UK: The UK's Referendum On Membership Of The European Union – An Update

This is an update to our Alert published on 24 June 2016 on the result of the UK's Referendum on membership in the European Union ("EU"). We consider in this Alert some of the immediate and longer-term consequences of the Referendum result.

The outcome of the Referendum on 24 June has no immediate impact on the UK's membership in the EU. The UK's legal basis for the Referendum – the EU Referendum Act 2015 – does not compel the UK government to initiate the exit procedure set out in Article 50 of the Treaty on European Union, although it is generally assumed that the government will give effect in some way to the result. There are a large number of options on how, post-exit, the UK might structure its relations with the EU, primarily to ensure continued free trade with the EU. At this stage, there is no indication of which parts of EU-derived UK law might be repealed (if at all).

The presidents of the institutions of the EU stated on 24 June that exit negotiations should start as soon as possible,1 although there now appears to be wider acceptance that exit negotiations cannot begin until a new UK government is in place. It is unknown whether exit negotiations will precede or follow formal notification by the UK – it is a given that exit negotiations will be complex and time-consuming.

Immediately following the outcome of the Referendum, the British Prime Minister, David Cameron, announced that he would resign as leader of the Conservative Party (and hence, Prime Minister) following election of a new leader, which is expected to take place at some point before the Conservative Party conference in October this year. Given Mr. Cameron's statement that a new Prime Minister should take the decision about when to trigger Article 50, it is accepted that any formal procedure to withdraw will not start until later this year, at the earliest. There is also a considerable amount of debate amongst constitutional experts as to whether formal withdrawal from the EU and the trigger of Article 50 requires further parliamentary approval. In any event, it is likely that any UK government wishing to give parliamentary approval (and hence binding legal effect) to the Referendum will need the support of a majority of all members of parliament (MPs) to do so – which may be challenging given the current understanding that about three-quarters of MPs were in favour of remaining in the EU at the time of the referendum held in June. In addition, political leaders in Scotland and Northern Ireland are weighing their options, further complicating likely political moves. Looking further into the future, some commentators reflect that a general election or second referendum may be held in the UK to approve the terms of any exit negotiations with the EU.

However, at this stage, the possibility of either a general election or a second referendum is pure conjecture, and therefore it is the case that firms must begin the process of analyzing the potential implications of a Brexit to their business. This is clearly not an easy task given that there is no current definitive plan setting out what a potential renegotiation of the UK and the EU would be based upon, and most crucially there remains an open question of whether the UK would continue to have access to the EU's single market.

Factors to consider for ongoing transactions or fund-raising

Bearing the above in mind, firms are beginning to grapple with and start to either dust-off previous analysis or formulate new plans gearing up for a potential "Brexit". Many of you are also continuing to be plugged into discussions with relevant trade organisations in the UK and the EU that are likely to provide assistance and guidance to their members on changes recommended to standard form contracts. However, in the meantime, firms clearly have to press ahead with business as usual whilst having an eye out to developments as they unfold as part of any potential Brexit.

With this in mind, we set out below some key considerations that firms will need to think about in relation to any current or ongoing transactions or fund-raising activity either in the UK, EU or outside of the EU, including the legal, regulatory and contractual implications of such an event.

  • Contracts should be drafted now to take into account the potential withdrawal of the UK from the EU. This may include the potential of the repeal of EU law, which is now part of English law (though, in reality and in the short-term, we are of the view that it is unlikely to be the case that swathes of English law would be amended, given the amount of resources and political will required to do so). EU law has effect in the UK either through "direct effect" EU Regulations or UK implementation of EU Directives into English law. Parties must assess the risk in their contracts of relying on any particular benefit of EU law (such as the "passporting" rights for financial services) and possible means to address the risk in contracts under negotiation. Similarly, parties must assess the risk of any particular contractual obligation being at odds with or in breach of EU law, and consider how any obligation framed by reference to EU law is interpreted. How references to the European Union in contracts (in terms of the contract's territorial scope, such as the territory of a licensing agreement) will be read following exit must also be considered.
  • Governing law clauses in contracts (currently subject to the EU Rome Regulations) may need to be redrafted to take account of withdrawal. It is likely that the government will legislate to address the position in existing contracts as part of any exit arrangements.
  • Parties should address the risk of force majeure or material adverse change provisions in contracts being invoked – in good or bad faith – in the short and long term.
  • In the longer term, UK courts may no longer be obliged to apply EU jurisprudence, such as judgments of the EU Court of Justice. In terms of enforcement of judgments, relevant EU treaties will for the time being remain in place.
  • Fund-raising in the EU relies on the Alternative Investment Fund Managers Directive ("AIFMD") (for alternative investment funds), the UCITS Directive (for EU retail funds) and the Prospectus Directive (for offers to the public of debt or equity securities or listing of such securities on EU-regulated markets). In each case, the "passport" allows EU firms to market in the EU, subject to compliance with the prospectus requirements and other conditions in the Directives. Any settlement between the UK and the EU will need to look at the possibility of allowing continued access to EU markets on the passport basis under these Directives. What is clear is that access to the EU single market is one of the key factors of any negotiation between the UK and the EU; however, at present, there is no clarity yet as to which way this debate will fall. Firms currently planning to fund-raise on the basis of these Directives should consider the impact of the Referendum result on timing, the contents of any disclosures and possible contingency plans if the passport is not available in its current form.
  • Whilst there is no immediate impact on the ability of EU citizens to work in the UK (or UK citizens to work in the EU), this again will be one of the key factors to be negotiated as part of any settlement between the UK and the EU.

There are clearly wider legal issues in many areas, including tax (and deal structuring), competition law, financial services, employment, public procurement and insolvency. We will continue to update and advise clients on current risks and future steps as the outcome of the Referendum plays out.

Footnote

1 Statement by EU leaders and Netherlands Presidency on the outcome of the UK referendum on 24 June 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions