The theme for this issue of Energy Voice is looking back on 2020 and looking forward to 2021 – I think most of us can’t wait to put 2020 behind us, so I thought I would focus on the future. One thing the future holds for us is Brexit.
Although we left the EU at the end of January, we have been insulated from the legal effects of departure, as EU law continued to apply during the transitional period. From January 1 2021 those changes will begin to kick in but may not be immediately apparent since the UK has legislated to retain most EU law in its domestic legislation for the time being at least.
Some effects will however be immediate. Many organisations had preparations for a no-deal exit in place this time last year during the fraught negotiations for the withdrawal agreement – you should be dusting off those preparations.
As I write in mid-November, it looks unlikely that the UK and EU will agree a free trade agreement before the deadline so we are likely to begin 2020 trading with the EU on WTO rules with consequent tariffs on imports and exports. Customs arrangements will also apply, meaning much more paperwork and new IT systems.
Those trading with the EU should by now have applied for appropriate EORI numbers, registered for the new UK systems and be training their staff on making customs declarations and valuations, or have appointed someone to do this for them. Exporters will need an EU-based customs representative. Those importing or exporting chemicals will need to take account of new arrangements under REACH.
Although the UK has deferred full implementation of the new customs regime until July, no such waiver applies on the EU side. Experts predict significant disruption at cross-channel ports with knock-on effects for goods from other countries using the same ports. Self-help measures include increasing stocks of imported goods, looking for domestic suppliers and checking what arrangements your suppliers and sub-contractors in the UK have made to protect their own supply chains.
Hopefully, by now, any EU citizens your business employs in the UK have been encouraged to apply for settled status where available. If you wish to employ EU citizens in the future you will need to apply for a work visa using the new points-based immigration system. If you wish to second UK staff to offices in the EU or even to travel to the EU on business you may require a visa or other documentation. You should also consider health insurance as the old EHIC arrangements will end.
Uncertainty remains over what will replace the EU emissions trading system (ETS) post-Brexit. Options under consideration are the establishment of a UK scheme linked to the EU system or a standalone system, or alternatively a carbon tax. If any UK scheme is to be linked to the EU ETS, then we will need to reach agreement with the EU on how that would operate. There are increasing calls for the government to clarify the timetable for picking an option as this uncertainty represents a considerable challenge for energy companies.
Organisations exporting personal data from the EU to the UK will need appropriate arrangements in case the EU has not determined the adequacy of the UK’s data protection regime by January 1 – this might include binding corporate rules for transfer between branches or affiliates, or appropriate contractual clauses for transfer to an independent entity.
Contracts should be reviewed, starting with the most business critical or highest value to see how they are affected by Brexit and whether amendments are required. Issues to consider include:
• Territory – clauses may assume the UK is part of the EU;
• Increased costs – who pays for tariffs or currency fluctuations;
• Force Majeure – if performance is affected by Brexit will this trigger force majeure? FM clauses sometimes cover legal obstacles to performance but rarely increased cost.
• Notice – consider whether to require EU counterparties to nominate an agent in England for the service of English court proceedings, as service in the EU may become more complex and costly.
• Governing Law – English law is widely used in international contracts – there is no reason for this to change following Brexit as courts in the EU will still recognise the validity of English governing law clauses.
• Jurisdiction and Enforcement – exclusive jurisdiction clauses in favour of the English courts should be upheld by courts in EU states but the situation is complex and you may need specialist advice. Arbitration clauses should not be affected by Brexit.