These are the key legal issues facing Irish firms as the Brexit clock ticks
From immigration to contracts, there are a string of areas in which companies need to be prepared.
THE UK HAS pressed the go button on Brexit - and despite Theresa May and Enda Kenny’s reiteration of desires for a ‘seamless’ and ‘frictionless’ Border, a hard border of some kind appears increasingly likely.
Nevertheless, it should not be overlooked that Ireland is well positioned to benefit from Brexit.
Minister for Finance Michael Noonan was recently reported as saying that more than 120 overseas banks, insurers and other financial companies were considering moving to Ireland post-Brexit.
The Irish market is also performing strongly, with a recorded €5.75 billion trade surplus in January 2017 and GDP growth forecast at 3.5% for 2017.
However, uncertainty surrounding Brexit means that companies will need to consider the impact of Brexit (good or bad) on their business, including any specific potential impacts on their current business models and strategies.
Contract reviews
While the future UK/EU trading relationship is unclear, contingency planning involving contract reviews should start immediately. Key issues to consider include reviewing strategic contracts where there is a dependence on UK trade and where pricing mechanisms are in place that assume no tariffs, quotas or other barriers.
The changed commercial landscape may also cause some contracting entities to look for ways to exit from contracts that are no longer profitable.
Immigration
The British government has made it clear that it intends to control immigration. While there is talk of amnesties for EU citizens currently working in the UK and UK citizens working in the EU, any barriers to the free movement of people will have a disproportionate effect on Ireland.
Irish and EU citizens will no longer enjoy an automatic right to travel and work in the UK and vice versa, meaning greater bureaucracy in recruitment.
Employers will need to consider Brexit when agreeing recruitment terms or cross-border secondments of employees and should also audit the extent and immigration status of their migrant workforces.
Competition
Post-Brexit, EU competition laws will cease to be applicable in the UK. The UK will have its own competition laws that will require compliance from Irish companies trading with the UK.
This could add a cost burden for businesses and necessitate longer time frames for UK merger control clearance.
Probably of most significance, EU laws on state aid will no longer be applicable in the UK, which would increase the ability of the UK government to support UK businesses financially to the detriment of competing Irish and EU businesses.
Equally, however, the UK would have limited ability to challenge state aid granted to Irish and EU companies that affects the UK market.
Data protection
A new European General Data Protection Regulation (GDPR) will be implemented in May 2018. As an EU Regulation, the GDPR will be directly effective on all EU member states, however it will no longer apply to the UK on post-Brexit.
On exit, personal data transfers to the UK, will be subject to the same restrictions as any other non-EEA countries, such as the US, and will need to meet the ‘adequate safeguard’ standard required for those data transfers to be lawful.
Companies should identify which systems and servers are located in the UK; which entities and operations transfer personal data to the UK; and where UK operations access personal data held elsewhere in the EEA.
Many transfers outside the EEA currently rely on alternative mechanisms to implement the ‘adequate safeguard’ standard, such as model contracts and binding corporate rules.
However, these mechanisms may not be suitable in the long-term given the level of trade and data transfers that take place between the UK and Ireland.
In this regard, the UK may seek to agree with the EU other alternatives, such as for the EU to recognise the UK’s data protection regime as providing an adequate level of data protection.
In summary, Irish companies that have a dependence on UK trade would be well advised to begin reviewing of their operations as a matter of urgency to effectively manage risk.
Sean Ryan is a partner in Eversheds Sutherland’s corporate and commercial department, and the chair of its designated Brexit unit.
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