No-Deal Brexit: Impact On Long-Term Commercial Contracts

While a range of outcomes, including a departure under the terms of the current Withdrawal Agreement, remains possible, it is important for businesses to plan for a no-deal Brexit, in which the UK leaves the EU without a withdrawal agreement or other deal. Here we look at the potential impact of a no-deal Brexit on long-term commercial contracts.

From the uncertainty over what will happen it may appear that there are too many risks to consider. Our key advice is to understand what contracts you have and how they might be impacted by the different scenarios. We have seen businesses gathering information on their key contracts, and in particular those that are impacted by cross-border trade. They are gathering information on matters such as:

What happens if there is a change in law - does the contract allow either party to vary/insist on the price? Is the price fixed or can it be adjusted to take account of currency or inflationary pressures? What does the force majeure clause say (if there is one?) - can a supplier be excused from performance if goods are held at the border? Should I include a clause to facilitate discussions between the parties if the contract is not viable - having a litigation claim is one matter but long-term objectives means it is probably better to ensure both parties are treated fairly. Which staff are used to fulfil a contract? Will they still be available? Does the contract seek to stop staff changes? Which law/courts regulate the contract - what will happen if the mutual recognition currently enjoyed within Europe is lost? Is it better to consider arbitration (but there may be other reasons which count against this, such as the potential cost of an arbitration decision)? Businesses should as a matter of priority audit their contracts to assess these and a number of other issues (more details of which are set out below). Our dedicated commercial contracts team is very experienced in spotting these issues and helping clients work through them to make practical decisions.

We are able to deploy artificial intelligence software to electronically read multiple contracts and work alongside our lawyers to pick out and advise on key issues. This can be done for a select few major contracts or can be spread further depending on the level of concern. Our pan-global team has strength and depth and allows us to support you on decisions with advice from around the world so that all angles are considered.

Further detail on some...