The ongoing impasse in the Brexit negotiations means that many of the legal implications of the UK’s departure from the EU are yet to be addressed or clarified.
In this article, we address some of the main legal areas which will be impacted and the considerations which arise. Where possible, we identify steps you can take to protect your business.
Of course, as matters become clearer, we will provide more updates and assistance.
For further information on any of these issues, please get in touch with any of the key contacts listed.
Intellectual property is an intangible property and is essentially the fruit of a person’s or organisation’s creative endeavour. A series of legal rights such as copyright, trademarks, design rights and others (known as intellectual property rights) have developed in order to protect this intangible property, which is often an extremely valuable asset.
Intellectual property rights are territorial. Therefore, if you seek Irish protection, you will be granted protection in Ireland only. However, there are protections available on a European basis, which can protect intellectual property rights in the European Union. One such protection is the protection afforded by an EU trade mark. As such, if the UK exits the EU, particularly in a no-deal scenario, what will the impact be on these EU trade marks?
Currently, under EU legislation governing trademarks, a trademark owner can file a single trademark application with the European Union Intellectual Property Office (EUIPO). Once accepted by EUIPO, the registered EU mark is protected in all EU member states, including the UK.
Following the UK’s departure from the EU, EU trade mark protection will no longer extend to the UK.
In a Brexit technical note on trademarks and designs, the UK government has indicated that it will ensure that all existing registered EU trademarks will continue to be protected and to be enforceable in the UK, by providing an equivalent trademark registered in the UK.
Right holders with an existing EU trademark will have a new UK equivalent right granted that will come into force at the point of the UK’s exit from the EU. The notes indicate that this new UK right will be provided with minimal administrative burden. It is not clear, however how this new right will be granted and whether some form of application process will be required. The trademark will then be treated as if it had been applied for and registered under UK law.
The technical notes provide that any business, organisation or individual that may not want to receive a new comparable UK registered trademark will be able to opt out. Again, no information is provided on how this may be done.
Any business, organisation or individual, who has an on-going application with the EUIPO, after exit, will be able to refile that application with the UK Intellectual Property Office under the same terms for a UK equivalent right, using the normal application process for registered trademarks in the UK.
For a period of 9 months from exit, the UK Intellectual Property Office will recognise filing dates and claims to earlier priority and UK seniority recorded on the corresponding EU application.
Various EU rules relating to cross border disputes apply to all member states. These rules deal with the following issues:
- Jurisdiction: In which member state's courts the dispute should be heard
- Applicable law: Which member states laws will govern the dispute
- Recognition and enforcement of judgments: How a judgment obtained in a member state can be recognised and enforced in the another
As such, it is necessary to consider how the UK’s exit from the EU would affect cross border disputes.
If the UK exits the EU without a deal, the EU rules dealing with the issues set out above would no longer continue to apply to the UK.
With respect to the rules on jurisdiction, in the UK government’s guidance on civil legal cases in a no-deal Brexit scenario, it notes that the rules would revert to the existing UK domestic rules. As such, where UK rules on jurisdiction conflict with EU rules on jurisdiction, it could be that both a court in an EU country and a UK court would accept jurisdiction of the same dispute.
With regard to applicable law, the UK government’s guidance in this area indicates that the UK will continue to apply what are known as Rome I and Rome II, even though they will no longer be a party to these EU treaties. Consequently, rules governing choice of law will remain unchanged.
Under EU law, a judgment obtained in one EU country is automatically recognised in every EU country. The judgment may be refused only in exceptional cases.
To enforce a judgment in another EU country, the applicant can go directly to the enforcement authorities in another EU country. For example, if a person is owed money, they can have the judgment recognised and enforced in the country where the debtor has assets without any intermediary procedure. This ability to enforce an EU judgment in the UK, will no longer apply in the event of a no-deal Brexit and the UK government's guidance notes in this area provide that UK domestic rules will apply to the enforcement of EU judgments. Consequently, the enforcement of a judgment obtained in an Irish court against an entity or individual in the UK may be difficult and costly.
Once the UK leaves the EU, unless there is a change to the Irish Court rules, leave of the Court will be required to initiate proceedings against a UK entity. This will add an additional layer of costs when instituting proceedings here against a UK entity.
Under the GDPR, personal data can be freely transferred between organisations within EEA countries without any specific measures. However, in the case of transfers of personal data to third countries – of which the UK will become one following Brexit – different rules apply under Part V of the GDPR.
One mechanism which facilitates the transfer of personal data to third countries is an EU Commission adequacy decision. This is where the EU Commission recognises a data protection regime in a third country as being adequate and further measures are not required to underpin the transfer of personal data. However, the EU Commission has confirmed that there will not be an adequacy decision in place in respect of the UK by the end of March 2019, meaning that in the event of a “no-deal” Brexit, organisations must avail of one of the alternatives under Part V of the GDPR in order to transfer personal data to the UK following Brexit.
The most commonly used mechanism which meets these requirements is the use of model data protection clauses that have been approved by the European Commission and enable the free-flow of personal data when embedded in a contract.
Businesses that transfer personal data to the United Kingdom now need to consider how that personal data will continue to flow in the event of a no-deal Brexit scenario.
As a consequence of Brexit, it is likely that UK citizens will no longer enjoy freedom of movement throughout the EU and vice versa. An estimated 300,000 British citizens reside and work in Ireland, whilst an estimated 340,000 Irish citizens reside and work in the UK (Office for National Statistics). For British citizens employed in Ireland and Irish citizens employed in the UK, the effects of Brexit on freedom of movement will be alleviated by the fact that there is an arrangement known as the Common Travel Area (“CTA”). The CTA pre-dates the foundation of the EU and is therefore independent to the UK’s membership of the EU. The CTA allows citizens of the UK and Ireland to reside and work in either jurisdiction. The Miscellaneous Provisions (Withdrawal of the United Kingdom from the European Union on 29 March 2019) Bill 2019 addresses the continuation of certain CTA arrangements, with particular reference to healthcare, income tax, social welfare and social insurance. It is likely that this bill will be the first in a series of legislative instruments designed to regulate the relationship between Ireland and the UK post-Brexit.
UK employment law has been heavily influenced by the UK’s membership of the EU. Many legislative developments in the area of employment law, such as working time, equality and transfer of undertakings rights have been primarily driven at EU level. It remains to be seen how UK employment laws will develop post-Brexit. In a White Paper issued in July 2018, the UK government stated its commitment to maintaining employment law standards after the UK leaves the EU, which could be interpreted as an intention to refrain from repealing existing legislation. However, this does not affect the ability of the UK to amend existing UK legislation after 29 March 2019. Similarly, there may be amendments to the EU framework, which arise in the normal course of events from time to time, either via the Courts of Justice of the European Union (CJEU) case law or replacement directives. Accordingly, it is likely that the common framework shared by both the UK and the EU will diverge post-Brexit. For pan-European undertakings, this will necessitate familiarity with both regimes, as they develop in parallel.
In a no-deal Brexit scenario, there will be substantial changes to the trading relationship between Ireland and the UK such that existing cross border contracts could become uneconomical or financially undesirable in certain circumstances. This could be due to the imposition of tariffs, customs borders, diverging regulatory regimes and currency fluctuations.
Businesses in such a situation need to consider whether there is anything in their existing contracts which would allow them to terminate or renegotiate such a contract.
It is unlikely that a party will be able to rely on what is known as a “force majeure clause” in order to terminate or renegotiate an existing contract. A force majeure clause is usually included in commercial contracts as standard. It is essentially a clause which provides that the parties do not have to comply with their obligations in the event of a force majeure event. Force majeure events are generally defined as events outside of the parties’ control which make it impossible for a party to perform its obligations.
The fact that financial hardship will be suffered by one or both parties would not generally be sufficient grounds for exercising a force majeure clause. While it will be dependent on the wording of each particular clause, unless the force majeure clauses specifically provides for Brexit, it is unlikely to provide any relief.
There may however, be other clauses in the contract, that allow for termination or renegotiation, such as the material adverse change clause. A material adverse change is sometimes seen in agreements to purchase companies. They will give the buyer a right to walk away if events occur which are detrimental to the target company, before completion of the sale.
For agreements being negotiated now, businesses should consider whether they wish to include a specific Brexit clause, which may trigger renegotiation or termination in the event of Brexit.
Another impact which Brexit may have on commercial agreements is where an agreement defines the EU as a territory for a particular purpose. The term might be used, for example to define territorial scope in a distribution agreement or a trade mark licence agreement. Depending on how the particular clause is drafted, it is unlikely to include that the term EU, would include the UK, after Brexit.
For existing contracts, depending on the nature and purpose of the contract, this may have a significant impact on the parties. In a trademark licence agreement, for example, the fee may have been negotiated on the basis that the trademark can be used in the EU, which at the time of that negotiation included the UK. It may be essential for the licence holder that it can continue to use the trade mark in the UK following Brexit. While the licence holder of course can seek to negotiate a change to the agreement so that UK is specifically included, in order to agree to such a change, the owner of the trademark may look for an additional fee.
For any agreements being negotiated now, parties should clearly define in the agreement whether the territory is to include all EU member states and the UK after Brexit.
Businesses should conduct an audit of current contracts and consider whether there are any contracts they may wish to seek to renegotiate in advance of Brexit.
Both UK and Irish competition law is modelled on EU competition law. Irish, EU and UK competition law prohibit anti-competitive practices between parties and prohibit abuse of a dominant position.
Like Irish competition law, UK completion law, has been influenced by EU competition law. Decisions of the Courts of Justice of the European Union (CJEU), which are binding on UK Courts, would have been used by both the UK Courts and the UK competition authority to interpret and develop UK competition law.
If the UK is no longer a member of the EU, then it is not bound by decisions of the CJEU and there could be a divergence between UK competition law and EU and Irish competition law. This will have an impact on Irish businesses that also operate in the UK; as such businesses will be subject to EU, Irish and UK competition law.
One area of competition law to be considered in the event of a no-deal Brexit is parallel imports. Under EU competition law, restricting parallel imports in the internal market can be a breach of the EU competition rules. If, however, the UK is no longer a member of the EU then these rules would not apply to the UK/Ireland relationship and parties would be free to restrict parallel imports from the UK. This may be welcome news for businesses that supply goods in both jurisdictions to other businesses. They may now have the ability to restrict customers or appointed distributors from importing goods from its own UK operations, where perhaps that customer can source goods for a lower price given currency fluctuations.
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About the Authors
David is Managing Partner and Head of the Commercial & Business team at Hayes solicitors. He advises a number of the firm’s major corporate clients on a wide range of corporate and commercial issues. He has expertise in advising on general corporate and commercial matters, particularly in the manufacturing, retail, aviation, sports and motor sectors, and frequently advises clients who operate in regulated areas.
Laura is a partner in the Commercial & Business team at Hayes solicitors. Laura advises clients on a diverse range of corporate and commercial matters and regulatory requirements. She is an experienced adviser on terms and conditions of sale and purchase, IT issues, data protection, product liability, advertising and promotions, intellectual property and a wide range of commercial agreements.