Contracting post brexit

Brexit continues to be a hot topic. There is still a great deal of uncertainty about when Brexit will take place and what the consequences of Brexit will be.

From a legal point of view, quite a few things change after Brexit. But what will Brexit particularly mean for existing contracts and the parties to these contracts from a Dutch legal perspective? At the moment it is still unclear what exactly will change with respect to contracts, but it is to be expected that uniformity, predictability and (legal) certainty will be lost in part.

Brexit and existing contracts

A contract concluded before Brexit that is effective is - and will remain - in principle binding, unless the parties have specifically included a provision in the contract pursuant to which the contract will be terminated in the event of a Brexit. In view of the parties' freedom of contract, the parties may arrange anything in this respect.

For existing contracts, there is no risk that the rights and obligations laid down in the contract will cease to exist upon Brexit becoming effective. It may be recommendable for parties wishing to enter into new contracts in the short term (i.e. before Brexit becomes effective) to include a provision on the basis of which a party can terminate the contract if Brexit has specific negative consequences for this party.

For contracts that have already been concluded, it will be advisable to consider in due course whether adjustments are necessary. Issues that require attention in this context include the territorial scope of contract terms. This could include a territorial non-competition clause or territorial demarcation in distribution or agency agreements. After all, if such are included in the contract with the European Union as its territorial scope, the United Kingdom will no longer be included after Brexit. The wording of these clauses will then have to be changed.

Jurisdiction, recognition and enforcement of judgments and applicable law

There is uncertainty not only about the content of contracts, but also about applicable law, jurisdiction and the enforcement of judgments. What does Brexit mean for the two main EU regulations Brussels I-bis (on jurisdiction, recognition and enforcement of judgments in civil and commercial matters) and Rome I (on the law applicable to contractual obligations)?

At present, the Brussels I-bis and Rome I Regulations provide uniform rules on jurisdiction, the recognition and enforcement of judgments and applicable law within the European Union for Member States of the European Union. If no contractual agreements have been made on these subjects, Brussels I-bis and Rome I determine which court has jurisdiction and which law applies. Following the withdrawal of the United Kingdom from the European Union, both regulations will cease to apply.

After Brexit, the courts may, in determining jurisdiction in cases involving the United Kingdom, invoke existing bilateral and multilateral treaties between Members States. With the introduction of EU law, these treaties between Member States became 'superfluous'. However, now that Brexit is to go ahead, these old treaties will be 'revived' between contracting parties if the United Kingdom ceases to apply EU law and the courts can then apply these 'old' treaty rules.

It is therefore advisable to clearly establish the competent court and the applicable law by contract. If the law of a country that remains a member of the European Union is chosen, this offers more certainty in dispute resolution than if English law (or the law of another jurisdiction within the United Kingdom) is chosen.

Product liability clauses in contracts

After the United Kingdom leaves the European Union, the situation concerning product liability will change if a contracting party from the Netherlands or any other Member State imports products from the United Kingdom. After all, this party will then no longer import a product from within the European Economic Area, but from a country that is no longer part of it. This means that certain rules concerning product liability and damage claims as they apply within the European Economic Area no longer apply.

In order to prevent the risk of certain damage claims, it is advisable to regulate 'damage resulting from a defect in a product' by contract. In this respect, it is advisable to include indemnity clauses in contracts with suppliers from the United Kingdom.

Data protection

After Brexit, personal data may no longer be shared with the United Kingdom, and contractual agreements that require this cannot be complied with. The rules that currently apply to the exchange of data with third countries will, after Brexit, apply to the United Kingdom, which will then become a 'third party'.

This could be avoided if the European Union issued a so-called adequacy decision for the United Kingdom, allowing personal data to be transferred without additional safeguards. For this to happen, the United Kingdom will first have to be classified by the European Commission as a 'country with an adequate level of protection'.

Se puede contactar: