There is much uncertainty over what will occur when the UK officially leaves the EU at 11pm on 29 March 2019 (Exit Day). This note focuses on the possibility of the UK leaving the EU without any withdrawal agreement in place (Hard Brexit).
In the event of Hard Brexit, there will be no transition period and all new EU law will cease to apply at Exit Day. As has been well publicised, this will have an almost unprecedented impact on the UK food and drink industry. Free movement of goods will end, with future trade occurring on World Trade Organisation (WTO) terms and/or UK customs borders being created. The uncertainty that will exist in this trading environment creates an increased risk for UK food and drink companies.
Whilst contractual provisions should be put in place where possible to mitigate that risk, UK companies operating in the food and drink industry should be mindful of the administrative burden that will come with varying contracts that were not drafted when Hard Brexit was in contemplation. UK companies should also consider the commercial implications of a Hard Brexit. For example, it may be necessary to urgently renegotiate contracts to ensure that the company is able to trade post Hard Brexit (for instance, alternate supplies within the UK or new export markets outside the EU).
Some of the key implications for the food and drink industry are set out below.
If there is a Hard Brexit, UK companies will still be free to negotiate an appropriate choice of law in contracts with EU-based customers or suppliers 1. UK parties should not feel obliged to accept contracts governed by an EU-based state's law, purely due to Hard Brexit. In the event of a Hard Brexit, it is anticipated that the English courts will continue to uphold the choice of the parties in deciding the governing law of a contract. Likewise, EU courts should respect the decision of contracting parties to decide that a contract should be governed by English law.
If a dispute arises – jurisdiction and enforcement
Currently, the recast Brussels Regulation 2 ensures that UK judgments are recognised in other EU member states. The EU has a similar arrangement to extend this relationship to Switzerland, Norway and Iceland (known as the 2007 Lugano Convention) 3, from which UK companies benefit by virtue of the UK's EU membership. Post Hard Brexit, the UK government is indicating an intention to apply to join the 2007 Lugano Convention, although this will not be in place by Exit Day.
If a Hard Brexit occurs, the recast Brussels Regulation will cease to apply. Cross-border disputes between UK food and drink companies and parties in the EU could be governed by the 2005 Hague Convention on Choice of Court Agreements (in addition to the EU, this also covers Montenegro, Mexico and Singapore) 4 . Although the UK is a party to that Convention via its EU membership, that membership will cease on Exit Day. However, the UK has taken the necessary steps to bring the Convention into domestic legislation with effect on 1 April 2019 5. To ensure that they benefit from the Convention, UK food and drink companies should ensure that any contracts to which they are (or are to become) a party contain an exclusive jurisdiction clause conferring jurisdiction on the courts of a contracting state.
Whilst the UK was an EU member, serving the legal documents required by the English court system in a dispute against a party in the EU was achieved using a simple, reciprocal regime under the EU Service Regulation 6. In the event of a Hard Brexit, that Regulation would no longer apply. However, the UK remains a signatory of the Hague Service Convention 7. Effecting service under that Convention is not as straightforward as doing so under the EU Service Regulation. For instance, under the Convention, each signatory state designates a Central Authority to receive and execute requests for service of legal documents originating in other signatory states. These Central Authorities can also determine what is and what is not acceptable for service.
What this means for the food and drink industry
Where a UK company operating within the food and drink industry contracts with an EU-based company, it should:
consider whether an arbitration agreement is appropriate. Enforceability under the New York treaty can be straightforward and will be unaffected by a Hard Brexit, due to the international nature of the regime;
if your preference is for dispute resolution through UK courts, consider requiring the other party to have an agent in the UK authorised to accept service, so as to negate any of the issues which may be caused by the UK withdrawing from the EU Service Regulation;
ensure that any contracts to which you are (or are to become) a party contain an exclusive jurisdiction clause conferring jurisdiction on the courts of a contracting state to the 2005 Hague Convention on Choice of Court Agreements.
Intellectual property rights may well be a significant asset for many UK companies in the food and drink industry. Accordingly, protecting that portfolio from threats in the context of Hard Brexit should be considered.
To that end, it is helpful to summarise the position of the UK government in relation to intellectual property following Hard Brexit:
all existing registered EU trade marks and registered designs will continue to be protected and to be enforceable in the UK by providing an equivalent trade mark or design registered in the UK 8;
as to patents, relevant EU legislation (or UK laws implementing such legislation) will be retained in UK law, including the EU's legislation on supplementary protection certificates 9;
the main international treaties on copyright will ensure that the scope of protection for copyright works in the UK and for UK works abroad will remain largely unchanged, although the EU cross-border copyright mechanisms will cease to apply to the UK 10;
the UK will continue to recognise the EEA regional exhaustion regime, meaning that there will be no change to the rules affecting imports of goods into the UK. However, there might be restrictions on the parallel import of goods from the UK to the EEA. Businesses undertaking such activities will need to consider if it is necessary to obtain the consent of the rights holder 11.
It is unclear how the European Union Intellectual Property Office (EUIPO) will deal with pending actions at and after Exit Day 12. However, the UK government has indicated that businesses with pending EU trade mark and Community design applications will be able to refile those applications with the Intellectual Property Office (IPO) in the UK, under the same terms for a UK equivalent right 13.
1 Rome I Regulation (https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32008R0593); www.gov.uk/government/publications/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal
2 1, 2 and 5 (https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32012R1215)
5 Dentons note – Brexit: Impact on Governing Law and Jurisdiction Clauses (December 2018)
12 Dentons' note – Brexit Key Issues: Withdrawal Agreement of No Deal (January 2019)