Start Assessing the Brexit Effect says Hogan Lovells
11 May 2015
London, 11 May 2015 - Businesses should start assessing the potential consequences of a UK exit from the EU and engage in the debate, advises global law firm Hogan Lovells. Following the election Prime Minister David Cameron has reconfirmed his pledge to negotiate amendments to the UK's membership of the EU and to hold an In/Out referendum on membership.
Brexit would have significant implications for business. Whilst those implications would be amplified for heavily regulated sectors such as financial services, pharmaceuticals and TMT, every business operating in, or dealing with, the UK would face questions over issues as diverse as contracts and supply chain, employment law, cross border disputes, tax and data privacy.
If the UK votes to leave, businesses will need to re-examine the way they operate and may need to put in place new legal structures to continue to function - or to trade - as effectively. If the UK votes to stay but on a reformed basis there will still likely be a number of significant changes. Clarity is needed on the alternatives to membership which the UK can secure so that the relative merits of In/Out can be evaluated.
Hogan Lovells' Constitutional Change Taskforce has developed a Brexit Issues Map, which delves into the wide range of legal implications. The Issues Map can be found online at: http://maps.hoganlovells.com/europe/
Susan Bright, Regional Managing Partner at Hogan Lovells, specialising in Competition and Economic Regulation said: "This is a vital issue for every business which is based in, or which deals with, the UK. There is a lot of uncertainty about the proposed referendum, including the details of what either 'In' or 'Out' would look like. Businesses should already be seriously thinking about what they can do to inform and influence this important debate at an early stage."
The Brexit Issues Map highlights non-sector specific issues such as the need to comply with differing rules in the UK and EU, reduced flexibility in deploying staff, trading or moving data across the UK/EU border and the need to re-examine any deal which implicit assumes the UK is an EU territory. In addition, some of the highlighted issues for highly regulated sectors include:
The potential impact on financial services regulation could be significant. Unless replacement arrangements equivalent to the current cross-border passporting regimes can be secured, financial institutions operating in both the UK and EU may need to consider establishing new regulated entities on each side of the EU border. Similar issues will be faced by banks, investment firms, insurers and intermediaries that currently operate on the basis of EU regulations or laws implementing EU directives. It will also be important to the UK capital markets for UK market infrastructure to benefit from the continuation of arrangements that facilitate cross-border access by firms based elsewhere in the EU.
The life sciences industry is one of the UK's leading manufacturing sectors. It is also one of the most highly regulated sectors and the current UK legal framework governing medicines and medical devices derives from EU legislation. Subject to the transitional arrangements put in place, a Brexit could result in disruption to supply chains, additional quality control testing, new export charges, and uncertainty regarding elements of the regulatory regime going forward, such as the validity of crucial EU regulatory authorisations.
Technology, Media and Telecoms
A Brexit would have an impact on the regulation of the broadcasting and telecoms industry, the EU "Digital Single Market" Strategy and the content licences and other rights agreements which currently cover Europe. In addition, unless alternative arrangements can be secured, all pan-EU intellectual property (IP) rights would cease to apply in the UK upon the exit taking effect. The only method of IP protection that would apply in the UK would be UK national rights, or those reciprocal rights granted by UK law (e.g. copyright) pursuant to its international treaty obligations. In the case of registered IP rights, that will be those granted by the UK Intellectual Property Office (IPO). In addition all pan-EU court orders issued by a UK court may also cease to apply in the EU.