Is my contract BREXIT-Proof?

The negating referendum vote about the continued membership of the UK on June 23, 2016 was a real thunderbolt for the entire European Union. There is a high degree of uncertainty and disruption. No one knows for sure what the political, economic, social, and last but not least, legal consequences of Brexit will be. The UK and EU will need a lot of time to negotiate the exit provisions. This is an attempt to illuminate the nebulous situation for commercial contracts.

First of all, in all likelihood, the Brexit is not going to have a fundamental impact on the most recent contracts. Those will survive and continue to operate post-Brexit.

In particular, there is a reasonable degree of predictability that the Brexit has no material effect on a contractual choice of English law clause. Such agreements are likely to continue to be upheld by the courts in England and the EU. If, however, a contract does not have a choice of law clause, the contract parties should be aware that English courts and EU courts will follow different paths to determine which law applies to a contract in the future.

In addition, the choice conferring jurisdiction on the English courts as well as an arbitration clause, are likely to continue to be respected in England and in the EU. Without a choice of venue clause, the legal situation may change. It will depend on the upcoming agreements between the UK and EU and whether the presently applicable Brussels Regulation will be upheld in the future.

This situation demonstrates perfectly how important it is for contractual parties to agree on the applicable law and jurisdiction for their agreement and clearly express it in their contract. Also the parties may be advised to clearly state if the choice of venue is exclusive or non-exclusive.

Though most contracts will continue to be in force, it is advisable for companies to undertake proactive due diligence on their commercial deals and begin assessing the effect that Brexit may have. For this reason and also for the negotiation of new commercial contracts, the following points could increase in importance. As for trade relations between the EU and the UK, it seems likely that trade barriers may increase. That will cause more costs. In addition, Brexit could have an impact on one's ability to travel. The freedom of UK citizens to travel within Europe and vice versa may be limited. Also, currency fluctuations can be expected in the future, which would affect the overall contract value.

To put it in a nutshell, there is no solid reason to worry about a sudden voiding of existing contracts. Nevertheless, Brexit will require legal caution in handling contractual terms and conditions which BridgehouseLaw LLP is prepared to offer.