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Hard or Soft? Dealing with Brexit Contract Problems -11th November 2016 - Click for larger version Hard or Soft? Dealing with Brexit Contract Problems -11th November 2016

Businesses need to consider how their contracts will be affected by the commercial implications of Brexit – whether you like your Brexit served Hard or Soft.

All businesses should review key existing contracts and future-proof new contracts to prepare for Brexit.

A number key issues could arise:

1. Brexit could have significant commercial implications, such as the imposition of tariffs, restrictions on the freedom of movement of people or further changes in exchange rates. This could result in financial hardship. However, in the absence of express contractual provisions, parties are unlikely to obtain relief.

In particular, it is unlikely that these situations will be covered by a general force majeure clause.

We’d advise that clients might future-proof relevant contracts to:

- include a termination right on Brexit;

- mitigate the commercial risks, perhaps by taking measures such as hedging.

2. Brexit could raise questions over the meaning of contracts; in particular, whether references to “the EU” will continue to include the UK after Brexit. The answer will depend on how the reference is used and the relevant context. We’d advise that clients might future-proof relevant contracts, to clarify whether references to “the EU” include the UK after Brexit.

3. A specific area of concern is whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE 2006) will continue to apply in business sales. It seems likely that TUPE 2006 will continue to apply to service contracts in the UK in the medium term. In some cases it may be necessary to include contractual clauses to replicate some aspects of TUPE 2006, should that position change.

4. It may be more difficult to enforce a judgement by the Scottish and English courts in some EU member states if the UK ceases to be covered by the relevant Brussels regulations and replacement arrangements are not established. Certainly it will become important to take local law advice on enforcing in that member state or alternatively seek to use arbitration to resolve the dispute.

If all this appears overwhelming, then help is at hand. We’ve prepared a simple guide breaking down the issues and our corporate team stands by to issue the same and advise in respect of any particular queries you may have.

The Corporate Team

Macdonald Henderson

Last updated: 3.13pm, Friday 11th November 2016

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