Brexit – Where the FX Are We?


UK retail has reportedly “shrugged off” Brexit, with August sales up 6.2% year-on-year. Sales to foreign tourists taking advantage of the weaker pound cannot, however, cancel out the longer-term flipside of costlier imports and rising suppliers’ prices. As our future in Europe remains uncertain even to those in charge of shaping it, retailers are asking what Brexit means for their commercial contracts. Clauses allocating the risk of future exchange rate changes are more common than express Brexit termination clauses. Retailers should check if they can rely on such clauses, or insist upon their future inclusion.

Read more from our Retail team in the latest edition of Retail Quarter.

Britain and the EU: Manufacturing an Orderly Exit

Brexit must be carefully-engineered to safeguard industry and secure new trade opportunities.  This report points to new findings showing that just 5% of British adults think that loss or damage to the UK manufacturing sector is a price worth paying for leaving the EU. And, while acknowledging that the Government faces a difficult balancing act between free trade and free movement of workers, it warns against rushing through a ‘clumsy’ Brexit plan that could do lasting damage to UK manufacturing and the wider economy.

The report is available to download now and was produced by EEF in partnership with Squire Patton Boggs.

House of Commons holds second EU Referendum Debate

When the UK voted in the Referendum on 23 June 2016 whether to remain or leave the European Union, the majority voted in favour of leaving. This was only the third UK-wide referendum ever held. They are rare because the UK relies upon the principle of Parliamentary sovereignty. However, the UK Government have instituted a process for the public to register petitions online. If a petition gets over 100,000 votes, the Petitions Committee will consider it for a debate in Parliament.

Even before the EU Referendum was held, on 25 May 2016 a petition was registered online calling for a second referendum to be held if the turnout was less than 75% and, based on that turnout, the majority was less than 60%. The results fell below both of those levels. There was a turnout of 71.8% of registered voters; 51.9% voted to leave (17,410,742 Votes) 48.1% voted to remain (16,141,241 Votes). Effectively, 37.33% of the Electorate voted in favour of leaving. In the days following the Referendum, over 4 million people signed the online petition.

The Government Digital Service verified the signatures on the petition and removed 77,000 fraudulent signatures. The Petition Committee then scheduled the debate on 5 September in Westminster Hall, the second debating chamber of the House of Commons. A debate in Westminster Hall does not have the power to change the law, and could not end with the House of Commons deciding whether or not to have a second referendum. It will be up to the Government to decide whether it wants to start the process of agreeing a new law for a second referendum.

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Brexit and Dispute Resolution

Signing Article 50 - BrexitThe vote, by the UK electorate to leave the EU, was just a vote. By itself, it does not alter the legal relationships of the UK, Europe and the rest of the world. First of all, the formal process of termination must commence pursuant to Article 50 of the Treaty on European Union (TEU) with a termination notice from the UK government to be given in accordance with the constitutional requirements prevailing in the UK, which will start a two-year period (Sunset Period) of negotiation on the details of the withdrawal (Withdrawal Agreement).

At this point, there is no certainty as to when the UK government will issue the notice of termination of its EU membership. Therefore, there is no certainty as to when the Sunset Period will commence, meaning that the actual date of Brexit remains uncertain.

However, to read more about how Brexit may affect dispute resolution practices, generally.

Brexit: EU and UK Constitutional Requirements

In its Opinion 1/91 of 14 December 1991 on the Treaty establishing the European Economic Area the European Court of Justice (“Court of Justice”) held that the EEC-Treaty, albeit concluded in the form of an international agreement, none the less constitutes the constitutional charter of a Community based on the rule of law.

Accordingly, Article 50 of the Treaty on European Union (TEU) which provides that Member States can notify to the European Council their intention to withdraw from the European Union is a constitutional rule of the European Union and the compliance with Article 50 by the leaving Member State, the European Council and the remaining Member States is subject to legal and constitutional review by the Court of Justice.

A number of constitutional issues which could be subject to review by the Court of Justice in the context of Brexit have been controversially discussed in recent weeks.

One of the most prominent issues is the UK constitutional controversy whether the UK’s Prime Minister could notify pursuant to Article 50 TEU the European Council of the intention of the UK to withdraw from the European Union without obtaining prior approval by the UK Parliament. This issue is currently pending in the English High Court, with the potential for the point of law to go all the way to the Supreme Court.

Since Article 50 (1) TEU provides that a Member State may decide to withdraw from the Union “in accordance with its own constitutional requirements”, the issue of whether approval by Parliament for Brexit is required under the UK’s constitution, turns into an EU constitutional issue as well, since it is debatable whether compliance with the relevant Member State’s own constitutional requirements is a pre-requisite for validly triggering the Article 50 TEU procedure and whether such compliance is therefore ultimately subject to scrutiny by the Court of Justice.

One potential avenue to proceedings in front of the Court of Justice could, depending on the circumstances, be Article 263 of the Treaty on the Functioning of the European Union (TFEU) in case of an infringement of the EU Treaties by the Council engaging in withdrawal negotiations where no constitutionally valid withdrawal notice within the meaning of Article 50 TEU has been given. Another avenue to the Court of Justice would be open pursuant to Article 267 TFEU in case that the question of whether the UK has actually ceased to be a Member State of the EU or not (which it only does if a valid notice pursuant to Article 50 had been given) becomes relevant in any domestic court proceedings (for example within commercial disputes) within any of the other 27 Member States of the European Union under any relevant circumstances.

In this respect one might assume that the Court of Justice would with some likelihood follow any ultimate binding decision rendered by the Supreme Court of the United Kingdom. Accordingly the degree of legal uncertainty which has arisen would be reduced considerably if there would either be an approval by the UK Parliament of any Article 50 TEU notice to be given or an ultimate decision by the Supreme Court of the United Kingdom on that point.
Another “constitutional” issue which is currently controversially discussed is what happens if the UK Government or UK Parliament changes its mind about a Brexit during the two year withdrawal negotiation period.

For a long time it had been the widely held view across Europe that any termination notice by the UK Government to the European Council cannot be revoked unilaterally since the wording of Article 50 TEU is said to be clear – it does not provide for a revocation right and provides that the termination notice kick-starts the two years negotiation period which automatically results in the relevant Member State leaving the EU after such two years unless an extension of the two year period is agreed unanimously by all Member States, and since Article 50 (5) TEU provides that any rejoining of the EU after withdrawal needs to take place pursuant to Article 49 TEU. This view has, for example, been set out in a research paper of the European Parliament published in February 2016.

In contrast to that view , on 4th May 2016 the European Union Committee of the House of Lords issued a report in which it proposes a contrary legal view that a withdrawal notice can be revoked unilaterally during the two years negotiation period. This report is based on a public evidence session which the committee held with Sir David Edward, QC, and Professor Derrick Wyatt, QC.

It should be noted that neither report discusses whether and to what extent Article 68 of the Vienna Convention on the Law of Treaties – which provides that certain notifications which target at ending International Treaties may be revoked at any time before they take effect – could become relevant for the interpretation of Article 50 TEU. In addition neither report considers how Article 50 TEU should be interpreted, in the light of the autonomous approach which the Court of Justice takes in respect of interpreting and applying European law independent from the individual domestic approaches of EU Member States and independent from international law and which might disregard Article 68 of the Vienna Convention. This is because the Court of Justice would argue that the European Union is a constitutional Union which exists outside of and beyond mere international treaties (see for example Opinion 1/91 of the Court of Justice of 14 December 1991).

Again, one potential course for proceedings in front of the Court of Justice could, depending on the circumstances, be Article 263 of the Treaty on the Functioning of the European Union (TFEU). This could arise in the context of an infringement of the EU Treaties by the Council, the Commission or the European Parliament in adopting acts implementing such withdrawal of the termination notice, or, in any event, the Preliminary Ruling proceedings pursuant to Article 267 TFEU as set out above.

Brexit and the Impact on UK Infrastructure

Infrastructure is one of the UK’s most vital sectors and, like all other considerations surrounding the consequences of the vote to leave the European Union, lies in a state of uncertainty. EU investment to UK infrastructure has been significant since membership began – including a huge £16 billion over the past three years alone – and would no doubt be a big loss to the UK if it were to be withdrawn completely. Generally, most commentators agree that one certainty following Brexit is a delay to the completion of a number of projects and the security of further funding, while the most crucial factor to address is the form of trade agreement to be negotiated. Robin Baillie, Stefanie Atchinson and Lydia Taylor evaluate such consequences and possibilities in our most recent article “EU Referendum: Brexit and the Impact on UK Infrastructure”, while attempting to explain the possible legal ramifications that the country may face in due course.

You can read the full article on our website.

Webinar: How will Brexit affect the Plastics Industry?

Last week, partners from a number of our practice groups hosted a webinar to members of the British Plastics Federation on how Brexit will affect the Plastics Industry.

Paul Anderson, Aline Doussin, Carl Rohsler and Supinder Sian reviewed the impacts on trade, immigration, financial services & contracts and intellectual property.

Click here to see the full webinar.


Brexit Webinar: What could happen to my IP rights?

On Tuesday 19 July, Squire Patton Boggs’ IP specialists Florian Traub and Carl Rohsler ran a webinar for clients entitled ‘Brexit: What could happen to my IP rights?’.  They discussed how IP protection in the UK might be impacted by Brexit and suggested changes that could be made to IP protection strategies.

Please click here to listen to the webinar recording in full.

Brexit – Universities facing uncertain times.

Brexit UK EU referendum concept for out of Great Britain from rest European union and handwriting text what next written in chalkboard with chalk on flag, close up

Of all the tweets I saw the morning of June 24th, the one which lingers long in my memory was a picture of an empty lecture theatre bearing the caption “meanwhile at the 9am EU law lecture”.

In reality the issues for universities arising from the Brexit vote are much wider than whether they continue to teach EU law as part of their law degree syllabuses.  The issues affect almost every aspect of university life from student numbers (and funding) to staff mobility to EU research funding and collaboration opportunities.

Whatever happens in the long term post Brexit– the biggest issue currently facing universities is the uncertainty and the impact that has the ability of both students and universities to plan for the future.

EU student recruitment

Students are understandably concerned about applying for and starting courses now, which they may not be able to finish or which might cost them significantly more (with no or reduced financial support) before they can graduate. The Higher Educations Statistics Agency (HESA)  reported in 2014/15  that studying in UK universities were 78,435 undergraduate students and 46,230 post-graduate students from the EU (excluding the UK).  This equates to 5.5% of the total student population (8.9% in Scotland where EU students are eligible for free undergraduate education in the same way as Scottish students).  If EU students planning their futures look for more secure and less risky alternatives elsewhere in the EU and consequently do not take up their places for the next academic session – this could leave UK universities with an immediate shortfall (although many of those places will probably be taken up through clearing by UK students, assuming of course they have the academic grades).

Staff mobility

The bigger issue is probably the longer term recruitment of both students and staff.  Approximately 14% of academic staff in UK universities are nationals of other EU member states.  Free movement of workers was probably the key “political” reason for the Brexit vote and will be a fundamental issue in negotiations to secure our Brexit. If ultimately the politicians agree a deal which does not include free movement of workers the reality is that leaving the EU will reduce the numbers of academic staff from elsewhere in the EU coming to the UK due to the challenges (real or imagined) of securing a visa.  True, as with the students, those roles could be backfilled by UK nationals but the question will remain as to whether UK universities are able to attract and retain the brightest and best especially against a background of talented researchers ‘following the money’ to the EU and elsewhere.

Financial impact

Alongside the potential threat to university finances from reduction in student numbers is the far bigger threat from the removal of EU funding, with the BBC recently (on 5 July) reporting that European academic bodies are already pulling back from research collaboration with UK academics due to the uncertainty about what the future may hold.  (The decline in EU student numbers  may in any event be overshadowed by the reintroduction of controls on student numbers which may occur if, (as is widely feared) the country goes into recession.)  The optomists amongst us might suggest that the Government will redirect some of the money it is no longer paying to the EU into the Higher Education sector but in times of recession, there will be many other claims on that funding (not least the NHS who may not, we now discover, be getting the whole of the EU contributions  but is likely to get at least some of that money).

So the UK Higher Education sector is (like the rest of the UK economy) facing very uncertain times.  The key difference for the sector is that it can’t continue to say, as many businesses are doing, “it is business as usual” unless or until the button is pushed on Article 50. Universities are long term organisations and  no longer  have that  luxury, now that European Academic bodies have effectively pre-empted the Article 50 process and started their own separation process.