After leaving the EU the UK is no longer part of the single market and customs union, and this continues to have a significant effect on many sectors.
Brexit-related legal advice
On 31 December 2020 the UK finally left the EU after an 11-month transition period. While there are still many aspects of the ongoing relationship to be worked out, the UK is no longer part of the single market and customs union, and this has a significant effect on many sectors.
While the changes brought on by Brexit impact on many areas of business, we have highlighted several key areas in which you may require particular legal assistance to deal with the implications of the new relationship between the UK and the EU. Harper Macleod’s specialists can help businesses, organisations and individuals come to terms with the new landscape and its practical and legal implication.
Some of the key areas in which we are assisting clients in relation to the new UK/EU relationship.
All businesses are dealing with the contractual implications of the UK’s exit from the EU and our team continues to assist clients in relation to their commercial contracts on a daily basis.
The Commercial Agents Regulations are often-overlooked and many principals and agents are unaware of them. They apply in Great Britain as a result of the EU Commercial Agents Directive and impose certain obligations on principals and agents operating in the EU, including the right for agents to receive potentially significant compensation on termination of their agency agreement. Despite the UK withdrawal from the EU and the end of the transition period on 31 December 2020, the GB Regulations continue to apply, at least for the time being.
Determining whether the Regulations apply can be complicated. In practice, agency is sometimes confused with distribution but distributors do not fall within the scope of the Regulations. There can also be issues around whether it is the GB Regulations or the equivalent regulations of another country which apply, particularly if the agent is operating in several different countries. If the Regulations apply, certain duties are implied into the principal-agent relationship and certain rights are afforded to agents, including rights to minimum periods of notice to terminate the agency agreement and a right to compensation or an indemnity on termination of the agency agreement.
Of course there are limited circumstances in which this right to compensation is lost, including if the agency agreement is terminated for the agent’s serious breach of the agency agreement but, generally speaking, it is a very valuable (although often unknown) right for agents.
Whether you are a principal or an agent, we can advise on the potential application of the Regulations and your rights and obligations.
Contracts with suppliers, customers and other trading partners
Brexit has required businesses of all shapes and sizes to reconsider their existing contracts with suppliers, customers and other trading partners and take into account different considerations when entering into new contracts. Some issues are directly affected by Brexit – such as the imposition of tariffs and increased customs checks. Businesses require to consider who will bear the financial cost of these and also whether any associated delays will impact on delivery dates.
Brexit may make it more difficult for businesses to perform contracts – for example, the restriction on the free movement of people is likely to have an effect, leading potentially to labour shortages and higher costs of labour, particularly in sectors such as care and transport. For businesses exporting to the EU, businesses require to be clear who is responsible for achieving compliance with the EU regulatory regime. On technical drafting points, some contracts refer to the “EU” (for example, to define the Territory in which a distributor or agent is authorised to sell) and it is unclear whether this always includes the UK after Brexit.
At a more fundamental level, Brexit could affect the commercial strategy of businesses – meaning that some EU principals may decide to cease trading in the UK (affecting their UK agents and principals) or some UK businesses may decide their purposes are better served by setting up EU subsidiaries rather than relying on third parties to act on their behalf. We have advised many businesses on all kinds of commercial contracts impacted by Brexit and continue to do so. Please get in touch with any queries or concerns you may have.
Immigration & people
Leaving the EU has meant a significant change for many UK employers. Our team is on hand to advise in relation to any issues that occur, including areas such as sourcing talent, immigration, right to work, settled status and future planning.
Throughout negotiations with the EU, the UK Government made it clear that free movement of people would end immediately following the expiry of the Brexit transition period (on 11pm, 31 December 2020).
This means that all EU citizens arriving to live and work the UK will be treated equally to non-EU citizens, and will be subject to the new ‘single’ post-Brexit immigration system.
Accordingly, EU citizens will no longer have the right to move to the UK to work and settle (and vice versa). The free movement rights of Irish citizens are unaffected, meaning Irish citizens are free to enter and remain in the UK without restriction.
Whether you currently employ staff from the EU and beyond, or have plans to in the future, we are here to help you with all of your employment law needs.
Points based immigration system and other “routes”
The points based immigration system assigns points to particular requirements of the visa route being applied for by a worker. Only when enough points have been scored by that individual, will they qualify to be awarded a visa.
This system has been in place already for non-EU migrants, so employers previously recruiting from this talent pool will be familiar with the requirement; but those employers whose only experiencing of overseas recruitment is of EU citizens may not be.
From 1 January 2021 the points based immigration system applied to all recruitment from overseas (except Irish nationals who are exempt, save for a few exceptions, due to being in the Common Travel Area with the UK).
If you anticipate that your business will be recruiting talent from overseas in the future, you will need to apply to become a licensed sponsor if you have not already done so.
If you already have a sponsor licence and adhere to the requirements of holding that licence, you will automatically be granted a new Skilled Worker or ICT license. This would have the same expiry date as your current licence.
Whether you need advice and guidance on the points based immigration system, or practical advice in relation to applying to become a licensed sponsor, we are here to help.
Right to work checks
Despite the expiry of the Brexit transition period, a six months’ “grace period” was agreed between the EU and UK in relation to right to work checks. This means that until 30 June 2021, right to work checks could be conducted in the same way as has been done in previous years.
Since 1 July 2021, unless an EU citizen applying for a role in the UK can demonstrate they have status under the EU Settlement Scheme (see below) or an application pending for the same, they must have obtained right to work through the points based immigration system.
Therefore, an employer’s checks will need to confirm whether right to work for the applicant exists through either the EU Settlement Scheme or the points based immigration system.
With possible fines of up to £20,000 for non-compliance per illegal worker, where an employer has reasonable cause to believe an EU citizen has no right to work then they should be conducting all necessary checks to ensure a right to work.
Settled status, posted workers and frontier workers
For EU nationals currently residing in the UK, the EU Settlement Scheme has been introduced that allows EU nationals and their family members to retain their existing rights.
Broadly, those who have resided in the UK for a continuous period of five years (subject to exceptions) which commenced prior to the end of the transition period will be granted indefinite leave to remain (also known as settled status). Those who have resided in the UK for less than five years by that date will be granted limited leave to remain (also known as pre-settled status) allowing them to accrue the relevant qualifying period to be granted settled status in the UK. Broadly, the deadline for applying under the EU Settlement Scheme was 30 June 2021, but an applicant is only eligible to apply if they can prove residency in the UK prior to 31 December 2020; late applications to the Scheme are permitted when there are reasonable grounds for the delay or if the applicant is joining family members.
One area that was not covered in the final Brexit arrangements, was that of posted workers, whereby workers posted into an EU member state should enjoy equality with employees of the host state in terms of certain specified employment rights (including rights in relation to working time, minimum rates of pay, health and safety, equality and maternity related rights).
The silence in this regard, means that EU countries now have freedom to impose different registration and work permit rules to posted workers than would be applied to locally-employed workers.
Another option that exists for those EU citizens who are not resident in the UK but do carry out work in the UK from time to time, is the new Frontier Worker permit, that allows the holder to come to the UK to work while living elsewhere.
If you need any advice in relation to Brexit and the possible employment implications, please get in touch with one of our team.
What does the impact of Brexit on the immigration system mean for UK businesses?
Simply put it means additional costs and process for those looking to recruit talent from the EU. For example, total costs for a 5 year Skilled Worker can easily reach around £6,000.
This will require an element of adapting to businesses who have not recruited non-EU talent previously under the points based system or indeed be prohibitive to businesses who cannot afford the additional costs or whose recruitment requirement doesn’t meet the Skilled Worker route criteria.
As is the overall aim of the points based system, businesses will be encouraged to seek to recruit home-grown talent. However, where there is demand for skilled workers the system still does allow the opportunity for recruitment from overseas
Minding your business after Brexit
The key concerns for businesses after Brexit are:
- ensuring the necessary requirements are met and in place for those looking to recruit from overseas;
- ensuring compliance with the ongoing obligations for employing overseas workers; and
- being vigilant as to an individual’s right to work whilst avoiding any practice that could be considered discriminatory on grounds of nationality.
If you need any advice in relation to Brexit and the possible employment implications for your business, please get in touch with one of our team.
Import, export and tax
One of the consequences of the UK choosing to take a path apart from that chosen by the EU is the development by the UK of an investment control regime. This has recently materialised into a more thought out form, via the publication by the UK government of the UK’s proposed National Security and Investment Bill. The Bill seeks to implement an approach which is becoming more common on a global level – that is, investment into certain sectors of the UK economy, particularly by foreign entities, will have to undergo a mandatory screening process. The sectors to be covered by the regime are those which are considered central to the UK’s national security.
IP & data privacy
Brand rights post Brexit
The European landscape for the protection of brand rights changed significantly on the UK’s exit from the EU. Brand rights holders are recommended to be cognisant of the changes, and ensure that their European brand protection strategies remain fit for purpose.
Medical devices post-Brexit
A number of key changes to the UK’s regulation of the sale of medical devices took effect upon the UK’s exit from the EU. These changes have been on the horizon since the arrival of the new EU medical device regulations a number of years ago, and will continue to reshape the regulatory landscape for these products over the next few years.
For those operating in this market it is important to remember and consider the impact of these regulatory changes. For those considering entry into the UK market alongside the EU market, it is important to remember that the UK is now in effect a third country for European purposes – that is, it is a different market to the EU, and the ability to sell onto the EU market may not necessarily bring with it the ability to sell onto the UK market.
Public law & regulation
Brexit has had a significant impact on public law and regulation, with more changes inevitable over the coming years. Our teams have been busy advising clients on areas such as procurement, state aid, competition law and funding.
Public procurement in Scotland is heavily regulated and governs the purchase of goods, services and works by both “contracting authorities” and utilities. Many public bodies, including central and local government, government agencies, universities and colleges, and registered social landlords are “contracting authorities” for the purposes of the procurement rules. The Scottish procurement regulations derive from EU directives but will continue to apply in Scotland even though the UK has now left the EU.
As a result of Brexit, there have been some minor amendments to public procurement in Scotland – for example, contracts are now advertised on the UK Find a Tender website rather than in the Official Journal of the European Union and some procurement documentation is different – public bodies must now use the SPD (Scotland) rather than the European Single Procurement Document. Although the rules remain the same at the moment, there is considerable scope for the procurement regime to change in the future (subject to the UK’s other procurement obligations, including those imposed by the WTO) and there are early indications from the UK Government that remedies for breach of procurement rules is an area which may change in the future.
In addition, through the Procurement Reform (Scotland) Act 2014, the Scottish Government imposed further obligations on the Scottish public sector which went beyond those required by the EU Directives and those remain unchanged by Brexit.
Whether you are a public sector organisation looking for advice on procurement or a supplier competing for a public sector contract, we are here to help you.
State Aid: new subsidy regime
During the Brexit negotiations, a key sticking point was that of State aid and what this would look like post Brexit. Initially the EU wanted the UK’s State aid rules to align with and adopt the rules of the EU. This was because the EU was concerned that the UK government would use their own rules as a competitive advantage with the use of subsidies for UK companies which could leave EU companies disadvantaged and possibly harm EU trade.
However, the UK successfully negotiated with the EU that a new subsidy scheme would be set up in the UK. As of 1 January 2021, EU State aid rules will no longer apply in the UK following the end of the transition period for the UK withdrawing from the EU (subject to some limited exceptions – where the Northern Ireland Protocol applies or the funding is provided using EU structural funds under an existing scheme).
A domestic enforcement body will be set up to oversee this new UK subsidy regime. It will determine whether the granting of a subsidy would distort trade and competition. The exact details of how and what the new subsidy scheme and the enforcement body will look like are yet to be revealed. While the UK Government is required to enact domestic rules to give effect to the agreement reached between the UK and the EU on public subsidies (see Chapter 3 of Title XI of the EU-UK Trade and Co-operation Agreement), until that time, the rules set out in various international, multi-lateral and bi-lateral agreements will apply (potentially creating a more confusing landscape) and public authorities are required to comply with the UK’s international obligations. Some detailed Technical Guidance has been issued by the UK Government on the steps public bodies must take to ensure compliance with the new subsidy regime.
Whether you are a public body looking to grant aid to a private sector business or a company or community group looking to receive aid from the public sector, we can help you navigate the new rules to ensure any subsidy is given in a compliant manner.
The UK competition law rules which prohibit anti-competitive agreements and the abuse of dominance (and which are heavily based on the equivalent EU rules) remain unchanged following the UK departure from the EU. The EU-UK Trade and Co-operation Agreement includes a commitment by both the EU and the UK to maintaining effective competition laws to address anti-competitive agreements and abuse of dominance. There is no indication that these UK competition laws are likely to change imminently although, over time, they could.
In contrast, there are changes to the merger control aspect of competition law. Before Brexit, the European Commission provided a “one-stop shop” for mergers which fell within the scope of the EU regime – meaning that such a merger required only to be notified to the European Commission and not to national competition authorities in the individual EU Member States. Now, post Brexit, parties to a merger must consider whether the merger falls within the scope of the EU merger control regime and separately, within the scope of the UK merger control regime. If it does, parties will be faced with notifying both the EU and UK competition authorities, resulting in increased costs, complexity and potentially different decisions being made by those competition authorities.
We have expertise and considerable experience in all aspects of competition law and are happy to help with any queries you may have.
Now that the UK has left the EU, the UK will no longer, in general, receive Structural Funds from the EU (although funding will still be available over the lifetime of projects agreed prior to Brexit). The Structural Funds (the principal two being the European Regional Development Fund and the European Social Fund) were intended to support economic development across the EU and were delivered on the basis of match funding (with UK public sector partners match funding 40% of the total investment) – in the 2014-20 period, it was estimated that €19.7 billion total spending was unlocked by Structural Funds in the UK. Some areas of the UK, including the Highlands & Islands have historically benefited more from EU funding than others.
The UK Government has stated its intention to create a UK Shared Prosperity Fund to replace Structural Funds, with the stated intention of reducing inequality between communities across the four nations and to deliver “sustainable, inclusive growth”. Details of the new UK scheme have not yet been published. There is particular concern among the governments/ administrations of the devolved nations that the UK Government will use the scheme to spend money directly in devolved areas, by passing devolved governments and also that funding under the UK Shared Prosperity Fund will not be equivalent to the Structural Funds, reflecting the fact that devolved nations have benefitted more, in per capita terms, from the Structural Funds, than England.
Whether you are a public body involved in the allocation and administration of funds or an organisation seeking to apply for, or having already received, public funding, we can assist you, for example in relation to appropriate grant conditions and the potential application of the new UK public subsidy regime (which replaced the EU State aid rules).