Article 50: a clarion call to plan for post-Brexit business

Prime Minister Theresa May officially triggered Article 50 on Wednesday, March 29, starting a two-year negotiation period before the UK’s exit from the EU.

British Retail Consortium (BRC) chief executive Helen Dickenson said that ensuring consumers continue to enjoy great quality, choice and value on goods through tariff-free trade between the UK and EU must remain at the heart of the negotiations.

“It’s encouraging that the Government recognises that the UK has a role to play as a champion of free and open trade,” she said. “Our priority is to make sure the terms of our trade relationship with the EU are right, before seeking new deals with other countries.

“Securing a positive new customs arrangement, which enables mutually beneficial opportunities for trade with the EU and the rest of the world, will be crucial to ensuring British shoppers aren’t hit with the costs of unwanted import tariffs at a time when the pound is already weakened. Therefore, ensuring a phased implementation that will maintain a free and open trading environment until a new trade deal can be put in place is essential.”

However, Philip Ball, corporate commercial solicitor at Myerson Solicitors, argued that uncertainty would continue to be a prominent feature over the next two years, with no guarantee that a deal will be reached at the end of negotiations.

This has already been highlighted in a report from the House of Commons Foreign Affairs Committee earlier in March, which stated that the risk of reaching ‘no deal’ is real enough to justify planning for it.

“Overall, this makes it very difficult to know the environment in which UK businesses will trade in two years’ time,” Mr Ball said.

From a legal perspective, Mr Ball suggested that businesses should consider whether they need to include ‘Brexit clauses’ in any new contracts they may be entering into, such as those involving cross-border trade or ones that are dependent on exchange rates.

“Brexit clauses can take a variety of forms – they can deal with specific risks that the parties envisage as being potential issues, such as changes in law, changes in tariffs, currency fluctuations outside of defined parameters, or they can simply refer to adverse effects that are caused by Brexit,” he explained.

“Once triggered, a Brexit clause will normally give rise to a right to renegotiate, which may also lead to a right to terminate if no agreement is reached. The purpose of a Brexit clause is, therefore, to mitigate the risks that may arise upon, or possibly before, the UK leaving the EU. As you can imagine, a Brexit clause itself can lead to uncertainty.”

For contracts that already exist, Ball suggested that businesses consider the risks posed by Brexit and whether there is any way of mitigating them.

These could include practical steps, such as taking options or futures in relation to currency exchanges or their supply chain or products, or legal steps by evaluating whether there are any ways to renegotiate or terminate contracts that have the potential to be particularly costly or onerous.

“Throughout the exit process, businesses will need to keep a close eye on what will be necessary for them to remain compliant with the law under which they operate, and on the regulations that determine whether or not their goods or services can be sold into the EU,” he concluded.

Mr Ball added: “Although there is a large degree of uncertainty as to the UK’s relationship with the EU upon exiting, by taking an active approach to ensure compliance and mitigate risks, businesses can minimise their exposure to the risks posed by Brexit and put themselves in a better position to exploit any opportunities it presents.”