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Brexit - the impacts


Brexit - the impacts


Content

1. Brexit 2. Contract and commercial law 3. Employment law 4. Corporate law 5. Capital markets law 6. M&A, Private Equity and Venture Capital Transactions 7. Legal disputes 8. Financial markets regulation 9. Insurance law 10. Antitrust law 11. Taxes and customs 12. Movement of goods/Regulation (including external trade) 13. Intellectual property 14. Data protection 15. Environmental law 16. Energy law

1. Brexit

Brexit - the impacts

The British citizens’ vote in favour of the ‘Brexit’ will have far-reaching political and economical consequences for the European Union. The impact it will have on companies within the EU is not fully predictable at this point and will fundamentally depend on the content and the outcome of the negotiations concerning the arrangements on the UK’s withdrawal. It is clear however, that the decision to ‘Brexit’ creates factual and legal uncertainties.

Which companies are affected?
The EU referendum affects all companies, which are settled or have a branch in a Member State of the EU, and do business with the UK, concerning the movement of goods, persons, services and capital.

What kind of changes should you expect?
The current discussion is based around the question of how long the withdrawal from the EU will take. This depends on when the British government declares its withdrawal. This will be the formal beginning of the negotiations on the terms of the withdrawal, which according to the rules of the EU Treaties, are set out to take two years. This time limit can only be extended upon the unanimous decision of the European Council. At the end of the negotiations, an agreement setting out the arrangements for the withdrawal will be concluded and new agreements concerning the future relationship between the UK and the EU will be reached (so called ‘subsequent agreements’). Both sides will have an interest in maintaining close relationships and in sustaining the many provisions that have proven to be advantageous to both parties, as far as this is possible. In which way and whether at all this can successfully be achieved, is uncertain at this point.

Which areas of law are affected?

In a first analysis, we would like to point out to you the changes that the Brexit could evoke and the areas of law affected.

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Our London Office

Dr Thomas Kuhnle

Lawyer, Partner
7 Pilgrim Street
EC4V 6LB London

Phone +44 20 7002 5335
thomas.kuhnle(at)luther-lawfirm.com

   

York-Alexander von Massenbach

Lawyer
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EC4V 6LB London

Phone +44 207 002 53 48
york-alexander.von.massenbach(at)luther-lawfirm.com

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Dr. Helmut Janssen

Lawyer
Partner
Avenue Louise 326
1050 Brussels

Phone +32 2 62 77763
helmut.janssen(at)luther-lawfirm.com

   

Gabrielle H. Williamson J.D.

Attorney-at-Law (Washington, D.C., Virginia (U.S.A.))
Partner
Avenue Louise 326
1050 Brussels

Phone +32 2 627 7764
gabrielle.williamson@luther-lawfirm.com

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Laurent Massinon

Avocat à la Cour, Partner
Luther S.A., inscrite au Barreau de Luxembourg
Aerogolf Center, 1B, Heienhaff
L-1736 Senningerberg
Luxemburg

Phone +352 27484 658
laurent.massinon(at)luther-lawfirm.com

   

Hervé Leclercq

Hervé Leclercq

Avocat à la Cour, Partner
Luther S.A., inscrite au Barreau de Luxembourg
Aerogolf Center, 1B, Heienhaff
L-1736 Senningerberg
Luxemburg

Phone +352 27484 663
herve.leclercq(at)luther-lawfirm.com

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2. Contract and commercial law

Contract and commercial law

Distribution law
If the UK does not become part of the EEA, in the future, British business partners of commercial agents and distributors could easily exclude post-contractual compensation claims, minimum notice periods, the right to inspect a principal’s books and other German distribution law provisions by way of contract.

Product safety/product compliance
It is currently completely open, whether licences, granted in the UK, to place products on the market (in the automotive, medical product, machine industries, for instance) and for the distribution of goods within the EU will still be recognised as valid or whether this will require new, time-consuming procedures. Likewise, this question concerns goods that are to be exported to the UK and have been granted licences in another Member State of the EU. Within this context, it is questionable, for instance, whether the UK will accept German CE marking in the future.

Supply relationships
If customs duties between Germany and the UK are reintroduced in the future, this could significantly impact the calculations that supply relationships are based on. Apart from Incoterms clauses, an explicit provision regarding customs duties has seldom been agreed on in business relations between Germany and the UK. In some cases, a right of modification or a special right of termination could be conceivable. However, such rights are usually restricted to serious cases.

Volker Steimle
Partner
Luther Rechtsanwaltsgesellschaft mbH
Cologne
Phone +49 221 9937 24820
volker.steimle(at)luther-lawfirm.com

 

 

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3. Employment law

Employment law

If your company depends on sending employees to the UK or if you regularly employ people from the UK, the result of the negotiations on this subject matter will be of the utmost importance to you. In the course of the referendum in the UK, precisely this topic was a significant reason for the people’s decision to leave the EU.

In the future, the UK will not be under an EU-law duty, to upkeep the TUPE regulations in its national law. However, we predict that, even after the Brexit, there will be regulations in the UK providing that, where a company changes ownership, all its employees shall be part of the transfer and therefore become employees of the buyer.

Likewise, a consequence of the Brexit will be that British members of a European works council or a SE works council will no longer have a right to participate in these panels. The other members will no longer have a right to information and consultations planned by the executive board of a British parent company.

We have already mentioned the forthcoming difficult negotiations regarding a right to free movement. The results of the negotiations and the implementation of any future agreements will be crucial in order to determine the extent to which the right of free movement of services and the EU Regulation No. 883/2004 on the coordination of social security systems will continue to apply. This will also determine the extent to which free movement of persons between the UK and other EU Member States can be provided for in international companies.

Prof Dr Robert von Steinau-Steinrück
Partner
Luther Rechtsanwaltsgesellschaft mbH
Berlin
Phone +49 30 52133 21142
robert.steinrueck(at)luther-lawfirm.com

 

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4. Corporate law

Corporate law

A key problem in the area of corporate law is the termination of the freedom of establishment. In the view of the EU Commission, a bilateral agreement with the UK should guarantee the freedom of establishment.

In the lack of a subsequent agreement to the point, transnational mergers, transformations and demergers involving British corporations will no longer be possible.

Due to the withdrawal of the UK from the EU, Societas Europaea (SE) with their headquarters in the UK will lose their legal basis. If future agreements between the UK and the EU do not provide a solution on this matter, these corporations will have to change their legal form.

The, until now, popular foundation of a UK Ltd. with its administrative headquarters in another EU Member State will only be possible in the future, if future agreements include the continued applicability of the incorporation theory (Gründungstheorie) to the UK.

Dr Klaus Schaffner
Partner
Luther Rechtsanwaltsgesellschaft mbH
Leipzig
Phone +49 341 5299 0
klaus.schaffner(at)luther-lawfirm.com

 

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5. Capital markets law

Capital markets law

Until now, prospectus law is mostly standardised throughout the EU due to a regulation and a directive. In the case of an emission, there was a possibility of using a prospectus in the UK by way of notification (European single passport). This will no longer be possible after the UK’s withdrawal, so that (initial) public offerings by an issuer in the UK could require independent approval of the prospectus by the British Financial Services Authority.

The same applies to the funds industry in the areas of distribution of fund shares, safekeeping of fund assets by national depositaries, and the management by capital management companies.

Dr Jörgen Tielmann, LL.M.
Partner
Luther Rechtsanwaltsgesellschaft mbH
Hamburg
Phone +49 40 18067 16829
joergen.tielmann(at)luther-lawfirm.com


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6. M&A, Private Equity and Venture Capital Transactions

M&A, Private Equity and Venture Capital Transactions

It is very difficult to predict the mid- term impact of Brexit to the transaction activity inside the EU. However, one can assume that the uncertainty that is coming with Brexit will lead to a decline of investments in the United Kingdom, at least on the short term. Thus, as the high liquidity of investors is unchanged, other Member States could benefit from this development. Due to the sustained strength of its economy and the attractiveness of the medium sized businesses, Germany could be one of those beneficiaries.

non-listed companies and commercial contracts

In transnational contracts involving a British party, the UK’s withdrawal will terminate the applicability of Regulation No. 593/2008 (EC) (Rome I) on determining which national law applies to contractual obligations in the EU. However, as this regulation contains long-established international principles and in practice, the parties tend to choose the law applicable to their contract, no changes are to be expected in this area of law.

As far as current contractual relationships and pending M&A transactions involving a British company are concerned, the question arises, whether the result of the referendum in itself significantly changes the contractual basis (MAC). This must be individually assessed for the relevant specific relations respectively.

Listed companies

The British Takeover Code (City Code on Takeovers and Mergers) significantly impacted the EU Takeovers Directive. Therefore, changes of law in this area are not to be expected as a consequence of the Brexit.

Dr. Thomas Kuhnle
Partner
Luther Rechtsanwaltsgesellschaft mbH
Stuttgart
Phone +49 711 9338 19193
thomas.kuhnle(at)luther-lawfirm.com


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Brexit: Impact on M&A

Zu rechtlichen und wirtschaftlichen Auswirkungen des Referendums auf Unternehmenskäufe und den Transaktionsmarkt

Auf den Punkt.

Das Votum Großbritanniens für den EU-Austritt hat zu erheblicher Verunsicherung aller Marktteilnehmer über das Markt­umfeld und die Beziehungen UK-EU nach dem Brexit geführt, die auch während der Schwebezeit bis zur Austrittserklärung (und vermutlich sogar darüber hin­aus) fortbestehen dürfte. Auswirkungen ergeben sich aus dem Referendum für alle Bereiche von Unternehmensakquisitionen, entsprechend umfassend müssen Käufer und Verkäufer diese berücksichtigen. Der kontinentaleuropäische M&A-Markt könnte durch den Brexit einen gewissen Aufschwung erfahren, unter anderem deshalb, weil sich gemeinschaftsfremde Unternehmen ihren direkten Zugang zum Binnenmarkt sichern möchten.

Überblick

Die Entscheidung des Vereinigten Königreichs zum Austritt aus der Europäischen Union hat bei allen Marktteilnehmern zu erheblichen Unsicherheiten geführt. Denn dass die Briten sich tatsächlich für den „Exit“ entscheiden würden, erschien den Allermeisten ausgeschlossen.

Mehr als vier Monate nach der Abstimmung ist nach wie vor völlig offen, wie der Austritt Großbritanniens aus der EU konkret von statten gehen soll, und auch die Frage, in welchem Umfang und auf welcher Grundlage die politischen und wirtschaftlichen Beziehungen post-Brexit fortbestehen werden, ist unbeantwortet. Ferner lässt die jüngste Entscheidung des London High Court, Premierministerin May an die offizielle Zustimmung des Parlaments zu binden, bevor das Verfahren nach Artikel 50 in Gang gesetzt wird, die Frage aufkommen, ob nun – wenngleich wenig wahrscheinlich – der „Exit vom Brexit“ folgt, oder ob es jedenfalls nur einen „Brexit light“ geben wird.

All diese Unwägbarkeiten schaffen große Unsicherheit und beeinflussen Unternehmensverkäufer und -käufer in ihren Entscheidungen. Sie müssen versuchen, diese äußeren Rahmenbedingungen bestmöglich zu berücksichtigen. Dies betrifft die Kaufpreiskalkulation ebenso wie die strategischen Planungen für die zukünftige Geschäftsentwicklung des Targets. Entsprechend umfassende Auswirkungen hat das Brexit-Votum damit auf die Durchführung von M&A-Transaktionen.

Auswirkungen der Brexit-Entscheidung auf M&A-Transaktionen

  • Due Diligence
    Käufer müssen im Rahmen der Due Diligence besonderes Augenmerk darauf legen, wie sich der Brexit mittel- und langfristig auf das Geschäft des Targets auswirken wird. Denkbar sind z.B. folgende Themen: Können langfristige Verträge der Zielgesellschaft vom Vertragspartner aufgrund des Brexits außerordentlich gekündigt werden? Ist der Schutz von Patenten und Marken des Targets im Inland unmittelbar gewährleistet, auch wenn bspw. bestehende Unionsmarken mit dem Austritt aus der EU wohl ihre unmittelbare Geltung innerhalb Großbritanniens verlieren werden? Wie kann zukünftig der Datenschutz gewährleistet werden, falls Großbritannien und die EU hierzu keine Regelung finden sollten und Großbritannien damit als sog. „unsicheres Drittland“ – vergleichbar mit den USA – einzustufen wäre? Erhält das Target Beihilfen der Europäischen Union, die im Falle eines Austritts künftig wegfallen würden oder ggf. sogar zurückgefordert werden könnten? Ist der Aufenthaltsstatus von solchen Arbeitnehmern der Zielgesellschaft gesichert, die bspw. sowohl innerhalb Großbritanniens als auch in der EU tätig werden?
  • Fusionskontrolle
    Falls keine neue Vereinbarung mit der EU erreicht werden kann, werden M&A-Transaktionen mit Bezug zu Großbritannien in Zukunft, soweit die jeweils maßgeblichen Schwellenwerte erreicht werden, parallel sowohl von der EU-Kommission als auch von der nationalen Wettbewerbsbehörde (Competition and Market Authority) geprüft und freigegeben werden müssen. Denn das EU-weite Anmeldeverfahren für solche Zusammenschlüsse wird dann nicht mehr den Vollzug des Zusammenschlusses im Vereinigten Königreich erfassen. Dieses Ende des one-stop-shop-Prinzips würde in der Zukunft zu einem signifikanten Mehraufwand für die Beteiligten führen und birgt zudem die Gefahr divergierender Entscheidungen.
  • Foreign Investments
    Bisher steht der britischen Regierung nur die Möglichkeit offen, Erwerbe inländischer Unternehmen durch ausländische Käufer bei Gefahr für die öffentliche Sicherheit und Ordnung (public interest) zu unterbinden, also vor allem bei Investitionen in sensiblen Sektoren wie bspw. der Energiewirtschaft oder der Verteidigungsindustrie und solchen mit Bedeutung für die nationale Sicherheit (sog. national security test). Presseäußerungen von Premierministerin May lassen erkennen, dass sie bei den nächsten Beratungen über die Bestimmungen des britischen Übernahmeregimes versuchen will, ein neues System zu etablieren, das ihrer Regierung bei Unternehmenstransaktionen unter ausländischer Beteiligung post-Brexit mehr Eingriffsmöglichkeiten bieten soll. Dies könnte sogar so weit gehen, dass vollständig neue, restriktive Bestimmungen für ausländische Investitionen erlassen werden, etwa nach US-amerikanischem oder kanadischem Vorbild. Insoweit scheint allerdings die Frage erlaubt, ob sich Großbritannien eine zu restriktive Politik gegenüber ausländischen Investoren künftig wird leisten können.
  • Material-Adverse-Change (MAC) Klauseln
    Soweit noch nicht vollzogene M&A-Transaktionen mit einer britischen Vertragspartei betroffen sind, stellt sich in der aktuellen Situation die Frage nach der Anwendbarkeit von MAC-Klauseln. Dies kann indes nur auf der Grundlage des Wortlauts der Vertragsklausel und der spezifischen Verhältnisse im Einzelfall beurteilt werden. Bereits das Ergebnis des Referendums und die hieraus resultierenden Unsicherheiten als eine wesentliche (nachteilige) Änderung der vertraglichen Grundlage im Sinne eines „MAC“ zu qualifizieren, wäre jedoch ein überaus drastischer Ansatz und wohl nicht effektiv durchzusetzen. Für die künftige Vertragsgestaltung empfiehlt sich daher die Aufnahme entsprechend konkretisierter Vertragsanpassungs- oder -beendigungsklauseln.
  • Spezifische Begrenzung der Verkäuferhaftung
    In der Praxis hat es bereits eine Reihe von Fällen gegeben, in denen Verkäufer ihre Haftung unter einem Unternehmenskaufvertrag insoweit zu begrenzen versucht haben, als sie nicht für Garantieverletzungen haftbar und dem Käufer ersatzpflichtig sein sollen, soweit die zur Garantieverletzung führenden Umstände aus einer veränderten Gesetzeslage infolge des Brexits herrühren. Auch wenn derartige Vereinbarungen über Haftungsausschlüsse aufgrund eines veränderten Rechtsrahmens nicht unüblich sind, dürfte es bei einer allgemein formulierten Klausel für den Verkäufer schwierig werden, im Einzelfall den Zusammenhang zwischen Brexit und Gesetzesänderung nachzuweisen. Hierauf ist bei der Vertragsgestaltung daher besondere Aufmerksamkeit zu richten.
  • Rechtswahlklauseln
    Sollten die Verhandlungen ergeben, dass mit dem Austritt Großbritanniens aus der EU die Geltung der Rom I-Verordnung über das auf vertragliche Schuldverhältnisse anwendbare Recht endet, ergäben sich hieraus im Hinblick auf Unternehmenskaufverträge mit britischer Beteiligung nur geringfügige Auswirkungen. Denn bei solchen Kaufverträgen treffen die Transaktionsbeteiligten regelmäßig ausdrückliche Vereinbarungen über das auf ihr Vertragsverhältnis anzuwendende Recht. Solche Rechtswahlklauseln sind weithin Marktstandard und bieten den Kaufvertragsparteien die notwenige Rechtssicherheit. Aufgrund dieser Vertragspraxis besteht hier kein weiterer Handlungsbedarf infolge des Brexits. Allerdings könnte es – aufgrund einer stärkeren Verhandlungsposition eines der Transaktionsbeteiligten – in Zukunft vermehrt zur Wahl kontinentaleuropäischer Rechtsordnungen gegenüber dem englischen Recht kommen. Dies gilt nicht zuletzt auch deshalb, weil unklar werden könnte, was zukünftig unter „English Law“ zu verstehen sein wird.

Entwicklung des M&A-Markts in UK und Europa nach dem Brexit-Votum

Eine Vorhersage zu treffen, wie sich das M&A-Geschäft entwickeln wird, ist schon aufgrund der Volatilität der Märkte nur unter Vorbehalt möglich.

Auswirkungen für den britischen M&A-Markt
Der britische Markt erlebte unmittelbar nach dem Referendum einen deutlichen Einbruch, erholte sich aber relativ schnell wieder. Eine Eintrübung der Konjunktur erwarten Experten für den Beginn des kommenden Jahres, insbesondere dann, wenn Premierministerin May an ihrem Plan festhalten sollte, den Austritt Großbritanniens im März 2017 zu erklären. Vor allem aufgrund der zu erwartenden Periode der Unsicherheit und eines drohenden Verlusts bzw. einer spürbaren Beschränkung des Zugangs zum europäischen Binnenmarkt erscheint ein merklicher Rückgang des M&A-Geschäfts im Laufe des Jahres 2017 als wahrscheinlich. Eine gewisse Kompensation mag daraus resultieren, dass aufgrund des anhaltendend Wertverfalls des britischen Pfunds einige UK-Targets besonders günstig zu erwerben sein werden.

Infolge einer zu erwartenden Markteintrübung dürfte es demgegenüber zunehmende Aktivität im Bereich distressed M&A und bei der Bereitstellung alternativer Finanzierungsmöglichkeiten geben.

Auswirkungen für den europäischen/deutschen M&A-Markt
Welche Entwicklungen könnten vor diesem Hintergrund der kontinentaleuropäische und speziell der deutsche M&A-Markt nehmen?

Es darf zumindest von einer leichten Zunahme von Investments in den verbleibenden 27 EU-Staaten ausgegangen werden. Dies betrifft Private Equity Investoren wie Strategen gleichermaßen schon deshalb, weil so der Zugang zum zollfreien europäischen Binnenmarkt gewährleistet ist. Von diesen Investments dürften am ehesten diejenigen Länder profitieren, die als wirtschaftlich stark und politisch besonders stabil gelten. Dies trifft auf Deutschland zu und dürfte die Attraktivität und folglich auch die Preise für Unternehmen des „Deutschen Mittelstands“ weiter erhöhen.

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Dr. Johannes C. Becker
Luther Rechtsanwaltsgesellschaft mbH
Köln
Telefon +49 221 9937 25799
johannes.becker(at)luther-lawfirm.com

York-Alexander von Massenbach
Luther Rechtsanwaltsgesellschaft mbH
London
Telefon +44 207 002 53 48
york-alexander.von.massenbach(at)
luther-lawfirm.com

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7. Legal disputes

7.1 Regular (domestic) courts

Concerning the law of civil procedure, the Brexit could impact the jurisdiction of the courts of Member States of the EU and the recognition and enforcement of judgments in relation to the UK. The aforementioned points are regulated by the “Brussels Ia Regulation” (Regulation (EU) No 1215/2012), which applies across the entire territory of the EU.

Crucially, it regulates three areas of the law of civil procedure:

  • The international jurisdiction of the courts of the Member States of the EU. Amongst other things, it declares that where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall stay its proceedings and potentially even decline jurisdiction in favour of that court. (Art. 29 f. Brussels Ia Regulation) This way, it is possible to establish the jurisdiction of German courts (instead of British courts where proceedings may be more expensive), if there is a general place of jurisdiction in Germany according to the regulation.
  • It also regulates that a judgment given in a Member State shall be recognised in the other Member States without requiring any special procedure. (Art.36 of the Brussels Ia Regulation
  • A judgment given in a Member State which is enforceable in that State is enforceable in another Member State, without requiring a declaration of enforceability (Art.39 of the Brussels Ia Regulation)

Concerning the aforementioned regulation, it is questionable whether its content will continue to apply in relation to the UK. The negotiated and concluded agreement on the withdrawal of the UK from the EU provided for by Article 50 s.2 TFEU will have to include a decision on the applicability or non-applicability of the Regulation. In the case of non-applicability, it would be in both the EU’s and the UK’s interests, to reach a corresponding agreement, as the alternative would be the application of national provisions (the private international law of the respective states involved).

In the light of the above, it is recommendable to have judgments, given in other Member States (judgments given by German courts for instance) that you wish to be enforced in the UK (for instance, because the debtor’s only assets are located there), enforced in the near future. Where a company settled in the UK threatens to bring an action, it is also highly recommendable to assert a negative declaratory action in a German court, if a general place of jurisdiction in Germany can be established on the basis of the Regulation. This will trigger the barring-effect of Art.29 ff. of the Regulation, the consequence being that the outcome of the case will be more predictable and the costs of litigation and the lawyers’ fees will be reduced significantly.

Dr. Florian Schulz M.B.A. (Nimbas)
Partner
Luther Rechtsanwaltsgesellschaft mbH
Hamburg
Phone +49 40 18067 18023
florian.schulz(at)luther-lawfirm.com


Dr Stephan Bausch, D.U.
Partner
Luther Rechtsanwaltsgesellschaft mbH
Cologne
Phone +49 221 9937 25782
stephan.bausch(at)luther-lawfirm.com


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7.2 Arbitration courts

The referendum has no immediate impact on current arbitration proceedings. The legal framework for international arbitration proceedings is mainly shaped by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which applies to the UK, even in the absence of its EU-membership. As a direct contracting state to the ICSID Convention of 1965, which created the International Centre for Settlement of Investment Disputes (ICSID) and regulates the enforcement of ICSID-arbitration awards, the UK is also bound thereto, even in the absence of its EU-membership.

Since the ECJ-judgment in the case of Benetton, arbitration proceedings within the EU are subject to core regulations of EU-law by way of ordre public. Antitrust law, for instance, is subject to these regulations. In the case of a Brexit, this antitrust law would no longer be applicable within the UK, but it would still apply to the enforcement of arbitral awards within the EU.

A Brexit would cause so-called anti-suit injunctions, by which injunctions against court proceedings in other EU Member States are meant, to revive. Such injunctions have been held unlawful since the ECJ-judgment in the West Tankers case.

Dr. Richard Happ
Partner
Luther Rechtsanwaltsgesellschaft mbH
Hamburg
Phone +49 40 18067 12766
richard.happ(at)luther-lawfirm.com


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8. Financial markets regulation

Financial markets regulation

Due to the EU financial markets directives, certain credit institutes are able to acquire a ‘European single passport’ whereby, after notification, these institutes are able to use licence for the supply of services obtained in one Member State in other Member States (either by way of transnational supply of services or by way of establishment). If the EU and the UK do not agree on a special arrangement, after the UK’s withdrawal from the EU, it will be treated like a non-member state in the financial markets regulation. The consequence would be, that institutes settled in the UK could no longer operate in the European Economic Area on the basis of a European single passport. Apart from the Alternative Investment Fund Managers Directive (AIFMD Directive No. 2011/61/EU), the EU financial market directives do not provide for a possibility of companies outside the EU to acquire a EU-wide licence.

Furthermore, if the UK does not agree to a special arrangement, institutes based outside the UK will no longer be able to operate in the UK on the basis of the ‘European single passport’.

In the light of the aforementioned, it is important that the future agreements deal with the question whether and in which form there shall be a single licence principle involving the UK in the future. The UK could use the Brexit in order to introduce less stringent regulations for its own market, thereby attracting more business to the UK. In relation to the EU Member States, however, such a strategy has little prospect of success. In the area of financial market regulation, the EU has always strictly ensured that only those non-member states should obtain facilitated access to the financial market of the EU that have a level of supervision comparable to the EU. And even if the level of supervision of the non-member state can easily be classified as high, from a legal perspective, in supervisory terms, dealing with financial market transactions or projects with non-member states remains difficult. Until now, non-member states have sought to overcome these problems by way of subsidiaries licenced across the EU settled in London. This strategy would no longer function after the UK’s withdrawal from the EU. Therefore, it would seem advisable in such cases, to move the company to a Member State of the European Economic Area (e.g. to Frankfurt) or to establish a subsidiary in the European Economic Area.

Ingo Wegerich
Partner
Luther Rechtsanwaltsgesellschaft mbH
Frankfurt a.M.
Phone +49 69 27229 24875
ingo.wegerich(at)luther-lawfirm.com


Dr. Rolf Kobabe
Partner
Luther Rechtsanwaltsgesellschaft mbH
Hamburg
Phone +49 40 18067 24680
rolf.kobabe(at)luther-lawfirm.com

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9. Insurance law

Insurance law

Insurance companies (cf. §§57 ff. and §§61 ff. Insurance Supervision Law (Versicherungsaufsichtsgesetz)) and insurance intermediaries (cf. §§11a s.4 and §34d s.5 Industrial Code (Gewerbeordnung)) of the EU and the EEA are principally bound by the so-called ‘country of seat principle’ and the ‘country of origin principle’. This means that insurance companies and insurance intermediaries only require a licence from their country of establishment or their country of origin, if they are operating or wish to operate elsewhere within the EU/EEA. Insofar, the only step to be taken, is for the supervisory authority of the country of origin to notify the authority in the country they wish to operate in.

The withdrawal of the UK from the EU will render these provisions inapplicable to the UK. If no equivalent agreements were to be reached, insurance companies and insurance intermediaries based in the UK would have to apply for a licence to operate in the EU/EEA and vice versa, insurance companies and insurance intermediaries based in the EU/EEA would have to apply for a licence to operate in the UK.

Dr Alexander Mönnig, LL.M. (Manchester), E.M.L.E.
Counsel
Luther Rechtsanwaltsgesellschaft mbH
Hamburg
Phone +49 40 18067 15453
alexander.moennig(at)luther-lawfirm.com


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10. Antitrust law

Antitrust law

As a consequence of the Brexit, the EU-wide application procedure for mergers with an EU-wide dimension will no longer apply to the enforcement of the merger in the UK. It is imaginable, but rather unlikely, that, the negotiations on the withdrawal of the UK from the EU could result in an agreement to the continued competence of the EU Commission, instead of requiring two separate application procedures, similar to the agreement between the EU and Norway.

As to the right of state aid, the UK will no longer be bound by the provisions in this area of EU law. On the one hand, this will enable the UK to offer more generous subsidies, which would create competitive advantages over European companies, but the Commission of the EU could confront this problem by imposing punitive tariffs on the UK.

Future agreements could also result in close cooperation between the British antitrust authority and the European Commission - similar to the agreement reached between the EU and Switzerland – in order to persecute and punish relevant acts in the area of antitrust law. It must also be taken into account that British antitrust law could contain provisions that differ in content from EU law after the Brexit, which would result in higher expenditure for advisory services and compliance.

Dr Thomas Kapp, LL.M. (UCLA)
Partner
Luther Rechtsanwaltsgesellschaft mbH
Stuttgart
Phone +49 711 9338 12893
thomas.kapp(at)luther-lawfirm.com


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11. Taxes and customs

Taxes and customs

Due to the UK’s withdrawal from the EU, benefits in respect of withholding taxes for dividends in corporations, previously acquired by way of the Parent-Subsidiary Directive (Directive 90/435/EEC), will no longer be available to British companies in the future. Instead, in the lack of a new comparable agreement, tax rates under the Double Taxation Convention (up to 5% instead of 0%) will apply after the Brexit.

Due to the Interests and royalties Directive (Directive 2003/49/EC), no withholding taxes are levied on interest and royalty payments to associated companies. Again, this is an area where the respective provisions of the Double Taxation Convention will apply after the Brexit. This means that if British corporations are part of your entrepreneurial group, the structures for dividends and other payments within the groups will require reviewing in so far as British corporations are involved.

Furthermore, all tax-neutral transnational conversions between British corporations and corporations of other EU Member States will require reviewing. Future and already executed conversions could be affected, insofar as vesting periods within the EU have not expired by the time of the effective date of the Brexit. If you own assets in the UK, they could be affected.

After the Brexit, tax exemptions for intra-Community supplies will no longer apply to supplies to the UK. Therefore, if your company supplies goods from the EU to the UK or from the UK to other Member States of the EU, you should start thinking about the optimal structure for your company in terms of VAT. This topic will most certainly be mentioned in subsequent agreements.

The Brexit will also cause the inapplicability of EU law concerning customs duties and other trade barriers to the UK. If no agreement is reached on this point, both the EU and the UK could impose import duties on goods from the UK/EU.

Ulrich Siegemund
Partner
Luther Rechtsanwaltsgesellschaft mbH
Frankfurt a.M.
Phone +49 69 27229 16364
ulrich.siegemund(at)luther-lawfirm.com


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12. Movement of goods/Regulation (including external trade)

Movement of goods/Regulation (including external trade)

Based on considerations of export control law, the withdrawal of the UK from the EU will lead to a situation, which already exists in the relationship between the EU and the USA: The mostly harmonised export control and embargo laws will no longer apply to the UK; instead, many new, independent export control provisions will have to be introduced, which could considerably differ from the generally binding EU regulations. Especially in the area of state embargoes, it would not be surprising, if the UK were orientated by the USA, rather than by the EU.

This could impact German companies and companies from other EU Member States in the following way:

Where the movement of goods did not require a licence until now (especially for the purposes of the Dual Use Regulation No. 428/2009) licences will have to be obtained in the future, though possibly, and this would be the best-case scenario, a general licence might be obtainable. Nevertheless, exporters should examine in full detail, if and under which conditions the supply of goods and technology to the UK will be permitted.

Furthermore, – similar to the situation of the USA – EU companies, that use British products and technologies in the manufacturing-process of their own goods which are prearranged for resale, or EU companies that have a branch or a subsidiary or a joint venture in the UK, will have to keep an eye on the British export control law, if they wish to avoid criminal liability in the UK due to re-export of British goods and technology. It must under no circumstances be ruled out, that supplies - for instance to Iran or Russia - that are permitted under the EU embargoes, could be forbidden under the British embargoes.

Ole-Jochen Melchior
Partner
Luther Rechtsanwaltsgesellschaft mbH
Essen
Phone +49 201 9220 24028
ole.melchior(at)luther-lawfirm.com


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13. Intellectual property

Intellectual property

Due to the Brexit, EU trade marks would lose their immediate validity within the UK, if no agreement were to be reached on their continued validity. The future of EU trade marks already obtained is uncertain. They could be converted into national trade marks by law or simply be rendered ineffective. In the latter case, additional applications for trade marks according to British law would have to be made. Whether the priority obtained by way of the EU trade mark could still be claimed, is questionable. The same questions also arise in the context of Community Designs.

The impact on licence agreements is problematic. If licence agreements provide for the validity of the licence within the EU or the EEA, the withdrawal of the UK from the EU could cause severe changes. In the UK, such licences would lose their validity. Then, it would be impossible to make intended use of the licences and this would evoke a right to terminate the contract. Furthermore, due to the reduced areal validity of the licences, agreed licence fees would have to be renegotiated.

The Brexit calls the planned standardisation of patent protection throughout the EU in question. The Unified Patent Court was supposed to start work in April 2017 and at the same time, the new European patent (unitary patent) was supposed to come into force with unified validity. It is supposed to guarantee standardised patent protection within the European Single Market. Due to the Brexit, the planned standardisation of patent protection will, at least, be seriously delayed. However, the UK’s withdrawal from the EU will have no impact on European patents and patent registrations without unitary effect, as the UK is a signatory state to the European Patent Convention (EPC). European patents will therefore retain their validity in the UK, despite its withdrawal from the EU, and will have to remain enforceable before the British courts.

Dr Wulff-Axel Schmidt
Partner
Luther Rechtsanwaltsgesellschaft mbH
Frankfurt a.M.
Phone +49 69 27229 27078
wulff-axel.schmidt(at)luther-lawfirm.com


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14. Data protection

Data protection

Due to its withdrawal from the EU, the UK will no longer be subject to the data protection laws of the EU and therefore will be classified – as the USA or India are – as a so-called ‘third country’. EU companies, that transfer data to these countries, must prove, that the data is adequately protected in accordance with the European provisions. However, under which circumstances adequate protection is provably given, is being heavily discussed since the decision of the ECJ on data transfer to the USA on the basis of the ‘Safe Harbour’, reached in October 2015.

Companies based in the EU that export data to the UK will certainly have to adapt their current and future contracts with British companies that are subject to data protection law. If data transfers are performed, despite the lack of a guaranteed adequate data protection level in the country of destination, the involved companies must expect image loss and severe fines from the data protection supervisory authorities.

Furthermore, the UK will not implement the General Data Protection Regulation that will be immediately effective in the Member States of the EU starting in 2018. Whether the UK’s level of data protection, which has already been classified as rather low in comparison to that of other EU Member States, will fall even lower and whether companies with critical data processing (e.g. social media providers, list brokers, or marketing agencies) will make use of this situation by moving their activities to the UK, must be awaited.

Dr Wulff-Axel Schmidt
Partner
Luther Rechtsanwaltsgesellschaft mbH
Frankfurt a.M.
Phone +49 69 27229 27078
wulff-axel.schmidt(at)luther-lawfirm.com


Silvia C. Bauer
Partner
Luther Rechtsanwaltsgesellschaft mbH
Cologne
Phone +49 221 9937 25789
silvia.c.bauer(at)luther-lawfirm.com


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15. Environmental law

Environmental law

The UK’s actual withdrawal from the EU could result in higher administrative demands in the environmental sector for the UK, because many systems of environmental provisions and environmental planning will have to be synchronised. Differing legal regulations and plans between the EU and the UK in this area of law do not only put a strain on the legal certainty of current investments, but also increases the threshold for future investments.

Such effects will not just be felt within the ever-growing area of standardisation, but will also impair companies, that take part in the EU Emissions Trading System, the so-called EU ETS. The EU ETS is the central instrument for reducing industrial greenhouse gases. Furthermore, it is the first important and largest CO2-market worldwide. By withdrawing from the EU, British companies will lose access to this unique common market and will no longer be able to acquire emission certificates. Furthermore, it can not be ruled out, that emission certificates, currently owned by British companies, will be able to be traded within the EU ETS.

As the standard of regulation for environmental protection is a central topic in international trade agreements, the UK, an advocate of free trade, will ironically be confronted with unequal conditions of competition, if globally accepted European laws and regulations are no longer applicable.

Last but not least, the UK will be excluded from the tremendous subsidisation by the EU which the latter grants to companies that signify environmentally friendly and energy-efficient products and services. As a consequence of the aforementioned, the inequality of competition will be advantageous to the EU, so you could benefit from the Brexit in this area.

Dr. Stefan Altenschmidt, LL.M. (Nottingham)
Partner
Luther Rechtsanwaltsgesellschaft mbH
Dusseldorf
Phone +49 211 5660 18737
stefan.altenschmidt(at)luther-lawfirm.com


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16. Energy law

Energy law

The impact of the Brexit on the energy sector can currently not be clearly assessed. It depends on how the relationship between the EU and the UK develops. As it is well known, many scenarios are conceivable.

The German energy providers have predicted a limited impact in first statements. In many respects, energy supply is a national or local matter, so that transnational consequences are limited. Even if the UK loses access to the European Single Market and customs are introduced, a severe price-increasing effect would probably be manageable on both sides, because the exchange of electricity and gas is limited. On the futures markets for electricity supplies in Germany for the front year 2017, the result of the referendum even had dampening effect on prices, in accordance to the dropping prices of raw materials like oil and coal. The effect on the UK could however differ, if the UK becomes dependent on gas supplies from the EU, due to declining gas exploration in the North Sea.

The Brexit could have a severe impact on investments in the UK. Energy supply is capital-intensive. The investment climate for infrastructure and other projects is likely to deteriorate noticeably, because the markups in financing are significant and the EU credit and support programmes will no longer be accessible. For current projects, the development of the exchange rate could prove to be a burden.

The Brexit could influence the generation mix in the UK. A general abandonment of renewable energies projects is not to be expected, because the climate protection aims of the UK are similarly ambitious as those of the EU. However, the UK would no longer be bound by the EU-laws on state aid. So, concerns about the accessibility of European state aid would no longer stand in the way of expanding the use of nuclear energy.

In the area of energy regulation, the political views are in broad agreement on both sides of the Channel; Liberalisation and competitive orientation are also met with vast approval in the UK. However, the UK with withdraw from regulatory important institutions in the EU, such as ACER, ENTSO-E and ENTSO-G and will therefore no longer be able to influence the further development of the regulatory law. The regulation-regimes will therefore probably drift apart eventually and this will impede the reciprocal market access.

If, after its withdrawal from the EU, the UK is treated like a third country in the area of financial market regulation, this will have an impact on the supply of services in energy trade. Institutes based in the UK will no longer be able to work in the EEA on the basis of the European single passport.

Dr. Holger Stappert
Partner
Luther Rechtsanwaltsgesellschaft mbH
Dusseldorf
Phone +49 211 5660 24843
holger.stappert(at)luther-lawfirm.com


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