Catherine Gleave, digital editor at LexisNexis, explains how you can best prepare in the run-up to Brexit, and use it to your advantage to gather insights into your organisation and the risks it faces.
With uncertainty set to continue as we count down to 29 March, in-house counsel must ensure that their Brexit plans are pragmatic and address business realities.
Although these uncertain times may expose some weaknesses in your business, Brexit offers an opportunity to gain invaluable insight into your organisation and to get involved earlier in conversations to shape and influence your strategic agenda, and ultimately growth. Businesses are increasingly looking to the legal and compliance functions to be closely involved with Brexit planning, from managing and mitigating risk to scenario planning and drawing up contingency plans.
Here are several ways in which in-house counsel can navigate Brexit turbulence.
Understand your business
In such turbulent times, it is tempting to look to other businesses to see how they are responding. However, in the same way that no two businesses are the same, there are no two same ways of handling Brexit: what works for one business may not work for another. Each organisation will face its own specific risks, all of which will be affected by its activities, workforce, supply chains, data handling and a host of other factors.
Take a holistic approach
Distinguish between legal risks, caused by possible changes in the law and regulatory frameworks, and economic risks, which may flow as a result of Brexit.
The potential economic risks of Brexit are substantial and well-documented and should certainly form part of a broad risk assessment and compliance review.
Such risks include, but are not limited to:
- increased costs of import, export and distribution
- border / customs delays
- shortages of personnel, both skilled and unskilled, and associated cost implications
- adverse market conditions and volatility
- apprehension from investors
- withdrawal of clients or suppliers from the UK market as a result of Brexit.
Create a practical action plan to address key priorities
LexisNexis has identified five key priorities and legal risks for Brexit risk management, outlined in a Brexit Risk Management Guide created specifically for in-house lawyers.
We focus on cross-sectoral risks affecting most businesses, rather than issues relevant only to specific sectors, for example financial services passporting.
The below is an extract of a comprehensive series of mini-action lists, with suggested action points for each priority area to help you record your organisation’s current level of compliance.Priority 1 – Risk exposure in contracts
Brexit could have significant implications for the validity and operation of contracts. As a first step, you should identify key contracts, particularly those which relate to the provision of goods or services either to or from the EU, ie contracts with businesses in the EU which last beyond 29 March 2019.
- Confirm definitions: where contracts refer to the EU or EEA (and this is intended to incorporate the UK) these contracts may need to be amended to reflect the UK’s position post-Brexit.
- Watch out for contracts which reference specific laws and regulations. Ensure clauses allow for any amendments or re-enactments to the laws; if they don’t, consider the impact of subsequent changes in UK law on the contract.
- Consider whether the contract allows for provisions and variations to be made in the event of a change of law.
While there remains uncertainty over what any final Brexit deal might look like, if a deal is even reached, it is highly likely that Brexit will result in some supply chain disruption. To prepare for and mitigate against associated risks:
- register for a UK Economic Operator Registration and Identification (EORI) number if you import goods from / export goods to the EU
- identify any key contracts containing international commercial terms (Incoterms) that may need amending to reflect a change in your status
- assess and quantify the impact of potential tariffs on any imports / exports.
Post-Brexit data transfers between the UK and the EU will be considered to be between the EU and a ‘third country’ under the GDPR. To avoid large financial penalties, ensure that appropriate safeguards are in place when transferring data:
- check whether your business currently makes transfers of personal data (as defined by the GDPR) outside of the EU
- if yes, determine whether is necessary to transfer that personal data outside the EU to meet your purposes.
It is critical you are alert to the extent your organisation relies on existing EU laws to operate. Changes to those laws, and the uncertainty around how they may be amended in time, including in relation to obtaining registrations and licences from EU-based agencies, may have a significant impact on your business operations.
You need to:
- identify whether your organisation is currently required by existing UK legislation to take any actions at EU level, and if so, document the legislation in question
- assess the impact of any applicable new laws and/or regulations on your business
- identify any changes, amendments or actions required because of the new law and/or regulation.
Currently it is relatively simple within the EU to enforce judgments of the UK courts. This may become significantly more complicated in both costs and time post-Brexit. There are several ways businesses can mitigate against this. Three practical steps to take now are to:
- work out whether your organisation has any outstanding judgments with businesses in the EU that have not yet been enforced
- if so, take necessary steps to seek enforcement before Brexit
- ensure you check proposed jurisdiction clauses in any new contracts with businesses in the EU to assess whether these clauses need to be negotiated in light of Brexit.
Brexit: supporting you
The LexisNexis Brexit Risk Management Guide is LexisNexis’ comprehensive set of Brexit-specific guidance and practical resources designed to support in-house lawyers enable a smoother transition to a post-Brexit world for their organisations. It includes:
- horizon scanners
- legislation tracker
- Brexit timeline
- action checklists
- Brexit analysis
- Q&As with experts.
Learn more about how LexisNexis can support you.