Locke Lord QuickStudy: Brexit: CHECKLIST

October 2016

Following the UK Brexit referendum businesses will now find themselves assessing their future. Below is a checklist designed to raise some important questions that should be considered in order to assess potential risks and opportunities in this initial phase after the Brexit result.

Capital Markets

  • UK companies considering listing on a stock exchange, or where the listing process is already underway, should ensure that disclosure of the potential impact of Brexit on the company, its business and the listing itself, is described in the risk factors section in the offer document.
  • UK companies undertaking fundraisings should consider whether the proceeds of the fundraising remain sufficient for their working capital needs following the Brexit decision.

By Nicole Fry 

  • Consider the impact of the drop (and/or fluctuations) in the value of the Pound Sterling and what impact this has and may have on costs of purchases as well as the fees charged to customers, and the mechanisms that your contracts have in place for addressing this.
  • Consider what impact any exit from the EU will have on your company's business operations; for example, if your business is licensed to operate throughout the EU by virtue of a registration in the UK, will this need to be changed to registration in another EU jurisdiction; and, if customs duties are imposed on imports and exports to and from the UK can the products be sourced or produced elsewhere and/or if not how might these costs be flowed through to purchasers of these goods?
  • Review Existing Contracts and considerations for new contracts:
    • Consider how changes brought about by Brexit will impact how contracts operate and consider whether amendments are required – it is important to keep this under review as the UK negotiates its withdrawal from the EU, particularly to ensure that rights with respect to jurisdiction and enforcement are not prejudiced.
    • Review governing law and jurisdiction clauses to weigh up the certainty provided by the English courts and the possibility of international disputes without the Rome Regulations (Rome I (593/2008/EC) (contractual claims) and Rome II (864/2007/EC) (tortious claims)) and Recast Brussels Regulation (1215/2012/EU) – is the current clause in the contract still appropriate and should it be agreed up front?
    • Does the contract contain EU derived law or a change of law provision? If so, consider whether any amendments are necessary.
    • Consider whether there is any potential for termination provisions or force majeure clauses to be triggered or for the contract to be frustrated.
    • Consider whether there is a need for transitional provisions to deal with existing contractual obligations.
    • Due diligence should be completed for new contracts and consideration should be given as to where the company has assets, which may affect where any judgment should be enforced.


  • Do any provisions in your contracts make direct reference to EU legislation? If so, the relevant provisions will need to be reviewed and the potential impact of Brexit assessed.
  • Additionally, EU derived rules are frequently relevant to the environment that energy and infrastructure businesses/projects operate in such as: state aid restrictions; public procurement rules; and, third party access requirements. Theoretically, these would no longer apply in a Brexit scenario. However, EEA, EFTA and/or WTO requirements, ongoing UK participation in European Energy Union and/or UK Government policy (all of which will to a greater or lesser extent fill the Brexit vacuum) will likely impose similar restrictions in any event so businesses/projects in the energy and infrastructure space should not be assuming that there will be a complete disappearance of restrictive rules and bureaucracy.
  • Is any current debt/grant for existing energy and infrastructure development contingent upon ongoing UK membership of the EU? The relevant funding documentation should be checked for the impact of Brexit. Further, what impact on the business will the absence of EU derived funding have going forward? Alternative sources of development capital may need investigating.
  • Whilst the potential for change in law post Brexit has been identified, the way in which change in law is addressed in the contracts associated with energy and infrastructure businesses and projects can vary widely as can the entitlement to relief in a change in law scenario.
    • What do your contracts say in this regard?
    • Is relief available in respect of change in law generally?
    • Must the change in law have been unforeseeable at the date of contract?
    • Is change of law relief limited to changes in law that only affect your business/project/particular services?
    • How is tax such as VAT affected?
    • Will a change in VAT be a direct pass through into a unitary charge or require a change in law claim?
    • Will any applicable changes in law post Brexit be sufficiently business/project/services specific to even lead to any entitlement to relief?

    Some analysis of the foregoing would be a worthy exercise for businesses and projects in the energy and infrastructure space.
  • Thought should be given as to what impact Brexit may have where one is procuring/sub-contracting goods and/or services from outside the UK. What will the economic consequence be on payments to non-UK based suppliers arising from currency fluctuations caused by Brexit? Will increased customs duties/tariffs on imported equipment have an economic impact on your business/project?
  • What does the future hold for Scotland vis a vis the EU? The UK’s North Sea oil & gas producers enjoy the benefit of tax breaks/subsidies. Should Scotland look to leave the United Kingdom with a view to staying in the EU, what will this mean for the UK’s North Sea oil & gas producers? An independent Scotland is a very different economic proposition and business environment to a United Kingdom which includes Scotland.


  • Companies inheriting UK workforces by virtue of TUPE when winning outsourcing contracts should focus on risks on exit. Currently, the impact of TUPE is that, where a service provider on re-contracting out is not reappointed and the contract is instead granted to a replacement service provider, staff and liabilities will, in almost all cases, transfer from the first service provider to the replacement service provider, meaning that the first service provider is not left with staff termination costs. In short, as a result of TUPE, service providers are effectively able to “pass the parcel” of employee liabilities. TUPE derives from an EU directive, however, the Acquired Rights Directive. Whilst wholesale repeal of TUPE is probably unlikely, the risk of this cannot be entirely discounted. Therefore, service providers entering into contracts for the provision of services, particularly, where on commencement they will be inheriting staff from the client or an existing service provider, should negotiate contractual provisions to mitigate against the risk of TUPE being repealed and, as a result of being left liable for staff termination costs on exit.
  • Whilst it is seems likely given the significant disruption to business that would otherwise ensue, that EU nationals employed as at the date of Brexit will be given the right to continue working in the UK, some UK businesses may perceive a risk in employing EU nationals until clarity is provided on this issue.

Intellectual Property
By Ellen Hughes-Jones

  • Now is a good time to review licences that refer to EU-wide ‎rights, as they may need to be amended in the event that European trade marks (EUTMs) cease to have effect in the UK.
  • In circumstances where EUTMs cease to have effect in the UK, it is likely that holders of EUTMs will be given the option to re-register those rights in the UK. Proprietors of EUTMs could therefore start to review their trade mark portfolios in order to identify the rights they would like to be re-registered in the UK.
  • In the event that EUTMs are re-registered as UK rights, to prevent those national rights becoming vulnerable to revocation trade mark proprietors will need to ensure that they are put to genuine use in the UK.
  • Review whether any UK companies have registered .eu domain names, and if so whether any new domain names are appropriate.
  • Review any pan-European injunctions that are in place to protect your IP rights in the EU.
  • Consider registering new designs as both Registered Community Designs and UK Registered Designs, as there may not be the opportunity to re-register existing Registered Community Designs as national UK rights (as will likely be possible for EUTMs). This is because a design needs to be “new”, and if it is already registered in the EU, and thus this requirement will not be met. Transitional provisions may be put in place to overcome this issue, but this is not currently clear.
  • If you sell goods under a Protected Designation of Origin (PDO), review supplier contracts and consider whether restrictions on similar or lookalike products are needed. PDOs are based on EU Commission decisions and following Brexit such decisions won’t apply to the UK. Accordingly products may need to be re-labelled and re-named, and be aware of potential mass-produced copycat products made elsewhere.

By Nicole Fry

Existing / pending litigation:

  • Consider enforcing any outstanding UK judgments in the EU or EU judgments in the UK, to take advantage of the Brussels regime, before Article 50 is triggered.
  • Consider settlement or ADR strategies before Article 50 is triggered.
  • It is quite likely that the changes will not take immediate effect and will take hold long after any cases currently before the court are decided.

Future litigation:

  • Consider bringing cross-border litigation now, particularly if there are questions of jurisdiction or governing law (for example in a tortious claim, where the question of governing law may be decided differently if the Rome Regulations no longer apply).
  • Consider the impact on service of documents or enforcement of judgments in cross-border litigation.
  • Defendants may seek to delay matters to take advantage of the uncertainty.
  • The uncertainty of how the law will change, will mean that parties should seek to protect themselves by agreeing governing law and jurisdiction clauses up front in their contracts and keeping these under review.

Loan & Financial Documentation

  • Review all loan documentation to check what the governing law is. If it is English law, it is unlikely to be affected by Brexit due to the Rome Convention.
  • Review all loan documentation to check jurisdiction and enforcement clauses. Whilst English judgments are currently enforceable in EU member states, it is not clear what the position will be following Brexit and consideration may need to be given to the enforceability of a judgment.
  • Given the significant turn of events in the UK since the vote, consider whether the event caused (or will cause) a “Material Adverse Effect” – this event of default is a feature in most loans. Practically, the actual terms of the documents and the circumstances or events concerned will dictate how this is navigated, so it is on a case by case basis. Whilst it is doubtful that a Material Adverse Effect is likely to have been caused by the vote result itself, it is possible that the indirect effects of the Brexit could impact upon the financial health of a borrower (e.g. because of a downturn in the economy, or by preventing free access to the European market) which may affect the loan.

Mergers & Acquisitions

  • Due to currency fluctuations, UK assets are perceived by some overseas acquirers as attractive investments. UK companies considering a disposal may wish to consider how to capitalise on this.
  • At an early stage, UK sellers should consider whether abort fees should be negotiated with potential acquirers. This would allow the seller to recoup some of the costs incurred in preparing the company for sale in the event that the acquirer terminates negotiations due to the uncertainty of the impact of Brexit on the transaction.
  • UK sellers undertaking auction sales which have now been put on hold should, to the extent possible, keep their due diligence and data rooms up to date to ensure a smooth transition as and when the auction process recommences.

Real Estate

  • If you occupy property as a tenant, consider whether there could be a possible reduction in rents in certain geographic locations? Do you have any reason to reconsider relocating? Is your lease due to expire or are you close to a tenant break date? If so, are you aware of what must be done?
  • If taking on a new premises, consider the impact Brexit may have on your business. Will you have the ability to terminate the lease, ie break right, or dispose of the property within the next few years? 
  • Do you have rent reviews coming up? Have any rents been reviewed on other properties that may be used as comparable evidence to support a reduction in rent? Is it worth waiting for this?