In a historic vote held on the 23rd of June 2016, the people of
the United Kingdom went to the polls in order to determine the
faith of their country's membership within the European Union.
In an unprecedented, albeit expected result, 52% of those eligible
voters opted for 'Brexit' meaning that for the first time
in the history of the European Union, a member state will be
triggering Article 50 of the Treaty of the European Union (TEU) and
commence the withdrawal procedure from the Union.
The news of a Brexit immediately rattled the financial markets
as the Pound plummeted to a thirty year low against the Dollar, and
the Euro also fell slightly. Obviously, this may only be a knee
jerk reaction to the result and in fact, only a couple of days
later, the markets stabilised whilst experts have already
re-assured that this drop will not bring about a recession and that
the Pound will recover. Also, it is too early to say how bad Brexit
will affect the global economy because negotiations between
Westminster and Brussels have yet to kick off and only then can we
have a clearer idea of how the future will pan out. Obviously, this
political uncertainty will essentially slightly curtail economic
growth in the UK and in Europe. However, one cannot help but wonder
how Brexit will affect the numerous businesses and millions of
workers who have set up shop in the UK thanks to the free movement
of persons and the benefits offered by the Single Market.
And thus the question beckons; how will Brexit affect the
Obviously, generally speaking, the Shipping industry in the UK
is seeing the referendum result negatively because it disrupts
trade, movement of goods and also affects labour issues which are
all regulated by EU law and may need to be re-negotiated if the UK
does not join the European Economic Area. There are fears that the
major banks who provide ship financing may decide to set up shop in
other EU Member States with a strong flag. This would mean a strong
blow to the UK's maritime services sector, which to date has
been considered the pre-eminent sector for the British economy.
One final important point relates to contract terms and dispute
resolution. Many shipping contracts provide clauses dealing with
trading to specific countries or regions. The uncertainties which
may arise relate to those contracts, signed prior to Brexit, since
such clauses make reference to the EU as an entity; but will the EU
continue to include the UK? If such contracts are drafted in a way
which presumes the existence of an EU including the UK, such
contracts may give rise to disputes as to the meaning or ambit of
the contract. With regards to dispute resolution, the rules by
which UK courts determine jurisdiction over, and the law applicable
to, the majority of disputes arising within the EU for contractual
and tortuous claims are currently determined by the Brussels I
Regulation and the Rome I and Rome II regulations. Thus, it is
uncertain whether the UK will continue to apply similar rules or
whether new rules will be adopted.
Being an economic superpower and one of the largest importer and
exporter, it is important to understand how Brexit will affect the
United States and, more specifically, its container trade with
Europe and the rest of the world. According to Mario Moreno, Senior
economist at IHS Maritime & Trade, Brexit will have a negative
effect on US exports rather than imports. The only way imports may
be affected is due to decreased consumer and business confidence in
the US who may be reluctant to conclude purchases from the UK. On
the other hand, exports pose a different story. US container
exports may likely be downgraded primarily due to the strength of
the Dollar against the Euro. which will make exports for US
businesses pricey. In fact, before Brexit, the forecast for US
containerised exports towards Europe were at +1.3% for 2016 and +
4.7% in 2017, which are likely to be revised downward. US exports
specifically to the UK were already forecasted at around -0.8% and
these are also expected to go further down.
As stated earlier on, it is difficult to properly pin down the
exact after effects of Brexit until negotiations with Brussels
begin. What is sure is that a feel of uncertainty will reign across
Europe and other continents. However, one must also keep in mind
that the UK is still currently within the EU and, thus, we should
keep on working normally and not let this uncertainty shackle
economic growth. All eyes are on Europe at the moment and we would
not be doing ourselves a favour if we allow this result to affect
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.
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