United Arab Emirates: Brexit's Impact On Commercial Transactions

Last Updated: 18 January 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, September 2018

Is it a bit too late to write about Brexit?

Economic instability, privacy concerns, dispute resolution framework, currency fluctuation and immigration issues – we have heard about each of these predicaments due to the political shift of one of the oldest economies from one of the most stable confederations. In this article, our lawyers in Sharjah will explain the impact on commercial transactions due to the United Kingdom's severance from the European Union (EU) when Theresa May triggered the Article 50 of the Treaty of Lisbon on March 29, 2017. The Article 50 of the Lisbon treaty states that: -

  1. "Any Member State may decide to withdraw from the Union according to the outlying requirements in the constitution.
  2. Any member state before its withdrawal from the treaty should notify the European Council about its decision. Concerning the guidelines provided by the European Council, the Union shall negotiate and agree with the country, outline its arrangements for its removal, and also consider its future relations with the Union. The negotiations of the agreement are according to Article 218(3) of the Treaty on the Functioning of the European Union(TFEU). The Union of the Council, who is acting as a qualified majority, should conclude post seeking European Parliament's consent."

So, the two-year countdown to Britain's official departure from the EU is already in action. No later than April 2019, Britain should leave the EU, and whenever negotiation talks are coming forward from Lanchester house, it touches the nerve of many stakeholders. Why? It is because your commercial transaction regarding your contractual rights, obligations, performance will be immensely affected by the negotiation between Brussels and Lanchester officials. But what is going on in this consultation? It is a re-defining process of EU's core principles- free movement of goods, capital, services, and labor – the four freedoms comprising the internal market of European Union. The definition of the domestic market of European Union is in Article 26(3) of the preceding Treaty regarding the Functioning of the European Union (the TFEU).

The internal market should involve a territory without inward wildernesses in which the free development of merchandise, people, administrations, and the arrangement of the treaties will guarantee the capital.

It is essential to go over each principle and understand the changes in those four laws following the Brexit. It will allow us to have a big and detailed picture of Brexit's impact on the commercial transaction. Then we will provide you the solutions for your business, to protect your contractual rights, obligations, and performance.

Free Movement of Goods

Free movement of goods is the success story because approximately 75 % of EU trade regards products. Free movement of goods is the economic freedom defined in the Articles 110 of Treaty of Functioning of the European Union (the TFEU) and Article 28 to 30 of the Treaty Establishing the European Community (the TEC).

The Article 110 of TFEU;

"No Member State should force, straightforwardly or by implication, on the products of other Member States any internal tax assessment of any sort more than that forced specifically on similar local items. Besides, no Member State should force on the goods of other Member States any local tax collection of such a nature as to manage the cost of indirect assurance to different products."

The Article 110 of TFEU means that member states have cleared away custom barriers amongst themselves and preceded with a common customs policy towards other countries. After Brexit, UK companies wishing to trade with EU/EEA member states will face the customs duty that they have not paid over 40 years since the joining of EEC in 1973. The customs duties that UK face, of course, are likely to be higher and this will weaken the competitiveness of UK products within European internal market. Furthermore, customs check of UK products is under an obligation for entering and leaving the EU. It could burden UK business entities with additional costs and delays. Most importantly, UK companies will have to comply with EU regulations over which they have no control in negotiation.

On the other hand, it is pertinent to note the sterling exchange rates in commercial transactions after Brexit. It will significantly affect the way import and export transactions works. A fall in the value of Sterling is excellent news for offshore businesses making imports from the UK, but not for foreign companies exporting to the UK. For international firms taking up investment in the UK, the fall in the value of Sterling may produce significant business opportunities to acquire UK firms cheaply.

Free Movement of Services

Tariffs apply to goods as well as services provided to and from the EU following Brexit. It could increase the cost of the service supplied by UK companies and weaken the price competitiveness of UK service providers. Meanwhile, the number of service firms present in the UK could reduce due to Brexit. Presently, thirty-seven (37) percent of financial services companies said they are likely to relocate their office if the UK left the EU. Potentially it can affect the entire service industry in the UK as many large international companies based in the UK are purposely to serve the EU as a whole market benefiting the process of single European regulatory standards. This benefit no longer exists after Brexit and will likely to reduce the entire volume of commercial services provided in the UK.

The most significant impact could be observed in Mergers and Acquisition industry in the UK after Brexit. Currently, merger and acquisition transactions to which EU Merger Regulation is in the notification are not under an obligation to make a filing to the UK authorities. After Brexit, the information of the operations under EUMR will be sufficient; it would be a mandate to report such transactions to the UK Competition and Markets Authority (CMA) as well. This duplication of notification requirements will increase the already significant volume of works for companies wishing to engage in mergers or acquisitions. They will have to make parallel and the duplicate filings in Brussels and London. The burden of duplicate merger notifications will be particularly significant in transactions such as the agricultural sector, such as Bayer and Monsanto, ChemChina and Syngenta, and Dow and DuPont. All these companies are engaged in multiple markets and have complex vertical and joint venture relationships.

Free Movement of Labor and Capital

Curtailment of the freedom of employees or on their action could lead to labor shortages. It could also drive up the costs of energy in the UK. It may affect businesses in specific sectors in the UK, such as construction and care that are heavily dependent on workers from the rest of the EU. Furthermore, UK capital market may suffer from the reduced investment after BREXIT. The UK has been attractive to direct foreign investment thanks to easy access to a vast European market. It is debatable, but almost 1/3 of foreign investment came from overseas banks and other financial services institutions to benefit the single regulatory service of the European system. Without EU market, UK capital market will no longer be so much attractive.

Conclusion

Commercial transaction and its obligation after BREXIT

As discussed above, the business can identify the impact of Brexit in the four areas- goods, service, capital and labor which lay down the foundation of the industrial transaction. Most importantly, the business effect of Brexit could freeze the performance and make your contract becoming more and more difficult to perform. Nonetheless, it is improbable that the English court will grant consequential damage to the parties as the consequences of Brexit.

Some may argue Brexit makes performance impossible and consider invoking force majeure clause. Force Majeure is used to describe events possibly affecting the contract that is entirely outside the parties' control. However, the counter-argument will be that the following consequences from Brexit were reasonably foreseeable considering that the two-year negotiation talk provided parties enough time to adjust their contractual rights or performance and equip express provisions.

In any case, under English law, the damages granted from force majeure is very much limited and is not positively applied. It has to be pointed out regarding the contract. Therefore, the best way to protect contractual obligations against Brexit is to furnish express provisions to accommodate for these changes. For instance, an express provision that protects right to not terminate upon Brexit or vice versa. Furthermore, parties could agree on an express provision that secures the movements of exchange rates following Brexit. In this way, your commercial transaction will survive in the stormy weather of Brexit.

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
 
In association with
Related Topics
 
Related Articles
 
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