Preparing for the End of the Transition Period

December Brexit Update

December 2020

On 31 January this year, the UK formally left the European Union and entered into an 11-month transition period during which EU law, as well as rulings of the Court of Justice of the European Union, continued to apply. The transition period ends on 31 December and EU law will not apply as of 1 January 2021. At the time of writing, no trade deal has been concluded and, in the absence of a “substantial shift” from the EU, the UK has indicated that there will not be a deal in place in time for the end of the transition. In this newsletter, we look at the impact of Brexit and the end of the transition period in our key subject areas.

Business

Commercial Contracts

Deal or no deal, it seems unlikely that English contract law as it relates to commercial contracts will be affected or amended as of the end of the Brexit transition period, i.e. 31 December 2020, the date on which the UK will exit from the EU. Nevertheless, it is still possible that the conclusion of the UK’s Brexit negotiations with the EU could result in circumstances requiring a change to the English law of contract.

The Government has published its own information on Brexit (which you can reach by clicking here) which you should review as part of your overall preparations relating to the end of the transition period.

Assuming that changes to English contract law do not occur, it will be unnecessary to update or make any changes to our commercial agreement templates to accommodate the ending of the transition period. However, we recommend that if you have not already done so, you should review your existing commercial contracts, i.e. those not expiring on or before 31 December 2020. We recommend that you consider existing contracts and your plans for future contracts, to see what (if any) impact any aspect of the end of the Brexit transition period might have on existing and future contracts, and what if any action you might or need to take.

There are numerous possible consequences of the transition period ending. For example, you might incur greater expense in order to perform a contract due to new or increased (import or export) tariffs or customs checks applying to trading between the UK and the EU, currency exchange rates fluctuating, or any restrictions on the free movement of people. In each case, this could affect the overall costs of buying or selling goods, products, or materials. As from the end of the transition period, aspects of Brexit might make it more difficult or even impossible to perform a contract; performing it might be commercially unattractive; or it might produce a different outcome from that required or expected by one or both parties. The implications and commercial realities for you will be specific to your business, your particular circumstances, and the nature and terms of the contracts concerned.

Where you decide that the end of the Brexit transition period might have an adverse effect on any contract currently in place, you should consider whether to terminate it before the end of the transition period if in the circumstances the contract permits it, or whether to seek to renegotiate it. Alternatively, you might see whether there is a provision in the contract covering the situation, e.g. a material changes clause which covers Brexit and its effects. You might also see whether a force majeure clause in the contract covers any effects arising from Brexit, although this is unlikely in the case of most force majeure clauses.

As to new contracts that you enter before the end of the transition period, whilst adding a Brexit clause to the contract will not solve all Brexit-related problems, you could consider including a clause to safeguard your business against uncertainty, e.g. one which allows for rapid termination of the contract or which provides for some financial adjustment (such as a price change) or change on the occurrence of a Brexit-related change in the law or some other Brexit-related change in circumstances.

Consumer Rights

Current consumer protection law in the UK is derived from EU law. In fact, in the form of the Consumer Rights Act 2015, it actually surpasses the standards of protection established in the basic EU provisions. At the end of the transitional period, EU law ceases to apply in the UK; however, it is possible that there will continue to be considerable regulatory alignment in this area under the terms of our future relationship with the EU, although there may also be some divergence.

Even in the event that no deal is reached at the end of the transition period, UK businesses selling to UK consumers should not, for the most part, expect a great deal to change. Those selling to EU-based consumers, however, must keep in mind the potential for regulatory divergence and keep up to date with developments in EU consumer law. It is also important to note that businesses and consumers will no longer be able to use the Online Dispute Resolution platform (an EU service that links consumers with ADR providers in the EU) from 1 January 2021.

At present, we do not expect our documents in this area to change as a result of Brexit; however, we will continue to monitor the situation and advise you of any changes.

Data Protection

Up until the end of the transition period, data protection in the UK is governed primarily by the GDPR and the Data Protection Act 2018. The GDPR is, however, an EU regulation and will cease to apply directly in the UK from 1 January 2021. The GDPR has been retained in UK law by virtue of the European Union (Withdrawal) Act 2018 and amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019, resulting in the UK GDPR.

UK businesses and organisations that have no customers or contacts in the EEA that are already compliant with the GDPR should not expect a great deal to change. The differences between the EU GDPR and UK GDPR are predominantly contextual and the main obligations and the rights of data subjects are unchanged. Privacy notices and other information should be checked and amended to ensure that wording aligns with the new legislation.

For those UK businesses and organisations with customers or contacts in the EEA or with an office, branch, or other established presence in the EEA, it will be necessary to comply with both the UK GDPR and the EU GDPR. It may also be necessary to appoint a representative within the EEA in some cases if you offer goods or services to individuals in the EEA or monitor their behaviour but do not have a branch, office, or other establishment within the EEA.

Restrictions on moving personal data across borders will also change. UK businesses and organisations sending personal data from the UK to the EEA will not face barriers. Unless and until the EU Commission makes an adequacy decision concerning the UK’s data protection laws, however, personal data moving from the EEA into the UK will need to be covered by a suitable protection measure such as the EU Commission’s standard contractual clauses. As to data transfers from the UK to third countries outside of the EEA, the UK Government intends to recognise all EU adequacy decisions current at the end of the transition period and all approved safeguards (again, such as the standard contractual clauses).

Many references to the GDPR in our document templates already include non-specific references to successor legislation that may be enacted in the future. We are currently working through our documents to remove specific references to the GDPR and to replace them with more generic (and future-proof) wording or UK GDPR references, as appropriate. We have also added a new UK Data Processing Agreement to our portfolio and are working to ensure that our range of data protection templates is up to date.

For more information on the changes to data protection in the UK from 1 January 2021, please refer to the Information Commissioner’s Office website.

Intellectual Property

Copyright protection is generally harmonised by international treaties. Within the EU, it is also governed by a body of EU legislation.

UK and EU copyright works will continue to be protected in both the UK and the EU thanks to international treaties (e.g. TRIPS and the Berne Convention). Existing cross-border copyright arrangements that are unique to EU member states will stop at the end of the transition period. Such arrangements include the portability of online content services, copyright clearance for satellite broadcasts, reciprocal protection for database rights, and the orphan works exception.

EU trade marks and design rights currently apply in all EU member states. They have also applied in the UK throughout the transition period. At the end of the transition period, comparable rights for UK trade marks and design rights will be created. On 1 January 2021, the UK Intellectual Property Office will create a comparable UK trade mark for every registered EU trade mark.

The UK has remained a part of the EU unregistered Community design system during the transition period. Unregistered Community designs arising before the end of the transition will also continue to be protected in the UK for the remainder of their three-year term. From 1 January 2021, a supplementary unregistered design will become available in the UK. This will provide similar protection to that conferred by the unregistered Community design, but its scope will be limited to the UK. In order to qualify, a design must be disclosed first in the UK or another qualifying country. If the design is first disclosed in the EU, its novelty could be removed and it may not subsequently qualify for UK unregistered rights.

With regard to registered designs, re-registered UK designs will be created at the end of the transition period. Those holding a Registered Community Design at the end of the transition period will be granted the new, equivalent UK re-registered design.

As for European patents, the current European patent system is not a part of the EU and will therefore be unaffected by Brexit. European patents can be applied for through the UK Intellectual Property Office or through the European Patent Office.

Database rights are bestowed by EU law and apply up until the end of the transition period. After 1 January 2021, UK citizens, residents, and businesses will not be eligible to receive or hold database rights in the EEA for databases created on or after that date. As a result, alternative means of protection must be considered, such as copyright or contractual protections. For those created before 1 January 2021, however, the Withdrawal Agreement guarantees that database rights will continue to be recognised in the UK and EEA for the remainder of their term.

We do not anticipate that our IP templates will change as a result of Brexit. As with all areas in our portfolio, however, we will continue to monitor developments. For further information about the changes to IP, please refer to the UK Government’s website.

Corporate

The UK left the European Union on 31^st January 2020. The 11-month transition period that followed ends on 31^st December 2020. UK company law was not affected during the transition period. At the time of writing, whether and what trade deal emerges to define the UK’s relationship with the EU going forward, is still not known.

Notwithstanding the above, the key legislation governing and regulating English and Welsh companies is the Companies Act 2006. This includes the types of companies that can be incorporated, their liability, the role of Companies House, directors’ duties, and the rules on accounts and audit. Whilst some parts of the Companies Act 2006 are derived from EU Directives such as shareholder rights, most of English company law is not derived from EU legislation. The Companies Act 2006 will, therefore, continue in force as at present and the legal status of UK incorporated companies will remain unchanged.

From 1 January 2021, a business may need to change its company registration if it is a:

European entity formed under EU law;
UK company with an EEA corporate officer;
UK company involved in a cross-border merger; or
EEA company.

More information is available from the GOV.UK website here.

Our templates only consider companies formed under English law with UK corporate officers and as such, it will not be necessary to update or make any changes to our corporate templates to accommodate the end of the transition period on 31^st December 2020.

The extent of any future divergence from EU law and regulations or changes that may affect UK incorporated companies following the end of the transition period will depend on the outcome of the UK’s negotiations with the EU. However, it is not expected that there will be any immediate significant divergence that affects company law.

Employment

In respect of Brexit and employment, one of the key considerations is the future of EU nationals living and working in the UK. EU, EEA, and Swiss citizens and their families can apply to the EU Settlement Scheme in order to continue living in the UK after 30 June 2021. The scheme is open and is free of charge. If an application is successful, settled or pre-settled status will be granted. Irish citizens and individuals with indefinite leave to remain are able to stay in the UK without making an application under the EU Settlement Scheme.

As was the case before Brexit, employers must check that potential employees have the right to live and work in the UK. Employers can access the online checking service to confirm that a candidate has settled or pre-settled status here: https://www.gov.uk/check-immigration-status. However, employers should be aware that, up to 30 June 2021, candidates do not have to agree to share their status using the online checking service. Potential employees who were in the UK prior to 31 December 2020 can use their passport or national identity card as an alternative and have until 30 June 2021 to apply for settled or pre-settled status.

The right of free movement for UK nationals in the EU, and EU nationals in the UK, ends on 31 December 2020. This means that EEA and Swiss nationals who arrive in the UK on or after 1 January 2021 will need a visa to work in the UK and will not be able to apply for settled or pre-settled status. Simply-Docs will provide an update on the new UK visa and immigration system in January.

Under the European Union (Withdrawal) Act 2018, all EU employment law will be converted (as it was before Brexit) into UK law. The Employment Rights (Amendment) (EU Exit) Regulations 2019 will make some small technical changes and introduce new provisions intended to preserve UK-located European Works Councils but employment law will otherwise remain the same for the time being. Further down the line, the UK government may take the opportunity to dismantle EU-derived employment laws, post-Brexit. However, it’s worth pointing out that some aspects of UK employment law - such as equality legislation - go further than EU minimum requirements. This means even if the UK government does decide to repeal some EU-derived employment rights, there are still likely to be areas of employment law where the UK goes further than the EU.

Health & Safety

The UK Government and Health & Safety Executive (HSE) have made it clear that your responsibility as an employer to protect the health and safety of people affected by your work activities will remain.

Most of the existing health and safety regulations will remain in place untouched. You will still need to make sure you have a Competent Source of safety advice to ensure your staff and anyone who may be affected by your work activities are not exposed to any hazards.

There are a few areas which will have minor changes to procedures, including the regulation of chemicals, explosives, machinery and equipment.

Chemicals

The HSE has produced information on the following:

CLP - Classification, labelling and packaging of substances and chemicals
PIC - Prior informed consent
PPP - Pesticides or Plant Protection Products
REACH - Registration, evaluation, authorisation and restriction of chemicals

Explosives

CE marked goods on the UK market

CE marked civil explosive goods can continue to be placed on the UK market until 1st January 2022. This includes civil explosive goods which have been assessed by any EU-recognised notified body.

The new UK Mark

The UK Conformity Assessed (UKCA) mark is the new UK product mark for civil explosives and other goods. From 1st January 2021 UKCA marking will begin to replace CE marking for goods being placed on the UK market.

You should be ready to use the UKCA mark instead of CE marking as soon as possible. From 1 January 2022 you must use the UKCA mark on civil explosive products.

Up until 31 December 2022 the UKCA mark can be placed directly on the product or on an accompanying document. From 1 January 2023 the UKCA mark must be placed directly on the product. You should start building this into your design process so you can meet this requirement in time.

The UKCA mark will not be recognised for products being placed on the EU market.

CE marked goods on the UK market

CE marked workplace products will be accepted in the UK until 1st January 2022. This includes workplace goods which have been assessed by an EU-recognised notified body.

The new UK Mark

The UK Conformity Assessed (UKCA) mark is the new UK product mark for workplace products and other goods. From 1st January 2021 UKCA marking will begin to replace CE marking for goods being placed on the UK market.

You should be ready to use the UKCA mark instead of CE marking as soon as possible. From 1 January 2022 you must use the UKCA mark on workplace goods products.

The UKCA mark will not be recognised for products being placed on the EU market.

For more information please see the HSE website.

Property

Whilst there might be uncertainty for the property market more generally, Brexit is having very little impact on property law and procedure in the UK. This is because there has been minimal intervention from the EU on the laws which govern property ownership and transactions in England and Wales.

EU regulations that are already a part of UK law, for example VAT, energy efficiency rules, GDPR and money laundering regulations are not going to be null and void, at least not immediately and these regulations must still be complied with.

Currently, no changes are needed to our property document templates. Our templates in the Property folder can be used as they are after the transition period (unless we notify you further that updates or amendments are necessary).

Landlords and letting agents should be aware that new immigration rules are in place and the Government’s right to rent policy may change in the future. In the meantime, landlords and letting agents should continue to conduct right to rent checks in the same way as now until 30 June 2021. Changes to the right to rent scheme were made in November 2020 this year. You can read about the changes here. The Government intends to introduce new guidance on how to perform checks for EEA nationals after the 30 June 2021. Landlords and letting agents are being urged by the Government to check all new tenants and not just those they believe are not British citizens. It is against the law to discriminate against anyone because of where they are from.

Although Brexit may not pose any immediate legislative changes for the property sector, landlords and letting agents need to keep under review the legislative changes that are afoot for residential and commercial property on a national level. The UK Government is committed to abolishing Section 21 ‘no fault evictions’ and has recently announced a review of commercial landlord and tenant legislation. Here at Simply-Docs we will continue to monitor these proposed changes and will update and amend our property portfolio when necessary.

Final Thoughts

Back in January, when we first published a version of this newsletter, we could not have imagined the challenges that the world would be facing throughout the year. Even without a global pandemic to contend with, the prospects of successfully concluding a deal between the UK and the EU looked somewhat bleak. Now, with Christmas and the new year nearly upon us and still no deal, it is highly likely that the transition period will end with no deal in place. Deal or no-deal, however, it is likely that many things will remain in flux for some time to come.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.