Many of us are still getting over the shock of the UK’s unexpected decision to leave the EU. Politicians of all hues in the UK and across the continent, sent into a spin, begin to grapple with the geopolitical and economic consequences. Theresa May’s fledgling UK government starts to contemplate its Brexit negotiation strategy. The role of the EU’s rulebook, which was first consolidated into UK law some 43 years ago and has developed complex tentacles ever since, is in question.
Ambiguity reigns. As Gavin Williams, partner at Herbert Smith Freehills LLP, put it on this blog on 24 June:
“…the full impact of leaving the EU and putting in place something else won’t be known for some years. The devil will be in the detail: there will be winners and losers. The one certainty is that we can expect a period of uncertainty.”
It would be easy, therefore, for the in-house lawyer to fall into the trap of unofficially declaring their own force majeure on all matters Brexit. It may currently feel like future political changes are so unforeseeable as to dissuade action to tackle medium term legal and commercial implications. Beware of this trap for there are many things the in-house lawyer can be doing and, perhaps just as importantly, can be seen to be doing at this time. Building your leadership role now will be critical to shaping the future.
We have written already about some of the important strategic planning that the legal department should be starting now. We have a wide range of Brexit resources for further background. The objective of this post is to supplement these resources by providing some practical material for the in-house lawyer to present to colleagues and prioritise the organisation’s Brexit agenda. This material focuses, firstly, on engagement with senior executives; and, secondly, on fostering inter-departmental dialogue around key Brexit-related risk areas. We hope this material will help distinguish the legal counsel as someone uniquely placed to connect other functions and drive future enterprise change. Of course, this is intended as a generic starting point for tailoring and supplementing as you see fit. Your business will face unique challenges which you will need to think about in depth and our more detailed Brexit resources will help you. For instance, those lawyers supporting banking clients will be preoccupied with passporting.
The overall aim here is to encourage you to see the Brexit challenge as an opportunity for you to develop as one of your organisation’s eminent thought leaders on the subject. Saying and doing the right things now will enable you to become an influential voice when the political and legal horizon becomes clearer.
Engagement with senior executives
No two businesses are the same and you will need to have very specific considerations for your organisation. However, there is a raft of general guidance which you can provide to the board and senior executives. Above all, it’s certainly not too early to be seeking to persuade senior management to start a thorough due diligence programme focused on assessing Brexit-related risk or to steer such a programme if one has already started. The exercise might entail: examining business conducted by subsidiaries located in the UK and in different continuing member states; considering reliance on continuing EU or UK market access or authorisation under EU or UK regulations; and examining supply chains that would potentially be affected by the re-emergence of tariffs and other trade barriers either with the EU or in other jurisdictions.
Post-referendum economic changes in the UK, including the fall in value of sterling, should also be considered. Businesses should consider reviewing existing commercial agreements to check the impact of the potential repeal of EU legislation or future trade barriers. The risk of losing key staff (who may lose their rights of free movement) must be considered too. Once this due diligence process has been started there is a further set of practical steps which you should contemplate steering the business through. In particular, the business might start building a lobbying strategy to attempt to directly or indirectly influence how Brexit plays out. We have summarised these steps in a brief PowerPoint slide for you to present to your senior executive team.
Fostering inter-departmental dialogue
Now is the time to start the Brexit conversation with interested parties in the other core functions of the enterprise. Whilst, politically-speaking, the Brexit roadmap is far from clear, responsible business units should start to think through scenarios, even the “worst case”, because there may be substantial or even existential threats to some business models which need due foresight and consideration. There may also be opportunities to think about too. The legal counsel is uniquely placed to assume the role of Brexit subject matter expert and sounding board.
For Finance teams you can focus the conversation on currency fluctuations, the UK government’s economic stimulus measures and the potential future implications for tax regimes and their impacts on trade. See a brief PowerPoint slide for you to discuss with your Finance team.
The implications of Brexit for employment law are potentially profound. For Human Resources teams the main talking points will be the strong likelihood of the repeal of the EU-derived Agency Workers Regulations 2010 as well as the future impact on freedom of movement for EU nationals in the UK and UK nationals in the EU. It is important to stress a watching brief in this area rather than any immediate change of staffing strategy – free movement of workers remains for the foreseeable future and will be a sensitive focus area in political discussions. See a brief PowerPoint slide for you to discuss with your HR team.
Any conversation with Privacy professionals will focus on the forthcoming EU General Data Protection Regulation (GDPR) for which preparations should already be being made. See our detailed article and practice note. GDPR will become law in the UK on 25 May 2018, long before any political Brexit takes place. For continuity, any successor UK data protection regime will almost certainly dovetail closely with the GDPR. See a brief PowerPoint slide for you to discuss with your Privacy colleagues.
Where the protection of intellectual property forms a substantial part of business strategy due to a heavy focus on R&D, design, production or publishing you should be ready to steer on the possible future implications for trade marks, designs, copyright-protected material and patents. See a brief PowerPoint slide for you to discuss with your colleagues in these areas.
Finally, those business teams responsible for managing commercial relationships and the promotion of the business – in particular, sales, marketing and procurement – can be helped at this time by gaining insights into the possible Brexit landscape in terms of impacts on commercial contracts, competition law and data protection. See a brief PowerPoint slide for you to discuss with your colleagues in these areas.
All of the slides referred to in this post may form the basis of a presentation to senior executives and departmental heads and are available as a single set of PowerPoint slides.