Brexit: Preparing Tech Companies for the impact of the UK's departure

By Roger Bickerstaff

11-2019

With the further Brexit delay beyond the scheduled departure date of 31 October 2019, the general election in the UK on 12 December has raised yet more questions about the nature of the UK's departure from the EU. Even so, unless the political landscape in the UK alters significantly as a result of the general election, the nature of the UK's departure is probably becoming clearer. The House of Commons approved the Withdrawal Agreement negotiated by the Johnson government. (This is the first time that the House of Commons has given such a positive approval). 

Under the Johnson Agreement a Transition Period would run until 31 Dec 2020 but can be extended for two more years. The Transition Period creates a legal standstill so that for most purposes the legal framework would not be changed but the UK would have no representation in the EU. The operative date for most of the changes to be introduced by Brexit would be the end of the Transition Period, rather than the date the UK leaves the EU.

The Transition Period would give Tech companies time to prepare but they should be aware of the issues and be making appropriate preparations. 

The key issues are:

People

The UK Government has made the commitment to protect the rights of EU nationals who wish to stay in the UK after Brexit. The EU Settlement Scheme requires EU nationals to register in order to preserve their rights under UK law (including rights to work, pensions, healthcare and other benefits). It is mandatory for all EU nationals who wish to continue living in the UK after 31 December 2020.

Businesses with British employees in EU 27 Member States should ensure that affected individuals comply with the national requirements to protect their continued right to reside and work in that country Member post-Brexit. 

Trade, Tax and Tariffs

Tech companies should review their international strategies to determine whether, and to what extent, they continue to use UK group companies as a gateway to the EU, particularly as companies within the EU will no longer be able to rely on EU directives to eliminate withholding tax on dividend, interest or royalty payments to the UK. 

Tech companies need to consider their trading position under WTO rules. Businesses should review their supply chains. WTO rules eliminate tariffs on a broad range of high technology products including packaged software and computer hardware.  Under the General Agreement on Trade in Services the international sale of services (including SaaS and other IT services) between WTO members are tariff-free.

Data Protection

EU to UK data transfers: The EU considers that post-Brexit transfers of personal data from the EU to the UK will be a transfer to a "third country" requiring an adequacy decision.  Until this is achieved, the normal adequacy "toolbox" needs to be used - the EU Standard Contractual Clauses, Binding Corporate Rules, or the various derogations for specific situations allowing data transfers (e.g. explicit consent or contract performance).

UK to EU data transfers: The UK has stated that EU laws will be adequate. Assuming this remains the case, transfer adequacy mechanisms will not therefore need to be deployed for UK to EU data transfers. 

UK to Other Country Transfers: Personal data transfers to other jurisdictions will need to be compliant with the Data Protection Act 2018 obligations. Essentially these are as per the pre-Brexit position. The UK and the US have agreed on measures to enable the EU-US Privacy Shield to be used to legitimise UK to US transfers post a no-deal Brexit.

Contracts

On the choice of governing law in contracts, the UK Government has indicated that the UK Courts will continue to apply the principles set out in Rome I and Rome II, the EU Regulations which currently govern the choice of law of contractual and non-contractual obligations.

Trade Marks

Tech companies should identify which of their business’ rights are likely to be affected by Brexit and may need further application/registration in order to achieve maximum protection over those rights. 

Post-Brexit, EU trade marks (previously community trade marks) will no longer have effect in the UK but the UK Government has confirmed measures to "ensure the continuity of protection" so that for existing registrations these rights will be replicated with UK-specific rights.

For new applications UK trade mark should be obtained alongside EU applications.

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For further information contact: Roger Bickerstaff