Working Through Post-Brexit Regulatory Divergence

Shepherd and Wedderburn LLP


Shepherd and Wedderburn is a leading, independent Scottish-headquartered UK law firm, with offices in Edinburgh, Glasgow, Aberdeen, London and Dublin. With a history stretching back to 1768, establishing long-standing relationships of trust, rooted in legal advice and client service of the highest quality, is our hallmark.
The regulatory impacts of the UK's departure from the EU and its single market continue to emerge, creating challenges for businesses operating in the UK ...
UK Government, Public Sector
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The regulatory impacts of the UK's departure from the EU and its single market continue to emerge, creating challenges for businesses operating in the UK and involved in cross-border trade and investment.

Residual application of EU law in the UK

Given the fundamental importance to the Brexit project of the UK Parliament (and, through it, the devolved legislatures) regaining control of the UK 'statute book', the Government continues to push forward with plans to limit the residual impact of EU law, most notably via the Windsor Framework (as the Northern Ireland Protocol is now known).

The evolving UK trade sanctions regime

The scope and reach of the UK's post-Brexit trade sanctions regime is continually evolving in line with geopolitical developments, meaning that ongoing compliance and monitoring is both challenging and potentially resource intensive. Equally, significant consequences can flow from non-compliance, including criminal sanctions and breach of contract claims. In addition to legal compliance risk, businesses also need to recognise the reputational risks from sanctions breaches in their own activities and the activities of those they do business with.

Robust compliance with the UK regime (as with other similar regimes) needs more than a 'tick box' approach. As always, it calls for a comprehensive assessment of risk and proportionate measures to secure ongoing compliance.

Regulation of foreign direct investment

The National Security and Investment Act fully established the UK's new investment screening procedure in 2022. This created a new compliance risk for those engaging in transactions in the UK, with some transactions requiring pre-clearance before they can close. There continue to be challenges in applying the requirements – particularly in 'edge' cases, or where there is an international element.

The regime will continue to evolve, together with the ever-changing geopolitical landscape that underpins assessments in the context of national security. Anyone engaging in transactional activity that could impact UK consumers will need to keep on top of the requirements in this area, and how the process might impact their deals.

Foreign Influence Registration Scheme

The National Security Bill is in its final stages in the UK Parliament and is expected to come into force later in 2023. It seeks to bring together new measures to protect national security in the UK.

As part of those measures, the Bill proposes to introduce a new Foreign Influence Registration Scheme (FIRS) aimed at deterring foreign power use of covert arrangements, activities, and proxies, by requiring greater transparency around activities directed by foreign powers. Whilst FIRS does not prevent activity from taking place, it seeks to boost transparency around lobbying activities.

It is a two-tiered scheme: the first tier requires registration of arrangements to carry out state-directed "political influence activities". The second tier gives the Secretary of State the power to require registration of a broader range of activities where deemed necessary to protect national security. It is proposed that failure to register when required will be a criminal offence.

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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