Posted by Claus Andersen, Partner
Contributing authors: Irene Trubbiani Montagnac
The key issues businesses should consider before the end of the transition period
With the post-Brexit transition period ending in 31 December 2020 and talks between the EU and UK about a Free Trade Agreement (“FTA”) continuing, businesses need to continue to prepare for the key challenges ahead.
There has recently been speculation about the progress of the talks on an FTA between the UK and EU. However, regardless of the progress there are still significant disagreements between the EU and the UK, and considering that the FTA will not be agreed unless all of these outstanding issues have been resolved, there is still is still a significant risk that an FTA will not be agreed in time. Therefore, businesses should prepare for the eventuality that a deal cannot be agreed.
Even with a deal, there will still be significant changes to navigate for any company that has operations – directly or indirectly – in the UK as well as in the EU. The relationship between the UK and the EU will be very different from what we are used to.
From the 1 January 2021, the UK will no longer be part of the EU’s Single Market and Customs Union, nor in EU policies and programmes.
With less than 2 months to go until the transition period comes to an end, what should businesses focus on?
Whist, of course, Brexit touches on many issues specific to particulars sectors, the checklist below focuses on issues likely to be relevant across a wide section of businesses.
- Do you have any EU employees? If so, are they aware of the steps they need to take to continue living in the UK after Brexit?
- Have you reviewed your contracts?
- If you export or import goods, are you ready to comply with the new trade, customs and VAT requirements?
- Will you be able to export manufactured goods to the EU?
- Will you still be able to operate in the EU?
- Will your intellectual property still be protected?
- Will you be able to transfer personal data to and from the EU?
We will be following up in the coming weeks with blogs that more specifically address the changes that will apply from 1 January 2021 to the trade in goods, trade in services, movement of labour, regulatory alignment and basic WTO rules.
In the meantime you can browse below some of the key consideration that should be addressed in order to continue operating without disruptions or limited disruptions.
Movement of Labour
At the end of the transition period, freedom of movement is to end and EU citizens will no longer have an automatic right to live and work in the UK. EU citizens currently living in the UK need to apply for “settled” status, under the EU Settlement Scheme, before the deadline of 30 June 2021.
Do you possess a valid Sponsor Licence to allow the company the flexibility to apply for any necessary work visas?
Have you carried out an audit of your employee records?
Trade of goods
Whether or not the transition period ends with a deal on trade, the right to move goods freely between Great Britain and the EU as we know it today will fall away at the end of the transition period.
Do you know what tariffs could be applied to goods coming into or out of your business if no trade deal is reached with the EU? Even if a deal is agreed, there may still be tariffs to pay on items moving between the UK and the rest of the world that are currently subject to EU-negotiated tariffs. Do you know what your worst case scenario is if the UK falls back on WTO tariffs?
Are you up to speed with those additional regulatory requirements?
Trade of services
Under a no-deal scenario, the UK will be trading services with the EU on the basis of the WTO’s General Agreement on Trade in Services (GATS). Impact for businesses will vary depending on which sector they operate. Some sectors will see limited to no change, whereas in other sectors there will be additional requirements and standards and even a prohibition on the provision of certain services between the EU and the UK.
You should review your key contracts for references to EU law, EU institutions or the UK being an EU Member State. For example, territorial provision referring to the EU will not in future include the UK.
More generally, the UK ceasing to be treated as part of the EU can fundamentally change the commercial complexion of a contract.
Is there a risk your key supply chain providers or key customers will default on their obligations, or look to renegotiate? Would you want to try and re-negotiate a contract, or consider exit options? What is the impact on your own supply chain?
Have you reviewed existing contracts focusing in particular on provisions such as change of law, termination? (is either party able to terminate?)
Organisations are advised to identify personal data flows between the EA and the UK and to devise a plan to ensure that these data transfers will be able to lawfully continue from 1 January 2021, in the event that the UK does not obtain an adequacy decision from the European Commission. Priority should be given to business-critical data flows and transfers of large volumes of personal data and special category data.
Other areas of data privacy compliance will require attention. For example:
- Have you identified an alternative lead supervisory authority to the ICO if your organisation engages in cross-border processing within the EU?
- Do you need to appoint a representative in the EU if your organization offers goods/services to EU data subjects or monitors their behaviour in the EU?
- Have you amended documents such as privacy notices and records of processing to reflect the UK’s status as a third country, if that is the case at the end of the transition period?
Intellectual property rights
While there remains considerable uncertainty around the future UK-EU relationship, one thing that is clear is that there will be continuity of IP rights when the Brexit transition period comes to an end.
- Existing European Union Trade Marks (EUTM registration) will be “cloned” so that after exit day there will be a separate UK trade mark registration together with an EUTM for the remaining countries. No additional fees or action necessary). For any EUTMs which are currently in the renewal period with fees payable, it will be sensible to renew now to avoid paying separate renewal fees on both the UK trade mark and the EUTM.
- Pending EUTM applications – for any applications which have not proceeded to registration before exit day, trade mark applicants will have until 31 August 2021 to file a UK trade mark application based on the EUTM application and will have to pay the normal UK application fee.
- New EUTM applications – applicants will need to file in both the EU and the UK. It is sensible to file directly in the UK as opposed to rely on the clone application right as fees are the same and this should avoid delays.
- Have you considered dual filings of UK trademarks, designs and EUTM applications to avoid delays?
- Have you checked IP licensing agreements to see if they contain a definition of the territory that refers to the EU as constituted on the date of the agreement or as constituted from time to time?
The above is just brief overview of some of the areas, where Brexit may impact a business. The reality is that Brexit will affect businesses in many different ways. One of the main features of the EU membership is the free movement of goods, services, capital and labour. Once the transition period expires this free movement will either disappear or in the event of the EU and the UK agreeing an FTA be dependent on the text of the FTA in this regard. Therefore, in preparing for the expiration of the transition period, businesses should examine to which extent it relies on the free movement, what will happen if the free movement disappears or is restricted and how can a business prepare for this situation.
If you have any questions as how your business can prepare for the end of the transition period, please feel free to contact Claus Andersen or Irene Trubbiani Montagnac on:
020 7842 1462, 020 7842 1514 Email us
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