Skip to main content

Bracing up for Brexit impact

It will be business as usual over the next two years as the United Kingdom negotiates the terms of its retreat from the European Union. In this interim period the UK will remain subject to EU law and European Commission decisions. However, in a parallel track running over the same period the UK will start making a new legal and regulatory regime applicable in the postBrexit era.
As Rabindra Jhunjhunwala, partner, Khaitan & Co, puts it, a lot will be left to speculation as no member state has left the EU before. “ There is no precedent and the rules of exit are very brief,” Jhunjhunwala said.
Here are some key FAQs and insights from legal experts on how corporate India could prepare itself for the uncertain times ahead.
What impact will Brexit have on existing and new contracts?
Currently a contractual provision stipulating English law as the governing law of the contract also includes applicable EU law. PostBrexit, that may not be the case.
On the face of it there may not be asignificant impact on existing or new contracts. However, in situations where Brexit has a severe impact on business, and leads to a breach of contract, one could invoke force majeure clauses as the ground for termination.
“Brexit could be construed as a force majeure event, effectively suspending discharge of obligations in acontract. However, the impact on each contract would vary, depending on provisions in individual contracts,” said Akshay Chudasama, managing partner, Legal experts point out there could be uncertainty in contracts – such as those pertaining to distribution agreements, joint venture agreements, franchises and licence agreements – that come with territorial provisions. Several Indian IT companies may need to take a fresh look in the terms and conditions of their service agreements with clients, given the volatility in exchange rates and the likely restrictions in the movement of employees between the EU and the UK in the post- Brexit years.
However, there will be question marks over enforceability of judgments.

“One has to see, depending on the outcome of the withdrawal process, how English judgement will be enforced in the EU and vice- versa,” said Chudasama.

How are tax laws expected to change post- Brexit?

As part of doing business in the European zone, companies will have to bear the risk of changes in law, including re- introduction of customs duties and tariffs. The UK may cease to be part of the customs union. PostEU from the UK, and vice- versa. Tax experts expect changes in how VAT is charged in the UK, which could be different from the EU VAT.

Will there be changes in the competition law landscape?

The substance of the UK competition law is very similar to that of the EU competition law. There is a statutory requirement to interpret the UK competition rules in a manner consistent with the competition case law of the European Court of Justice.

Legal experts note post- Brexit EU competition rules will continue to apply to agreements or conduct of UK businesses that have an effect within the EU.

“We do not expect any immediate impact on the competition law landscape in the UK and the EU. The UK already has its own competition legislation.

However, over time there could be divergence between the UK and the EU rules reflecting a new insular approach,” said John mergers, the one- shop stop approach might be abandoned, and companies might have to face scrutiny under both the UK and the EU systems, he added.

Will Brexit impact the intellectual property rights regime?

The EU Trade Marks and Registered Community Designs are governed by the EU laws and will eventually cease to apply in the UK. Experts noted that treatment of positions based on EU laws would depend on the negotiations between the UK and the EU over the next two years. However, the patent system will remain unaffected as the European Patent Office is not an EU institution.

Going forward the regulatory requirements may require independent compliance in both the UK and the EU for entry into the respective markets. Sectors such as pharmaceuticals and automobiles will be required to comply with two distinct sets of regulatory guidelines and This could call for additional outlay in the short national practice head, intellectual property, Shardul Amarchand

How will the changes in immigration laws impact movement of employees?
The EUs immigration policies have been human- rights based-- something that the UK and some other EU member states have not been entirely happy with.
Going forward there could be increased divergence in immigration legislation between the EU and the UK. “ Immigration laws in the UK may become even stricter. The free movement of nationals from other member states is likely to be restricted, given that this issue was an important plank in the ‘ leave’ campaign.
This will have a bearing on the mobility of labour and the way companies hire and retain talent,” said Handoll.
According to Nishith Desai of Nishith Desai Associates, immigration is the worst form of protectionism. “A lot will depend on how aggressive the UK will be on tightening of immigration laws,” said Desai. Indian IT companies would face the brunt of this uncertainty over sending people to the UK, he added.
Business Standard New Delhi, 27th June 2016

Comments

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...