Brexit: Preparing for the end of the transition period

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01 September, 2020

The UK formally left the EU on 31 January 2020 and is currently in the transition period. On 12 June 2020, the UK Government formally confirmed to its negotiating partners that it would not seek an extension to the transition period therefore it will expire on 31 December 2020.

On 30 July 2020, the Chancellor of the Duchy of Lancaster Michael Gove wrote a letter to all businesses moving goods between the UK and the EU. The purpose of his letter was to urge businesses to prepare for the "new arrangements" for trading with the EU coming into force in January 2021.

As the "future relationship" negotiations are still underway, the big unanswered question is what will the new trading arrangements look like, or could there be a 'no trade deal' exit? Despite this uncertainty, it is important that businesses take steps to ensure that they are prepared for the inevitable disruption.

For businesses who have suppliers and/or customers based in the EU, we recommend that you check the terms of your existing contracts. Whilst there is no magic 'Brexit clause', there are key points to consider particularly carefully to future-proof contracts, including:

  • Flexibility - should the contract be structured to be flexible in the face of an uncertain trade deal with an EU member state where the counterparty is based.
  • Pricing - how will pricing respond if duties or taxes are imposed, either directly to the contract in question, or at another point in the supply chain.
  • Risk allocation - can this be aligned with insurance cover.
  • Impact on supply chain - will the disruption caused by Brexit, such as interruption of supply or the imposition of new checks at borders, hinder a party from performing its obligations or require it to prioritise competing contracts.

Other provisions which should be reviewed include Material Adverse Change clauses (or other termination rights), illegality clauses and governing law and jurisdiction clauses.

For businesses looking to try to renegotiate or amend existing contracts to deal with the implications of Brexit, it is advisable to start this process as soon as possible to ensure there is enough time for any renegotiation to take place before January 2021.

For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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