Even during the current global pandemic, it is difficult not to be reminded that the UK left the EU on 31 January 2020, and businesses are supposed to prepare for a “no deal Brexit” ahead of the end of the transition period. This is now fast approaching: 11 pm (UK time) on 31 December 2020. However, uncertainty remains about what if any agreement will be in place by then. There is a very real possibility that the period could end without a deal, and the Prime Minister has urged businesses to prepare for that outcome. The task is vast. Even with a deal, there will be significant changes to navigate. Businesses should therefore take steps to understand what challenges they will need to overcome and their options.
There is no “one fits all”solution. . In this article there are some insights and key questions to ask yourself, to assess how ready you are for the end of the transition.
If you already have a contingency plan, you can test it against our short article. If you are still considering preparing one, or think you will be unaffected, you can use the article to ensure you identify and consider key issues. Please note that most of the issues raised in this article will arise even if there is a trade deal.
At the end of this checklist, we have referred to the UK government website on Transition (click here)
as it remains the best starting point to prepare a contingency plan, even with its current imperfection and uncertainties. (If you sign up to the appropriate Government mailing lists you will receive updates on any new rules. The rules will change and continue to change even after 31 December 2020)
Below are the key points for businesses to review ahead of Brexit.
1. Is your business model fit for purpose?
Whether your business is based in the UK or the EU, you should check national and EU law and regulations to ensure all impacted areas of your business comply. A lot of the focus have been on the import and export of goods and WTO rules,however, other issues such as local regulations (e.g. for professionals and financiers, medical, defence/security industry), legal structures under which a business can or cannot operate in Europe, and the transfer of data also represent a huge part of our economy and should not be neglected.
Those changes could also have financial, insurance, accounting and tax implications for you with the risk of taking on additional liabilities.For example, from 1 January 2021, all companies will need to use ‘UK adopted IAS’ instead of ‘EU adopted IAS’ accounting standards . Both sets of standards will be the same on 1 January 2021. There may be differences later if the UK adopts or amends standards and the EU does not.
2. Check your data transfers
Companies, big or small, should by now have investigated their data flow with EU member states and with the USA. If you have not yet, you should appoint someone within your organisation to take lead responsibility for data protection. For data protection purposes, it is clear that having “a deal” by December 2020 will help the transition while we wait for a decision of adequacy from the EU of our procedures in the UK.
Data protection specialists in the UK are increasingly concerned about this outcome, due to the way the EU recently reneged the arrangements in place with the US as a result of increased control of such data by the national security services there. If we have no deal, it then becomes particularly important to check you have processes and contractual arrangements in place with the person in the EU who sends you personal data (including names or email addresses). Those “senders” could include people in your “head office”. This would still constitute as a data transfer by the head office to a “third country”. Processes of personal data also include those relating to the sale of goods or services, and the monitoring of customer behaviours (including via cookies on websites).
If you do not process any personal data from contacts or clients in the European Economic Area (EEA), you do not have to take any further action.
If you do receive personal data from contacts or clients in the EEA, and you’re a small or medium-sized firm, you should use the UK ICO tool to decide what action to take. You may also wish to be assisted by a lawyer both in the EU and in the UK to review your group requirements.
In the UK, the ICO regularly update their advice so you should monitor changes. For example, recently the European Data Protection Board produced new standard Contractual clauses (as of 12 November 2020) in draft form for which they are consulting until 10 December 2020. More details below.
Actions you may wish to take:
Review your data transfer mechanisms:
- If you use standard contractual clauses (SCCs), you should revise their use in light of the recent Court of Justice of the EU judgment in Schrems II. More SCCs have been created and it is no longer the case that the contract form of these clauses could be left in a drawer without being effectively implemented.
- If you use binding corporate rules (BCRs) with the ICO as the lead supervisory authority, consult the EDPB’s guidance. If you do not have those already, it will be difficult to put them into place by the end of December 2020.
- If you use SCCs, conduct a risk assessment to determine whether these provide sufficient protection within the local legal framework, whether you’re transferring to the United States or elsewhere
- Your privacy policies will require updating in the light of Brexit and the Schrems II ruling. Your business clients and suppliers need to understand the movements of their personal data in and outside of the EU, including your subcontractors. The same applies to the EU as the data protection laws in the UK broadly reflect so far the same rules than in the rest of the EU. You need to know where the UK personal data could go in the chain of exchange of data.
- Review the consent language used around your data collection processes or obtain consent again if you rely on this mechanism to process EU personal data. It’s also unclear whether UK businesses relying on consent (obtained while the UK is still a member of the EU) can continue to do at the end of the transition period
- You may be required to appoint an EU representative (if you do not have an office in an EU/EEA country) and update your privacy notices to include their contact details.
- You may be required to nominate another EU regulator as your lead supervisory authority if you have offices in other EU states and have nominated the ICO as authority.
3. Do your staff require a visa and are you a sponsor?
Short-term stays and business visits should be free of visa requirement. Therefore when going to the EU, and assuming you are not an EU citizen, you will need to check how many days the visits will last and whether there are any further requirements for that country.
In these cases, non-EU citizen employees may need a visa and accompanying documents before travelling.
You will therefore need to check whether your staff are allowed to work in the UK and have the correct visas.
From the UK standpoint, any eligible EEA/Swiss employees living in the UK prior to 31 December 2020 should already registered with the EU Settlement Scheme, The deadline has been extended to 30 June 2021 but it will make more complicated for employer and employees if they don’t register before 31 December 2020. Please contact us if you wish to discuss this aspect.
From 1 January 2021, if your company is not already a sponsor, you will find it difficult to recruit quickly EEA citizens in the UK.
4. UK employees’ ability to work and live in Europe
If your company has an EU presence and you have employees currently working in the EU, the EEA or Switzerland, then UK employers are required to check that they are entitled to work there. :
Any new employees who are UK nationals only and travelling to Europe after 31 December 2020 will be considered third country nationals. They’ll need to get the right permits to enter, stay and work in that member state.
There will also be the additional issue of EU social security institution to check if your employee needs to start paying social security contributions in that country, as well as in the UK. For more details click here. It should be noted, however, that Portable Document A1 or E101 issued before 31 December 2020 for a period which extends beyond 31 December 2020 should continue to work provided that the UK does not opt-out of the EU directive and arrangement in place as part of the deal.
Individuals should also consider changing their UK driving licence for a locally issued licence or obtain an international one. Information about national arrangements is available on the European Commission, national authorities and UK Embassies’ websites.
5. Providers of websites, domains and IT services
Providers of IT services, including websites hosted in Europe may not be able to continue servicing you after 31 December 2020. Also, registered “.eu” web domain ceases to be available to UK registered owners. You should review the terms and conditions of your IT providers and contact them to discuss options.
6. Intellectual property
From 1 January 2021, the rule to register EU/community trademarks will change for UK businesses particularly for those who intend to operate in the EU. If you already have IP rights registered in the EU, you should check that they are automatically and correctly transferred with the UK Intellectual Property Office. This should occur automatically without the need for the application.
When you applied for an EU trademark and the application is pending before the end of the transition period, you will have nine months to register in the UK any such trademark applications if you wish to keep the original EU filing date for the UK registration purposes.
For all other IP rights due to be created after the end of the transitional period, you’ll need to review how to ensure protection across the EU, and this will be subject to the ongoing UK-EU negotiations.
7. Availability of supplies of goods and services past 1 January 2021
Similarly to October 2019, where it was thought that we would experience shortages in the UK on “exit date” for lack of a deal, it is still advisable to check with your EU suppliers of goods or services if they have put into place contingency measures to ensure timely delivery/performance and, if so, how these measures are reflected in the contractual agreement. Discuss whether terms of contract, including penalty clauses, should be amended.
8. Accounting and VAT invoicing
If at the end of the year, we still do not have a “deal”, then businesses should adjust their billing system to reflect the changes on VAT when invoicing individual clients. There are other tax and accounting aspects to an exit without a deal and you should speak with your accountants.
Another example is that companies who have a presence in an EEA country (with a branch or permanent establishment or a subsidiary), need to check the reporting requirements in that country.
9. Use of EU law and competence of courts
The right to use existing EU law rights (rights derived from EU law and incorporated in the UK legislation, or any such rights which are modified but this is with several conditions to it and those conditions are bound to be subject to interpretation and future court rulings, especially concerning data, discrimination and employment rights) before an English court will remain available to a point and for a while. This is a complicated area of the law and there are bound to be some issues with it.
As to court’s jurisdiction, until 31 December 2020, any action before the EU courts will remain with the court for adjudication under the terms of the Withdrawal Agreement. There will be an issue as to which court is competent after that period but under English law at least, there are common law principles that will favour the explicit choice of the parties to submit to a particular court or arbitration authority.
If you need to use a lawyer to make a claim in the EU, please bear in mind that UK lawyers will no longer have the right of audience in the EU unless they hold another qualification from an EU country, they compliant with the national law in the relevant jurisdiction, including having appropriate professional indemnity insurance.
10. Government site for a sector based analysis of your requirement
We welcome the new government webpages collating by sector Brexit transition and post transition guidance for businesses. It is a great starting point. However, given the volume of materials involved and the complexity of the issues and the urgency with which business need to grasp and act, we are concerned that nothing will be on time. Some law firm are also critical of the information provided and of the guidance given there on WTO and other trade deals signed by the UK.
At D -45, we would still recommend that you fill in the question on that site and then contact us to address the legal issues where you need assistance with as a matter of priority. Click here for further details