Whether or not you have business or investments in the UK or the EU, you may be directly affected by the UK's surprising vote to leave the EU. Here's what you need to know.
Officially, nothing much changes immediately. Until the UK invokes Article 50 of the Lisbon Treaty, the EU withdrawal notice, long-standing legal policies like free-trade and free movement of EU citizens between the UK and the EU continue. Once the UK gives its Article 50 notice, however, negotiations will begin between UK and EU officials to adapt the UK's post-withdrawal relationship with the EU and non-member countries, like the U.S. that have no direct trade and similar treaties with the EU. Many such changes will require legislative implementation likely to be widely reported by the press.
Unofficially, much could change immediately. The UK's currency, the pound, has already plunged with the surprise Brexit vote, London real estate prices have dropped as banks and other businesses fear London's premier financial services sector may lose its access to EU business and be forced to relocate to Paris, Frankfurt, or other EU capitals. Asian and other inbound investors to the UK may also direct their new investment in factors and facilities from the UK to other EU counties as uncertainty and concern mount about future UK access to EU automobile and other commercial markets.
Steps to take. Smart businesspeople should immediately do the following to protect their UK and EU business:
- Check their contracts, purchase orders, and other agreements with customers or suppliers in the UK and EU to determine whether an Article 50 notice will invalidate or change such agreements under any force majeure (an unexpected event, like a labor strike, war, or government action that can excuse a contracting party's performance). Businesses may need to amend their agreements to reaffirm contractual commitments, Article 50 notice notwithstanding.
- Check their agreements to ensure choice of law and dispute resolution clauses do not require modification when, for example, the EU Data Protection Directive for personal information may not apply to data collection activities, like software applications and on-line businesses in the future.
- Check their agreements to determine whether the payment is in UK Sterling, EU Euros, or another currency. A falling UK currency means UK exports will be cheaper, and UK imports will be more expensive, so other country importers of UK products and services may gain financially while other country exporters to the UK may find their products more expensive with Sterling falling in value.
- Check their agreements and banking relationships to ensure such documents provide for successors to LIBOR (London Interbank Offered Rate), a common interest-rate setting mechanism in international agreements.
- Check to identify EU executives and workers in the UK, UK executives and workers in the EU, and foreign nationals in both jurisdictions to monitor likely changes in immigration procedures, including work visas.
- Be alert for potential tax competition between the UK, EU, and other jurisdictions as governments vie for more inward investment.
These are only a few of the items businesses should check in the unfolding Brexit saga. For more information, or to discuss your specific business or investment concerns, please feel free to call the ShawnCoulson Brexit desk at +1.202.331.7900.