Brexit Desk

Four years after in the Brexit referendum a small majority of voters (51.89%) voted in favour of the United Kingdom (UK) leaving the EU, the UK officially left the European Union (EU) on 31 January 2020. Just 1 week before the end of the transition period, the EU and UK reached an agreement on 24 December 2020. This Trade and Cooperation Agreement (TCA) sets out the rules on the new partnership between the EU and UK that apply from 2021. The TCA includespreferential arrangements in areas such as trade in goods and in services, digital trade, intellectual property, public procurement, aviation and road transport, energy, and fisheries. The TCA was signed on 30 December 2020, was applied provisionally as of 1 January 2021 and entered into force on 1 May 2021.

Otherwise than expected, the TCA has not resulted in calming the waters between the EU and UK. The first year of the agreement was characterized by quarrels between the EU and UK about the application of the Northern Ireland Protocol, ensuring that the EU free movement of goods rules and EU Customs Union rules remain applying in Northern Ireland, as a result creating a de facto customs border down the Irish Sea for customs purposes. Also, there have been frequent rows between in particular France and the UK about fishing rights and licenses.

UK-EU goods trade volumes fell sharply after the TCA came into effect, and remain below their pre-Brexit (and pre-pandemic) levels in 2019. Especially small and medium-sized businesses have reported a marked drop in exports to the EU, caused by delivery delays and increased costs as a result of new customs requirements. The terms of the TCA are yet to be implemented in full, meaning trade barriers will rise further as more of the deal comes into force. For example, the introduction of full checks on UK imports has been delayed until 2022.

Brexit has resulted in a surge in UK companies moving to the Netherlands. There are several different ways in which Brexit-impacted companies move to the Netherlands:

Relocate activities to the EU market. This will likely include setting up a legal entity or headquarters. This can also include moving a particular production line or logistics operations to the Netherlands;
Expand existing activities directed to the EU market in the Netherlands, and downscaling those in the UK;
Set up a European headquarters that covers all European, including UK, activities;
Open an EU office, allowing it to reproduce services for the EU market.

With the continuing uncertainty surrounding Brexit, e.g. the risk that theUK government triggers article 16 of the Northern Ireland Protocol andretaliatory measures of the EU, for you exporting goods or services from the UK to the EU or having business partners or a company in the UK it is important to be well prepared against economic disruption caused by Brexit.

The BUREN Brexit Desk team closely monitors the developments regarding Brexit. They can inform and advise you about the latest developments and help you implement changes further to new laws and regulations.

Below you will find links to publications of our Brexit Desk. They will tell you which measures could apply to you and contain practical advice.

Key contacts

LEGAL ADVICE BREXIT DESK

Our experts can of course also assist you if you are affected by the consequences of Brexit. We can assist you with questions such as:

Financial law & investment management
Brexit will have a significant impact on the position of financial institutions in the Netherlands. After the transition period, licensed financial institutions established in the Netherlands (such as investment firms, managers, banks and insurers) will no longer be able to use a European passport. The rules on the outsourcing of activities by Dutch financial institutions to service providers established in the United Kingdom will also be affected. It could be necessary to use the “Temporary Permissions Regime” offered by the UK Financial Conduct Authority or to provide services in the UK via another route. Do you have any questions or do you need guidance? Please do not hesitate to contact one of our financial law specialists, they are up-to-date with all developments.

Tax law
One year after the Brexit Transitional Period expired on 1 January 2021, the impact of Brexit is still noticeable for businesses doing business in and from the UK to the EU and vice versa. The impact is mostly noticeable for taxes that are harmonised on European level for instance for value added tax, social security and custom duties. The UK is considered a third country (i.e. non-EU) whereby business in principle have to deal with UK and EU customs regulations when importing or exporting goods. The aforesaid also resulted in that North-Ireland businesses widely redirected their trade routes to Ireland instead to the UK.

Furthermore, the European Directives (e.g. Parent-Subsidiary Directive and the Interest and Royalties Directive) are not applicable anymore that may result in the loss of certain benefits for businesses doing businesses in and from the UK to the EU. Our tax law specialists closely follow the post-Brexit developments and can advise you on European and Dutch tax and customs issues.

Employment law
Your company has a branch in the UK. What does Brexit mean for the people employed in or seconded to the UK? Should these employees be recalled? And what if British employees are employed by your company in the Netherlands or temporarily working for your company on secondment? Do you have to take action?

Employers should prepare for Brexit by identifying the types of employees/independent workers working within their company. Depending on the outcome of the negotiations on a trade agreement between the EU and the UK, Brexit could have significant labor law implications. This includes the free movement of employees, the freedom to provide services, social security rights, employment conditions (relating to seconded employees), pensions, etcetera. Our employment law specialists can assist you with these issues.

Commercial contracts and disputes
A central element of the Trade and Cooperation Agreement (TCA) is that it provides for zero tariffs and zero quotas on all goods traded between the UK and the EU, provided that they comply with the appropriate rules of origin. The TCA rules of origin requirements are intended to prevent that third country suppliers circumvent EU import tariffs and quotas by using the UK to import their commodity in the EU and visa versa. Only goods that originate in the UK or EU will be tariff free and businesses will need to claim preference on declarations, including holding proof that the goods meet the rules of origin.

The TCA, however, does not eliminate the need for customs declarations for EU trade across UK borders nor the requirement to meet EU product standards and labelling requirements. Although the majority of existing EU product standards will initially continue to apply in the UK, changes are necessary to labels and other documentation to reflect that the UK is not a EU member. On 1 January 2021, the UKCA mark was introduced as a replacement for the CE mark for goods sold within Great Britain. To allow businesses time to adjust to the new requirements, they will still be able to use the CE marking until 1 January 2023 in most cases. The CE mark will continue to be required for goods sold in Northern Ireland. It may also be expected that in due time the product standards for some products will start to deviate in the UK from those applied in the EU.

In addition, it is important to consider provisions on dispute resolution. At the end of the transition period on 1 January 2021, the EU Brussels (Recast) Regulation ensuring that parties' contractual choice of jurisdiction is enforced and that judgments from the courts of member states are recognisable and enforceable across the EU ceased to apply in the UK. The UK applied to join the Lugano Convention in April 2020. The Lugano Convention regulates jurisdiction and the enforcement of judgments as between the EU, Switzerland, Norway and Iceland in a similar way to intra-EU rules. However, the European Commission, representing the EU, has since blocked the UK's accession. This means that for the time being commercial parties will have to navigate the requirements of different national regimes. For contracts with the Netherlands, the parties may rely on The Hague Choice of Court Convention 2005, which stipulates that if a court has jurisdiction on the basis of an exclusive choice of court agreement, the judgment given in those proceedings is enforceable in all contracting states. For monetary claims the parties may also rely on the 1968 Convention between the Netherlands and the UK for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters and for Convention of 30 June 2005 on Choice of Court Agreements. On 16 July 2021, the European Commission published a proposal recommending that the EU accede to the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments. This Convention is intended to establish an international framework for the recognition and enforcement of judgments. However, it is anticipated the ratification process will take a considerable amount of time. This means that you will have to consider which forum is competent to resolve disputes. Our legal specialists closely monitor all developments. They can advise and assist you in negotiations and disputes.

IP / IT and GDPR
Patents will not be affected by Brexit, as the UK remains a full party to the European Patent Convention. From 1 January 2021, EU trade marks (EUTM) are no longer protected in the UK. Further to the Withdrawal Agreement Act, on 1 January 2021 the UK Intellectual Property Office created a comparable UK trademark for every registered EUTM. These have the same legal status as if you had applied for and registered it under UK law, keep the original EUTM filing date, keep the original priority or UK seniority dates, and are fully independent UK trade marks that can be challenged, assigned, licensed or renewed separately from the original EUTM. A similar regime applies for EU registered designs.

In terms of privacy, on 28 June 2021the European Commission adopted two adequacy decisions for the UK - one under the General Data Protection Regulation (GDPR) and the other for the Law Enforcement Directive. Personal data can now flow freely from the EU to the UK where under the UK GDPR it benefits from an essentially equivalent level of protection to that guaranteed under EU law. Our IP / IT and AVG specialists can advise and help you with any questions you may have.

Mergers & Acquisitions
Brexit has a major impact on mergers and acquisition processes. What does Brexit mean in concrete terms for current, completed and future transactions? Can a proposed acquisition be canceled? Can the terms of a transaction be adjusted?

Given all the uncertainties surrounding Brexit, companies from the UK and companies from other European member states will want to guarantee their competitive position and the continuity of their activities as much as possible. A possible safeguard could be making strategic acquisitions or entering into joint ventures between parties from the UK and the EU. Will it gradually become more difficult for companies on both sides to find suitable acquisition candidates or partners? Will acquisition or cooperation processes that have been initiated be completed more quickly?

Our specialists of the Mergers & Acquisitions practice group can advise you on the impact of Brexit on your transactions and how you can best deal with this.