Brexit, a pandemic, and tips for commercial contracts in 2021

2020 has been an extraordinary year for everyone, managing the challenges of the Covid-19 pandemic; however, in the year ahead, schools and colleges should not overlook the implications of Brexit.  EU Treaties and the general principles of EU law now no longer apply wholesale in the UK, but there are some exceptions, in that prior EU regulations will continue to apply in UK law until they are modified or revoked by UK regulations.

Even with the EU-UK Trade and Cooperation Agreement now in place, schools and colleges should still be thinking ahead and auditing commercial arrangements to decide whether any changes need to be made now or in the future when new agreements are negotiated.  We recommend that you should consider the following points:

1. The end of the transition period may raise questions over the meaning of contracts; for example, whether references to ‘the EU’ will continue to include the UK after Brexit. If the contract defines the EU by reference to its member states ‘from time to time’, that indicates that it will not include the UK after Brexit.  Any express provision dealing with EU Member States leaving the EU would be decisive. If the language is not clear, the purpose of the clause and the contract as well as the wider commercial background become more relevant.
2. Contracts should include provisions to deal expressly with modification to legislation; for example, by stating that references to a law include any modification, re-enactment or consolidation of that law. This might indicate that references to EU law include implementing or successor domestic law. If any EU legislation is central to the operation of the contract, for example, the GDPR, then the contract should instead reference the parallel UK legislation.
3. Trade barriers between the EU and the UK may increase, meaning that costs would increase. It is important to assess the commercial impact this will have on your agreements. When negotiating future contracts, you may wish to consider the extent to which prices should include or exclude any new taxes that the UK government or EU member states’ governments may introduce.
4. If you are contemplating entering into, or are already subject to, long-term commercial agreements, you will need to be mindful of the contractual impact that changes in law following the end of the transition period may have. The regulatory regimes in the EU and UK could diverge and this may mean that you will need to comply with different regulatory regimes.
5. If you are planning to recruit from overseas, you will need to register as a licensed visa sponsor.  You may not be able to legally hire people from outside the UK if you do not have a licence.
6. There is a six-month extension agreed in relation to data protection arrangements. The UK government had already indicated that transfers from the UK to the EEA could continue after Brexit without additional protections being put in place. Transfers from the EEA to the UK may continue for the present and the hope is that the EU will grant an adequacy decision about the UK, indicating that the UK’s existing safeguards were considered adequate.   It is unclear if such an adequacy decision will be made, so we would suggest putting in place ‘appropriate safeguards’ through the use of standard contractual clauses (SCCs). Schools can enter into SCCs on a ‘conditional’ basis, so they only apply if necessary.
7. In relation to determining the governing law of an agreement, an express choice of law clause in a contract in favour of English governing law will still be followed by the UK courts and those of the remaining EU member states, so that schools entering new agreements can continue to choose English law to govern their contracts.
8. Contractual variation procedures should be carefully drafted to make provision for future changes in these uncertain times.  It is also worthwhile for parties to agree in advance who will bear the costs of compliance with changes, in order to avoid unwittingly entering into an agreement that is not commercially viable.  One of the best ways to future-proof against Brexit is to include express provisions to cater for certain events. The expression ‘Brexit clause’ refers to a clause in a contract that triggers some change in the parties’ rights and obligations as a result of a defined event occurring. The trigger events may not be Brexit but the occurrence of events which the parties predict might occur as a result of Brexit – for example, new laws.

We hope this is a helpful starting point for the New Year.  If you would like to discuss this further or would be interested in us reviewing your commercial contracts, please do feel free to get in touch. Emma Swann  07773 937 401 [email protected]