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What impacts can the potential no-deal Brexit have?

01. 16. 2019

On the market of goods and services, it will be possible to prevent import and reexport of goods and provision of services on the basis of the existence of intellectual property rights in the UK and in the EU. Trade could also be affected by tariffs and different national standards.

Regarding the intellectual property, “clones” of EU trademarks valid at the date of Brexit will be created in the UK. Trademarks not be registered at the time will have to be applied for again. But this does not apply to designs. Participation of the UK in the planned European systems of unitary patents is also endangered. Intellectual property rights will also have a significant impact on the market of goods and services (above).

In connection with the data protection, the UK will become a third country. To transfer data between the EU and the UK, additional safeguards would have to be provided, especially the standard contractual clauses. However these may not be fully applicable to relations between processors and subprocessors. SCCs also impose many obligations.

In the field of public procurement the UK may become „a third country“ or a GPA (Agreement on Government Procurement) party. British contracting entities will cease publishing their notices in the  Official Journal of the EU (OJEU). Access in particular to utilities and defence/security procurement procedures may be significanlty restricted for British companies, at least provisionally. The same applies to Czech companies in the UK.

For multinational entities, it may be necessary to revise both current and planned structures to ensure their operability. Furthermore, UK entities will no longer be able to participate in cross-border mergers and other transformations and potential acquisition activities will be subject to additional administrative procedures.

From a regulatory point of view, meeting conditions to carry out certain business activities by UK entities and individuals in EU and vice versa might prove more difficult. Current activities may have to be ceased following loss of necessary permissions and new activities might have to be postponed.

Corporate income taxation will be most significantly affected by the inability to apply EU directives concerning dividends, interest and royalty payments paid out between parents and subsidiaries on UK entities. Taxation of such payments will be based on the respective double tax treaties.

For value added tax purposes, UK will become a third country. Current business relations and supply chains will need to be reevaluated keeping a tax regime of supplies provide from/to third countries in mind. Value added tax base will also include the newly imposed tariffs (above). Excise duties will undergo similar changes.

Regarding social security, EU and UK citizens’ pension rights and entitlement to other support will need to be reexamined. Medical insurance will cease being universal and might have to be substituted by commercial alternatives. Visa and working permit requirements will also tighten for employees moving to and from UK.

Current status of UK citizens residing, working or studying in CZ should be preserved until 31st December 2020 even if hard Brexit takes place. This should be made possible by a law on treatment of relations in connection with UK exit from EU (“lex Brexit”) that’s currently being discussed by the Chamber of Deputies.

Possibly dramatic changes are expected in the area of resolution of business disputes and extra-contractual liability for the law governing the contracts and torts and, especially, the jurisdiction of courts. The United Kingdom will leave the current regimes invoked by the Rome I, II, and Brussels I bis Regulations. Not even the Lugano Convention would be immediately applicable as its signatories were the European Community as whole, EFTA states and Switzerland. A cross-border enforcement of recievebles might probably more complicated as well because the Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters and Regulation on European order for payment procedure will not be applicable to the British population and companies anymore.

Also from the point of view of the pharmaceutical industry, UK will become a third country for the EU Member States, which will impact, among other things, the clinical trials of pharmaceuticals. If the sponsor of the clinical trial is from the UK, it will have to appoint and authorize a legal representative who will be established in the EU.

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