it is no longer bound by the relevant EU legislation.

  • The UK has struggled to meet EU requirements in certain areas (for example, air quality and treatment of urban waste water (sewerage). The government may use Brexit as an opportunity to weaken environmental standards, so new regimes may emerge in these areas.

See Article, Brexit: potential implications for environmental law ( www.practicallaw.com/3-630-5545) .

 

Family

EU legislation is relevant for cross-border family cases. The main EU family law instruments are:

  • Brussels IIa. This is the most significant piece of EU legislation in family law which established rules for determining jurisdiction over "matrimonial proceedings", principally divorce. It also provides for mutual recognition and enforcement of judgments relating to parental responsibility.

  • Brussels IIa and the Hague Conventions. These provide rules on the return of children abducted to, or wrongfully retained in, other EU member states. These rules supplement the 1980 Hague Child Abduction Convention (to which EU member states are also parties) which provides a mechanism for the return of children wrongfully removed or wrongfully retained away from their country of habitual residence, usually by one parent.

  • Maintenance Regulation. This provides rules for determining which country's court has jurisdiction in maintenance disputes, for determining which law will be applied, and for the recognition and enforcement of maintenance decisions from other member states.

  • Mutual recognition of protection measures. Someone who is at risk of domestic violence or harassment may apply for an order in one member state and have its terms recognised and, if necessary, enforced in any other participating member state.

The EU measures adopted by the UK are generally regarded as providing greater certainty on dispute outcomes. The current provisions of Brussels IIa present some problems in so far as they make provision for the court where proceedings are first issued to be the court of jurisdiction, arguably encouraging a race to court in the search for a perceived favourable jurisdiction.

Every divorce petition is founded on the jurisdictional requirements of the Brussels II Revised Regulation. Similarly, virtually every application for financial remedies is founded on the jurisdictional requirements of the Maintenance Regulation. The provisions of Brussels IIa are relevant to many aspects of both private and public children law.

It is too soon to predict what the impact will be on this regime, but if the UK joins the EEA, it would in all likelihood decide to join the Lugano Convention, and therefore be under a regime similar to Brussels IIa. The EEA countries have no say on the specific provisions of Brussels IIa.

If the UK followed the WTO route, it would remain a party to the Hague Conventions, but it might be difficult to achieve the same level of co-operation on jurisdiction and enforcement which exists at EU level. Bilateral agreements with non-Hague countries are therefore seen as less effective in cases affecting children.

 

Finance

Brexit is likely to have a significant commercial impact on finance transactions and may affect the way deals are structured. The impact on documentation is likely to be more limited. For the ways in which finance documents can be adapted to address the eventual outcome of the Brexit negotiations, see Article, Brexit: potential implications for loan agreements ( www.practicallaw.com/7-626-4576) .

If the UK loses its passporting rights in relation to services then a significant number of transactions done in the City of London will be affected. Cross-border unsecured and secured lending, guarantees, the issue and sale of bonds, MTNs, Commercial Paper, Derivatives and structured finance all currently use passporting to some degree to avoid having to investigate and comply with the 27 different regulatory regimes operating within the EU. In addition, the UK also relies on treaties that have been negotiated with 60 non-EU nations, a number of which deal with the provision of financial services and many of which will cease to be binding in relation to the UK on leaving the EU. This is not to say all cross-border transactions will become impossible: they won't. Nor will all areas of finance be equally affected. For a more detailed analysis, see Article, Brexit: losing our passport. ( www.practicallaw.com/6-631-6849)

It is, however, likely that the legal and regulatory environment for cross-border finance transactions will become more complex and therefore more expensive. It will be interesting to see the extent to which these additional costs are considered worth bearing, in order to secure the other advantages of doing business out of London.

The contingency plans put in place by banks and other financial institutions in response to the risk of Brexit almost all involve relocating certain functions and ultimately their centre of operations to another city within the EU; the most common choices are Dublin, Frankfurt, Paris, Luxembourg and Amsterdam.

We anticipate that English law will remain the most commonly used law for finance transactions in Europe and indeed in the whole the EMEA (Europe, Middle East, Africa) region.

See Articles, Brexit: potential impact on the UK's banking industry ( www.practicallaw.com/2-630-5428) and Brexit: implications for financial services regulation ( www.practicallaw.com/0-625-2440) .

 

Financial services

The implications of Brexit for the financial services sector are vast, given that much UK legislation and regulation implements, or is otherwise heavily influenced by, EU legislation.

Key issues for the financial services sector include:

  • Access to financial markets. A key concern for UK financial institutions is the loss of "passporting" rights. Passporting is the exercise of the right available to a firm authorised in one EEA member state to carry on certain activities covered by an EU single market directive in another EEA member state, on the basis of its home state authorisation.

    Once the UK leaves the single market, UK financial institutions will lose their passport rights. Some UK financial institutions may be able to obtain access to EU markets on the basis of the equivalence of the UK's regulatory regime, but this option is not available to all sectors and is potentially subject to political obstacles.

    The UK government has indicated that it intends to agree a free trade agreement (FTA) with the EU. It is possible that this agreement might contain bespoke measures allowing UK financial institutions some degree of access to the EU, potentially through mutual recognition of regulatory regimes.

  • Transitional arrangements. There have been calls from the financial services industry for the UK and the EU to agree transitional arrangements to soften the immediate impact on the financial services sector following the UK's departure from the EU. Although the UK government intends to seek a "phased process of implementation" to allow business to prepare for the post-Brexit legal framework, it is unclear to what extent this would apply to the financial services sector and, if so, whether an agreement can in practice be reached with the EU.

  • Impact on EU legislation in the pipeline. There is also uncertainty as to the approach regulators and financial institutions will take to EU legislation that is in the pipeline. Until the UK leaves the EU, it is an EU member state and so obliged to transpose EU directives in UK law and to ensure that its existing legislation and regulation complies with EU regulations. This means that, until the government or regulators indicate otherwise, financial institutions are obliged to implement significant ongoing EU reforms, including MiFID II and the Fourth Money Laundering Directive (MLD4).

  • Creating a new UK financial services regulatory regime. Much of the UK's regulatory regime implements, or is based on, EU legislation and regulation. It will be a major task for UK legislators and regulators to revise existing requirements to take account of Brexit and to replicate EU provisions where necessary.

    The UK may choose to use the opportunity of Brexit to change its regulatory regime for financial services, potentially with the aim of bolstering the UK as a competitive centre for financial services.

For an overview of financial services issues relating to Brexit, see Practice note, Brexit and financial services ( www.practicallaw.com/w-003-4882) . For information on the implications for UK firms of the loss of passporting rights and the potential alternative methods to obtain market access, see Practice note, Brexit: passporting, third-country status and equivalence ( www.practicallaw.com/w-003-1244) .

 

Intellectual property and information technology

Most intellectual property rights will be affected because the law has been harmonised by EU legislation, but different rights will be affected in different ways.

Trade marks and designs. There are registered trade marks and registered designs that cover the whole EU. These will no longer have force in the UK when Brexit takes effect, so the question is how these rights will cover the UK after that time. It is thought that the owners will need to be granted parallel rights via a conversion process in the UK. However, it is not clear how priority dates will be dealt with. Rights owners should be aware that any conversion process is unlikely to be free or automatic. (See Article, Brexit: implications for EU trade mark holders ( www.practicallaw.com/9-628-4465) and Article, Brexit: action points for intellectual property rights-holders ( www.practicallaw.com/w-003-8761) .)

Copyright. There are no registered rights for copyright, but copyright law has been increasingly harmonised by a series of EU directives and regulations and the ECJ has shaped EU copyright law as a result of references by national courts. So it is unclear if the UK will retain these harmonised laws and, if it does, whether the UK courts will interpret those laws entirely separately or whether they will follow the ECJ's rulings in some way, either by a law that binds them to do so or on a voluntary basis. There are a number of areas of copyright law where English judges have expressed dissatisfaction with EU law and one school of thought is that English and EU copyright law may start to diverge in certain areas post-Brexit.

Confidentiality. For confidentiality, the new Trade Secrets Directive is due to be implemented by June 2018. This will be before the end of the two-year Article 50 period, but it is not yet clear whether or to what extent the government will implement it. As the Directive largely reflects the UK law position, the current thinking is that companies are best advised to follow its provisions in any event.

Patents. For patents, there had been little harmonisation at EU level but this was about to change with the launch of an EU-wide patent known as the Unitary Patent, accompanied by the opening of a Unified Patent Court in 2017, two sections of which were to have been based in London and premises have already been earmarked. Participation in the Unitary Patent (and the Court) was open only to EU members, and the agreement for this to proceed has not yet been ratified, so Brexit will mean the UK cannot participate unless a special agreement were to be reached with the EU and participating states (incidentally, Spain has also chosen not to join).

There is a separate system of European patents under the European Patent Convention which is not an EU creation and will not be affected.

Cybersecurity. The Cybersecurity Directive (also known as the Network and Information Security Directive or NIS Directive), due to be implemented by 10 May 2018, lays down security obligations for operators of essential services (such as transport, health and finance) and for digital service providers (such as online marketplaces, search engines and cloud services). The requirements will be stronger for essential operators than for digital service providers, reflecting the degree of risk that any disruption to their services may pose to society and the economy. Various transitional measures will apply from 9 February 2017. It is not yet clear what the UK government's approach to this will be, but in practice, like the GDPR, the UK's cyber security laws will need to be similar to the EU laws to avoid trade restrictions.

The Joint Committee on the National Security Strategy has recently announced an inquiry into UK cybersecurity.

 

Life sciences

EU regulatory work for the pharmaceutical industry is carried out by the European Medicines Agency (EMA) in Canary Wharf, London. This looks likely to leave the UK with the relocation of 890 staff. In addition, a number of international pharmaceutical companies are based in the UK, as well as having global R&D and manufacturing sites in the UK, while others have European headquarters in the UK. However, large companies do not need to be based in the EU to exploit the EU market, as is shown by the fact that many international pharmaceutical companies are based in Switzerland.

Pharmaceutical and biotechnology companies and academic institutions face restricted access to substantial EU research funds. Loss of EU funding may cause reluctance from companies and institutions around the world to view their UK counterparts as prospective research partners. Some media reports have shown that the current uncertainty has already led to a decrease in appetite for potential collaborations between the UK and other EU member states.

A number of international pharmaceutical companies are based in the UK, as well as having global R&D and manufacturing sites in the UK, while others have European headquarters in the UK. However, large companies do not need to be based in the EU to exploit the EU market, as is shown by the fact that many international pharmaceutical companies are based in Switzerland.

Regulatory requirements concerning life sciences are largely harmonised across the EU. Examples of key legislation are the Medicinal Products Directive, the Clinical Trials Regulation and the Regulation on Supplementary Protection Certificates. There is no indication yet as to what would happen to these post-Brexit, but there is the prospect of divergent regulation unless the UK follows the EEA trade model, under which EU law would continue to apply. However, in that case, the UK would not have the right to vote on EU law or significantly influence any decisions taken by the EU, such as those recommending the grant or refusal of marketing authorisations.

If the UK adopted a model other than the EEA trade model, it would need to determine and implement its own laws and regimes, including authorisation procedures for medicines and clinical trials, as well as inspection practices. It could consider entering into bilateral treaties or mutual recognition agreements with the EU to ease the regulatory compliance burden on manufacturers, such as in the cases of, respectively, Switzerland and Canada. (See Article, Brexit: implications for life sciences regulations and infrastructures ( www.practicallaw.com/7-631-3968) .)

 

Media & Telecoms

Although the general regulatory framework for telecoms and broadcasting networks is largely derived from EU directives, it has been transposed into UK law through national legislation (mainly the Communications Act 2003 and Wireless Telegraphy Act 2006). Leaving the EU will not affect this legislation per se.

At first glance, the EU Regulation on roaming and the open internet will no longer apply postBrexit. In relation to roaming on public mobile telecommunications networks, customers in the UK could see increased prices for telephone calls and data roaming when they travel abroad, although UK telecoms providers would potentially benefit as they would no longer be subject to a cap on wholesale roaming charges. In relation to open internet access, the Regulation introduced restrictions on paid prioritisation of internet traffic and discrimination or interference (like blocking or slowing down) by internet access providers. These limitations will also no longer apply. A decision of the Joint Committee of the EEA on bringing the Regulation into force in the EEA is currently pending, so if the UK joins the EEA it is possible that the Regulation would continue to apply in the UK.

The EU Digital Single Market initiative, which is currently being negotiated, may not be fully implemented in the UK. The Digital Single Market proposals involve amending a range of EU legislation to improve online access for businesses and consumers, create the right conditions and a level playing field for advanced digital networks and innovative services and maximise the growth potential of the digital economy. Of particular relevance to this sector are the Audiovisual Media Services Directive, the Satellite and Cable Directive, the telecoms regulatory framework and a Commission consultation on a policy on the needs for internet speed and quality beyond 2020.

These proposals are likely to be incorporated into the EEA Agreement once passed as the legislation they amend is incorporated, so the UK could be subject to this legislation if it joined the EEA.

 

Pensions

Legally, there is minimal immediate impact. A substantial amount of EU pensions law has already been incorporated into UK legislation, and so are likely to remain unchanged. Over time, it is possible that there may be divergence between UK and EU pensions law (and related aspects of employment law), which could have a particular impact on sectors with a high number of mobile employees in non-UK or cross-border schemes.

For impending EU laws, as ever, much depends on the timing of formal exit. For example, the text of the revised IORP directive (a pensions-related directive known as IORP II) has now been settled; the only remaining step is formal approval by the European Parliament, after which the Directive will be published in the Official Journal and EU member states will have two years from the date of publication to transpose the text into their national law. But there is uncertainty over how this will happen in the UK, especially if the UK is still technically a member state bound by EU law when IORP II needs to be implemented, but may also potentially be nearing the end of the two-year period for negotiations about the terms of withdrawal.

See Article, Brexit: what pension schemes and sponsors need to know now ( www.practicallaw.com/9-630-5806) .

The other, less direct effect of the decision to leave the UK, is the financial and economic volatility which may be causing significant issues for schemes in terms of investment strategy, funding levels and governance; this in turn may lead to changes in the legal and regulatory regime in these areas. In addition, it may push some sponsoring employers into insolvency, leading to wind-up situations for schemes.

 

Planning

There are no immediate legal implications. The main influence of EU law on planning in the UK is in relation to the requirements for the environmental assessment of development projects and policies. For further information, see Article, Brexit: potential implications for environmental law ( www.practicallaw.com/3-630-5545) .

 

Private Client

There is no immediate impact in this area. The UK has opted out of the regulation that is of most direct interest to private client practitioners, the EU Succession Regulation, so the UK will remain a third country for the purposes of the conflict of rules laws within it (see Practice note, EU Succession Regulation (Brussels IV): Brexit ( www.practicallaw.com/1-519-9410) ).

We are expecting consequential developments, in particular tax measures that may be needed to deal with the economic consequences of the vote. There may be new measures, or changes or delays to measures already announced. One area of particular speculation is the planned changes to the taxation of non-doms, as this has links with the whole area of attracting people to the UK (or not) and inward investment. There are likely to be announcements in the autumn, now that a new Prime Minister and Chancellor are in place. (We track tax announcements affecting private client practice in Private Client tax legislation tracker 2015-16 ( www.practicallaw.com/0-620-3510) .)

The review of existing law that must now take place may result in further consequences, particularly where the UK took action only as a result of case law or infringement proceedings, but this will depend on whether compliance is required as the price of single market access. An obvious example is whether the extension of certain tax reliefs to remove discrimination against EEA member states will be maintained (for example, see Practice notes, Inheritance tax: agricultural property relief: overview: EU law ( www.practicallaw.com/9-383-4485) and What is a charity?: Definition of charity for tax legislation ( www.practicallaw.com/6-503-5888) ). A less obvious example is whether there will be any change to the criteria for trust corporation status (see Practice note, Trust corporations: overview: Requirements for EU companies ( www.practicallaw.com/3-587-7946) ). Similar cases will no doubt come to light in the months ahead.

Private client practitioners will also be interested in aspects of wider developments, in particular:

Charities are a special case because they are a sector of the economy in their own right, and will be concerned about loss of funding from EU and Social Investment Funds (estimated at £200 million per year), and a reduction in funding from grants, donations and contracts if the economy shrinks. In addition to the tax reliefs mentioned above, charities will also be interested in some of the same developments as businesses, including data protection, VAT, equality law and employment rights. (See For charity lawyers.)

 

Property

There are no immediate legal implications. However, there has already been a significant impact to the commercial property market due to the volatile financial and economic conditions triggered by the decision to leave the EU. This is likely to extend into the residential market and continue for some time to come, if the current level of uncertainty continues.

Going forward, there may be changes, or the repeal of some legislation that derives from EU legislations, such as EPCs (energy performance certificates), MEES (minimum energy efficiency standards) and Green Leases, as well as various regulations applicable to residential tenancies.

 

Public sector

Public law. There are obvious constitutional law implications, the most high profile of which at present is the Article 50 mechanism for leaving the EU and how this needs to be approved; this is currently subject to legal challenge. Other constitutional developments will need to be assessed when the Article 50 process begins (not now expected until 2017). Another area to watch will be whether the UK remains a party to the European Convention on Human Rights, and whether the Human Rights Act 1998 will be repealed, although the new Prime Minister indicated before taking office that there would not be wholesale change in this area.

Local government. Key areas for possible change in law are public procurement since the whole regime is EU based, although there is an expectation that it would be retained in large part (see Public Sector blog, Procurement law after Brexit), and the provision of services to EEA nationals by public authorities (particularly local authorities under the housing and social care regimes).

 

Restructuring and Insolvency

The principal impact of Brexit on UK restructuring and insolvency law and practice will be the fact that the EC Regulation on Insolvency Proceedings (EC/1346/2000) (Insolvency Regulation) will cease to apply to the UK. The Insolvency Regulation provides for procedural co-ordination and automatic recognition of insolvency proceedings across different EU jurisdictions where the debtor has its centre of main interests (COMI) within the EU. Principally, this means that insolvency proceedings in the EU member state in which the debtor has its COMI will be the dominant proceedings for the purposes of administering the debtor's assets across the EU, and that status must be recognised across all other EU member states.

Although there are other mechanisms in UK law for recognising insolvency proceedings over UK debtors that have been commenced outside the UK, a consequence of Brexit will be that debtors in UK insolvency proceedings may also be exposed to additional insolvency proceedings in the EU that are not co-ordinated with the UK insolvency proceedings. Moreover, the routes by which the UK proceedings can be recognised in other EU jurisdictions are likely to be more expensive, time-consuming and uncertain in outcome.

Slightly counter-intuitively, as the Insolvency Regulation applies to even non-EU entities that have their COMI in the EU, the Regulation will also continue to apply to a UK debtor that has its COMI outside the UK but within the EU. Accordingly, such UK debtors will need to be aware of the continued risk of being subject to insolvency proceedings outside the UK, even when the Insolvency Regulation is no longer part of UK law and even though UK insolvency proceedings may also be opened in respect of that debtor.

Brexit may also cause the UK legislature to reconsider which debtors are eligible for English insolvency proceedings as a matter of domestic law. For example, the key insolvency process of administration is currently available for, among other entities, non-UK companies that have their COMI in the UK (by reference to the position under the Insolvency Regulation), which of course will cease to be a useful measure.

There may be other, less clear, areas of impact as well. For example, various EU directives serve as legislative background and provide important legal definitions for the substantive UK insolvency regimes for credit institutions and investment firms. It seems unlikely that the UK's insolvency jurisdiction over UK credit institutions will change substantively, but the relevant legislation derives from an EU directive and will therefore also need revisiting; this will also be affected by whether the UK joins the EEA as key directives in this area also apply to the EAA.

Finally, it will be interesting to see whether Brexit will affect the attractiveness of the UK jurisdiction to foreign companies in relation to schemes of arrangement. In principle this seems unlikely as schemes are outside the scope of the Insolvency Regulation in any case, and do not intrinsically lend themselves to co-ordination with insolvency processes in other EU jurisdictions. However, it should be noted that the EC Regulation on Jurisdiction and the Recognition and Enforcement in Civil and Commercial Matters (EC/44/2001), which is often relied on to persuade the UK courts that a scheme will be recognised and effective in other EU jurisdictions (where, say, creditors are located), will also cease to apply in the UK by virtue of Brexit.

See also, Article, Brexit: implications for cross-border insolvency and restructuring ( www.practicallaw.com/7-628-8445) .

 

Share Schemes & Incentives (SSI)

The immediate impact of the Brexit vote on share schemes law and practice is minimal, except insofar as companies operating share plans, and participants in those plans, are affected by fluctuations in share price or currency exchange rates.

In the longer term, the impact of Brexit will depend on the exact form that Brexit takes, in particular whether or not the UK joins the EEA.

Currently companies operating share plans across the EEA are governed by a single regime, the Prospectus Directive. If the UK ceases to be a member of the EEA, UK companies wishing to operate share plans for employees in EEA member states and, conversely, companies based in EEA states wishing to operate share plans for UK employees, may find it more complicated and costly to do so.

Several measures related to the structure of remuneration that affect share plan design (such as clawback and malus for financial services firms) are derived from EU law. However, in the UK the Corporate Governance Code and various institutional investor guidelines require malus and clawback provisions to be included in most remuneration policies, such that they are becoming standard practice in the UK among all listed companies, not just those in the financial services sector.

Currently the EMI code is partly determined by the EU state aid rules. If these rules cease to apply, the government may have more scope to make the EMI (enterprise management incentives) regime more generous, depending on the terms of any international trade agreements.

The Market Abuse Regulation has some impact on the operation of share schemes. However, if the MAR no longer applied, it is likely that the UK would revert to provisions similar to those in the recently abolished Model Code, such that the MAR ceasing to apply would be unlikely to have a huge impact.

An indirect impact on share schemes may arise from additional tax-raising measures, if needed, to address the economic consequences of Brexit. These are difficult to predict.

For a discussion of some of the likely issues, see Article, Brexit: implications for employee share plans ( www.practicallaw.com/1-627-9321) .

 

Tax

The following are the likely direct and indirect implications for tax law:

Direct impact. The key area affected is VAT, as it is an EU-law based tax. At the moment, the consensus seems to be that it will be retained in broadly the same format because it raises a lot of revenue, collection costs are largely borne by business and it is relatively simple and well understood. A UK version of VAT is likely to diverge from existing EU VAT law in some specific areas, such as the supplies qualifying for the zero or reduced rates (domestic fuel was mentioned during the referendum campaign) and the treatment of supplies to or from EU member states. More generally, UK VAT law would no longer (presumably) be interpreted in accordance with the underlying EU directives and the general principles of EU law, such as proportionality, the abuse of rights doctrine and the requirement to provide an effective remedy for enforcing EU law rights. The UK's general anti-abuse rule (GAAR) may well be extended to include VAT (see Practice note, General anti-abuse rule (GAAR) ( www.practicallaw.com/4-527-0508) ).

The tax treatment of cross-border payments of interest, royalties and dividends between companies within the EU is governed by EU directives (see Practice notes, Cross-border interest and royalties payments: tax ( www.practicallaw.com/1-367-0987) and Dividends: tax rules for corporates: Withholding tax (UK source dividends) ( www.practicallaw.com/1-366-8036) ). If these no longer apply, taxpayers will need to rely on double tax treaties and domestic law to determine the withholding tax position. This may mean that tax needs to be withheld at source from cross-border payments in circumstances where that is not currently the case.

There is an EU regulation which sets out the social security contribution regime (in the UK, NICs) for workers who are nationals of one member state and work in another. The regulation is designed to ensure that contributions are paid (so that the employee's contribution record is protected) and are only paid in one member state (so avoiding double payments), see Practice note, EU social security rules for cross-border employees ( www.practicallaw.com/3-502-0850) . It is unclear how this situation will be dealt after exit. Cross-border exchange of tax information between EU tax authorities is currently governed by EU law. However, EU law effectively implements the OECD's international standard on cross-border tax information exchange, with which the UK has to comply in practice, so we are unlikely to see significant substantive changes as a result of Brexit. (See Practice note, CRS, EU administrative co-operation and FATCA: UK implementing regulations ( www.practicallaw.com/3-608-3605) .)

There are some areas of UK tax law which have been redrafted to comply with ECJ decisions. These include exit charges when a company moves its residence or a business within the EU, tax relief for losses made by group companies in other EU countries, the controlled foreign companies rules, tax credits on dividends and transfer pricing. The government may choose to amend some or all of that legislation if it is no longer bound by EU law in those areas. (See Practice note, ECJ direct tax cases: where are they now? ( www.practicallaw.com/6-378-8871) )

There is a significant number of pending tax claims which are based wholly or partly on EU law, particularly relating to overpaid VAT and the rules governing the areas mentioned in the previous paragraph before they were amended to comply with EU law. The status of these open claims during and after withdrawal is not yet clear. There is a risk that the government will introduce legislation that cuts off claims or removes EU law arguments after a particular time. It is also unclear whether the UK courts will be able (or perhaps willing) to refer pre-Brexit era tax questions to the ECJ post-Brexit.

Indirect impact. In the short term, the new Chancellor Philip Hammond has stated that he does not think there will be a need for an emergency budget. However, the autumn statement or the 2017 budget may contain tax measures designed to stimulate the economy or prop up falling tax revenues, should the UK fall into a recession. Possible options for tax measures could include a cut in the rates of corporation tax personal income tax or stamp duty on property, further tax incentives for capital investment, R&D and the creative sectors (the latter two sectors being at risk due to potential loss of EU funding) and targeted tax raising measures.

In the longer term, the UK may seek to position itself as a low-tax jurisdiction in order to attract investment. So we could see further cuts in the rate of corporation tax or more generous tax reliefs for R&D Certain UK tax reliefs, such as the venture capital rules and the creative sector tax reliefs, are currently constrained by EU state aid rules. The government may choose to make those regimes more generous once free of the state aid rules. However, many international trade agreements restrict the provision of "public aid", so there may be less room for manoeuvre than first appears.

We may also see the introduction of stamp taxes on the issue of securities. These are currently prohibited by EU law.

 

Brexit hierarchy of practice areas

 

Background on the EEA and other opt-out options

The European Economic Area (EEA) consists of the EU and three of the four European Free Trade Association (EFTA) countries (Iceland, Liechtenstein and Norway, but not Switzerland). The EEA Agreement, which entered into force on 1 January 1994, enables Iceland, Liechtenstein and Norway to enjoy the benefits of the EU's single market without the full privileges and responsibilities of EU membership.

Normally, the European Court of Justice (ECJ) has the power to enforce the single market rules. However, as the ECJ does not have jurisdiction over Iceland, Liechtenstein and Norway, the separate, supranational EFTA Court had to be established.

The current UK government view appears to be that the EEA model (commonly referred to as the Norway model) will not be a favoured option in the forthcoming withdrawal negotiations.

The other options for a trade relationship with the EU that might be considered are a customs union (along the lines of the EU relationship with Turkey); a bilateral free trade agreement or trade with the EU as a World Trade Organisation member. (For more information, see Article, Britain's relationship with Europe: what might the future look like? ( www.practicallaw.com/5-623-5405) )

 
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