18 February 2021
Update your commercial contracts for the post-Brexit regime
While certain changes are already in place as a result of Brexit, we can expect a constant stream of legislative reform that will affect businesses and their commercial contracts.
As the new trading relationship with the EU evolves, it is likely that you need to update your own terms of business to ensure you continue to comply with relevant regulations and to safeguard your trading position.
‘The Government has provided an online Brexit checker tool which is a useful starting point, but this guidance is generic,’ explains corporate and commercial partner, Simon Deans.‘We recommend carrying out a tailored audit and assessment of your business contracts to review the legal provisions and to identify any practical steps required by the new regulatory regime.’
Here is a brief overview of the key issues which you may need to consider:
Import and export of goods
If your business exports goods to the EU or imports goods or supplies from the EU, the biggest change is to the rules around increased customs and border checks.
From a day-to-day perspective, it will be important to familiarise yourself with the changes and new documentation requirements and to work with a reputable agent at the border. As a result of changes within the export and import framework, any supply or distribution contracts should be reviewed to see if current provisions will protect you or if new terms need to be negotiated with your partners.
Key contract provisions to review will include:
- Right to inspect goods - provisions may require adjusting to account for changes in regulatory standards that may apply whether you are exporting or importing.
- Representations relating to standards or accreditations - any updates to standards and certifications should be captured in your contracts so that you are not inadvertently in breach. Alternatively, you may need to think about tightening up any representations or warranties provided to you in your contracts with EU partners.
- Production criteria - specifications may need to be updated to reflect any changes in processes or compliance requirements.
- Right to reject goods and handling a product recall - take care to protect yourself from a recall or regulatory headache if EU authorities find your products do not meet local rules.
Provision or receipt of services
If you are offering your services to customers in the EU or receiving services from individuals or partners in the EU, a review of your service contracts will also be essential.
Key contract provisions to review will include:
- Professional qualifications - it will be important to consider whether you continue to meet any professional qualifications or accreditation requirements in line with new rules, as there may no longer be any equivalency that you can rely upon.
- Professional insurance - find out from your insurance provider if there is any impact on your professional indemnity insurance regarding the provision of services outside of the UK, and you may need to make appropriate amendments to any insurance related provisions.
Regulatory compliance and loss of equivalence
In some sectors the UK no longer has the same rights relating to certain standards previously deemed acceptable within the EU on an equivalent standard basis.
There may be additional regulatory steps that you need to address. For example, phytosanitary or other sanitary certificates may be required for agricultural products being exported from the UK. Industry specific standards for products, such as organic certification, are also going to change and will require action in order to remain compliant.
References to any industry specific EU legislation in your contracts could need to be updated or renegotiated.
Time frames differ, so it will be important to keep a calendar of relevant regulatory changes. For example, you may be able to use the CE marking for certain goods on the UK or EU market until 1 January 2022. Also, think about whether the time frames set out in your contracts remain achievable and appropriate in practice.
Passing on additional costs
It is thought that additional requirements could increase costs by between 8% and 13%. Costs associated with Brexit-related changes will need to be factored in somewhere within your supply chain. To what extent do your contracts give you flexibility to pass on these extra costs?
Other contract provisions to review
Taking into account new regulatory requirements, impacts on delivery times, increased administration, and extra costs, it is likely that some of the provisions in your contracts may no longer be right for your business. Issues to discuss with your solicitor include:
- Time being of the essence - with inevitable delays ensuing until the processes normalise, you do not want to be caught in breach of a provision that states that ‘time shall be of the essence’ in regard to matters outside of your control.
- Exclusivity or non-compete provisions - if, as a result of Brexit, your commercial strategy warrants branching out in different territories or widening your net in other ways, restrictive covenants in contracts may no longer be to your advantage.
- Liability and indemnity provision - all the increased requirements and continual legislative changes can put you at increased risk of liability and so this will also become a pertinent area of your contracts to consider and potentially renegotiate.
- Dispute resolution - you will need to check whether you can continue to insist that disputes are handled under the laws of England or Wales.
- Privacy and data protection - while GDPR has been incorporated into English law, the UK is currently negotiating with the EU on data transfers to allow the status quo to remain. In the meantime, we have a grace period of four months when data can continue to flow without restrictions. However, if you receive personal data from the EEA, you may wish to put in place additional safeguards in your privacy policies and data processing agreements before the end of April 2021. Such safeguards will include the incorporation of standard contractual clauses which the EU requires of countries processing EU personal data where the EU does not regard local laws as adequate to protect its citizens. If your business has an office or other presence in the EEA or you have customers in the EEA, you will need to comply with both UK and EU data protection regimes, including appointing a data protection representative in the EEA.
As the UK Government takes back control, more changes to legislation and regulation will inevitably emerge and could require your business to respond quickly and accurately.
Prior to entering into or negotiating any future contracts for supply, manufacturing, import, export, or services, make sure that your contract is reviewed by a solicitor to ensure any recent changes have been captured and reflected.
How we can help
We keep updated with all the latest developments in commercial law so that you can focus on running your business, and we are here to help you to navigate the changes and stay compliant.