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Brexit update – the legal impacts of leaving the EU

While the road to Brexit is filled with twists and turns, one thing is for certain: our exit from the EU will affect everyone's legal position.

While we are not proposing to go into the politics here, we have set out below the likely long term legal impact by sector:

HIGH IMPACT: Financial services, immigration, competition law, data protection, environment, energy, IP, life sciences, dispute resolution, public law, agriculture

MEDIUM IMPACT: Business crime, commerical, corporate, finance, tax, employment, media, insolvency, pensions, local government

LOW IMPACT: Arbitration, construction, private client, property, shares schemes, planning 

Many co-ops will be in the “high impact” sectors, including agricultural co-ops and community energy providers, along with community development financial institutions (CDFI) and all co-ops where competition law is an issue (consumer societies, for example). Any organisation in these sectors needs to keep a watching brief on the situation. 

Where sudden change is unlikely 

The overall legal position is that “EU-derived domestic legislation, as it has effect in domestic law immediately before exit day, continues to have effect in domestic law on and after exit day.” (EU Withdrawal Act).

Some EU rules have been put into force with UK Acts or Statutory Instruments (such as the Competition Act 1998).  Some EU rules have “direct effect”. All of the applicable law on 29 March will still apply after what the EU Withdrawal Act terms “exit day”. 

The EU Withdrawal Act seeks to ensure that the legal position on the day after Brexit – or the end of any transition period, i.e. 31st December 2020 in the draft withdrawal agreement – is the same as on the previous day.  But, with no further modifications from new EU law, court cases, or directives. This has been described as taking a “photo” of EU law on that day, and incorporating into UK law. 

What all this means in practice is that there will be no sudden changes to the rules on State Aid, or competition law, or TUPE, or any of the other provisions which have come into our laws because of EU membership. 

In commercial law, EU law has had a significant effect on the following areas of commercial law: advertising and marketing, commercial agencies, consumer, distribution, e-commerce, outsourcing, product liability and labelling and supply of services. Our best guess is that these areas are unlikely to change in the short term, as they are well embedded in UK law. 

Where major changes may happen 

In two sectors in particular, we are likely to see very major changes to the legal landscape in the medium term. 

The Common Agricultural Policy (CAP) is written into European Communities Act 1972, which was the Act which transposed EU law into the UK. In the UK, EU farm subsidies currently make up around 50-60% of farm income. This means that, regardless of the shape of the future EU-UK relationship, the UK will need to replace CAP with its own farming policy and support system. 

The UK’s future trading relationship with the EU could also have a major impact on the extent to which the government could, or would, seek to deregulate environmental policy post-Brexit. The UK would need to comply with, or seek to adopt measures equivalent to EU environmental standards in order to continue to trade freely with the EU. 

The impact on contracts

There is already a significant impact on the practicalities of commercial contracts, particularly if they are international in scope – what if Brexit means you want to bring a contract to an end because it isn’t viable any more? The consensus seems to be that it is unlikely that a standard “force majeure” clause will be triggered by Brexit in the absence of wording specifically contemplating Brexit or a reasonably analogous event.  

The parties might do so by adaptation of provisions that often or even usually appear in commercial contracts, or they might include specific "Brexit clauses", that is, contract clauses that trigger some change in the parties' rights and obligations as a result of a defined event occurring.   

In summary, the best advice is to prepare for uncertainty – the future is (still) far from clear. 

We have worked with our lawyers Anthony Collins Solicitors to produce this blog to keep our members up to date with the latest legal developments to affect co-operatives. If you have any questions about this content, please contact the Advice Team at [email protected]

Written by Anthony Collins Solicitors
Updated: 03/07/2019