Thu. Mar 21st, 2019

Guide to tackle a hard Brexit | Economy

Guide to tackle a hard Brexit | Economy

A hard Brexit, that is, without agreement between the United Kingdom and the European Union, it has gone from possible to probable. The difficulties of Theresa May for the British Parliament to ratify its agreement with the Twenty-seven, have triggered the concern of companies with interests on both sides of the English Channel. Putting yourself in the worst is today a more than reasonable position in view of the uncertainty surrounding the vote next Tuesday and the speed with which it approaches March 30, the date on which, with or without agreement, will be consummated. divorce.

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Are companies prepared? to face a hard Brexit? What should your contingency plans contemplate in this scenario? The law firms are privileged testimonies to answer both questions. On the one hand, because the consultations they receive radiograph the concerns of the organizations. And, on the other, because his intervention is essential in the design of the measures to survive such a complex legal situation.

The perception of many of the lawyers consulted is a certain lack of foresight on the part of politicians and companies. "Nobody looked at the hard Brexit as the most possible scenario," explains Lourdes Catrain, partner in Brussels of Hogan Lovells. Opinion signed by Marco Antonio Sanz, partner in London of Cuatrecasas: "It has caught us a bit by surprise; we had always assumed that there would be agreement. "

Francisco Uría, partner of KPMG, distinguishes two groups of companies by their degree of preparation. In the first, entities from regulated sectors appear, well equipped thanks to the fact that supervisors (both British and European) have demanded contingency plans that include the option of breaking without an agreement. In the second, that of companies not subject to this normative pressure, the picture is not uniform. While small and medium-sized enterprises arouse doubts, the trust in the largest and most important. In this sense, suggests Francisco Garcimartín, Linklaters consultant, managers who have not adequately prepared their organization could be subject to internal liability for not acting with due diligence.

These companies face two major types of risks, according to Ferran Foix, managing partner in London of Gómez-Acebo & Pombo: the commercial ones, which substantially affect the agri-food, chemical, transport or automotive companies; and the regulatory ones, to which banks, insurers, telecommunications, energy or technology are sensitive. By sector, lawyers reveal that the financier has done his duties in a timely manner. Instead, industry and commerce are concerned. The appearance of a new frontier, where until now the freedom of movement of goods governed, will seriously affect the production, supply and distribution chains.

In this sense, one of the critical elements of contingency plans is to calculate the customs effect. His estimate, however, is not simple. Thus, although the tariffs are predictable (cars outside the EU, for example, are subject to a 10% tax), determine the cost in time and money that customs procedures will entail (inspections, deliveries of certificates, possible delays ...) is more complex. Especially when, as Manuel Gil, an expert in the field of KPMG, warns, many border administrations are not prepared to assume the increase in work that the goodbye of the United Kingdom will cause. Who assumes the payment of these new tariffs and costs is a circumstance that will force the renegotiation of many contracts.

In spite of how sensitive the industry is to any alteration in its production chain, Catrain considers that, "in many productive sectors, this analysis is not being carried out with the rigor and detail that would be appropriate". Idea that subscribes Foix, which warns of how slow it is to implement any change in these complex processes. "Who has not started already, will not arrive on time," he predicts.

The complex of contracts

The second essential element of the contingency plans is the contractual revision. A procedure that, according to all lawyers, is much more complex and involves much more work than it seems. "The easy thing is to adapt the contractual terminology (stop referring to the United Kingdom as a Member State, for example), but there are other more complicated aspects, such as the transfer of a contract to another group company or determine the applicable law or jurisdiction to the one that is submitted, "explains Garcimartín.

Sanz warns that all contracts will be affected, not only those most sensitive to the new frontier, such as supply or distribution. Thus, for example, clauses in the acquisition or financing agreements (the relevant adverse change) that modify or annul the agreement if there is a significant regulatory or economic change. Anticipating if the Brexit can activate any of them is essential to avoid unwanted surprises.

But there are more important issues, such as articulating the correct transfer of personal data between the EU and British territory, clarifying the protection that brands will have in the United Kingdom or defining, in multinational organizations, the distribution of benefits or burden. fiscal between countries.

The adoption by companies of an appropriate contingency plan acquires special importance if there is no agreement before March 30. And this, because the opening of a transitory period that softens the effects of the rupture is linked to the signing of the pact. True to their suspicion to speculate, none of the lawyers consulted dares to predict how this process will end, but Catrain recalls that the EU "has a long tradition of reaching inconceivable agreements at the last minute".


Although all the lawyers agree that the main victims of the Brexit are the British companies, they point out that very few have resorted to the resource of offshoring. The largest movements in this direction have occurred in the financial sector, moving business to subsidiaries to not lose or not lose the European passport. At industrial level, Ferran Foix, of Gómez-Acebo & Pombo, points out, many companies are reviewing their supply and production chains to minimize new costs, for example, through a change of suppliers.


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