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Commercial Property, Frustration and Brexit

Commercial Property, Frustration and Brexit
The UK's return of a vote in favour of leave in the referendum on its future relationship with the European Union had an impact on the latter's decision as to where its European Medicines Agency should be based and, having entered into a lease for a property based in the United Kingdom some 21 months prior to the result, wished for it to be re...
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Government offers Brexit assurances to European trademark holders

Government offers Brexit assurances to European trademark holders
With the UK's expected departure from the European Union just weeks away, those with registered intellectual property rights are becoming increasingly concerned for any implication this may have for their registrations.The exact nature of the new trading relationship is not yet known and in all likelihood may not be known with any certainty right u...
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Brexit – most complex legal issue in history?

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With massive Brexit changes afoot, we look closer at what experts are calling the most complex legal issue in recent history.

The Brexit changes have still got legal minds running; the Lord Chief Justice of England and Wales, Lord Thomas, considers that leaving the EU is likely to be the “most complex” legal issue in recent history.

The fact that English law is no longer certain and it is considered that the UK is no longer a safe forum to bring disputes is worrying litigants; what happens to judgements which may no longer be enforceable in the European Community? There is an air of uncertainty circulating around such matters, and the task of overhauling large parts of domestic legislation, post-Brexit, is a huge job and one which is fraught with complexities say the country’s most senior judges.

Some might say that now is a good time to test cases at domestic level because once Brexit is implemented properly when the UK leaves the EU in 2019, the risk is that judges will be asked to decide cases against the background of Parliamentary uncertainty about how the law should look.  This could mean that there will be a clear removal from the current principle that similar European cases are judged in the same way.

Whilst the concept of sovereignty does protect the UK’s ability to shape its own laws - a fundamental principle underpinning Brexit – the risk is having to decide whether Britain wants a complete overhaul of the laws, or whether there is instead a large scale harmonisation that falls in line with current EU regulations. Lord Thomas has also called for the Law Commission – an independent body that is responsible for keeping laws under review – to be given a bigger role after Brexit to try to disentangle highly technical areas.

There are also governmental plans to pass the Great Repeal Bill and to transfer EU legislation into UK law. Even if this is passed, parts of the law will still be subject to extensive amendment from Parliament and in some other areas more minor changes will inevitably be made.

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Brexit Boom for Commercial Property

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Since the vote for Brexit, the commercial property market has been braced for a recession. However, it looks like things are bouncing back. Our Partner Julien Pritchard explains more.

Ever since the UK voted to leave Europe, the majority of commercial property professionals have been bracing themselves for a substantial slump in the commercial property sector; it was certainly noted that immediately after the vote the London market came to a standstill overnight. However, the month after the Brexit vote over a million square feet of commercial property was let in the city – confidence was truly restored.

This nod of assurance appears to have continued into 2017 as purchases by investors hit a nine-year high of 127,280 in 2016/17, up six percent from 119,920 in 2015/16 according to Lendy, Europe’s leading peer-to-peer secured lending platform.

The significant rise in commercial property transactions demonstrates the continuing attractiveness of UK commercial property to both domestic and overseas investors.

Lendy explains that the UK property market is the most fluid in Europe and has a number of features - such as upward-only rent reviews and long leases - that are absent in other overseas commercial property markets.

The fall in the value of sterling since the Brexit vote in June 2016 has made the UK property market more attractive to foreign property buyers who are hungry for yield in a low-interest-rate environment.

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Brexit Update - Article 50 is Just the Beginning

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After an extremely eventful nine months regarding Brexit, our Senior Associate Ed Garston looks beyond Article 50 and what the future holds.

Those that believed the referendum would pave the way for a swift and decisive exit could not possibly have expected so many obstacles to the formal triggering of Article 50.  But even following unprecedented peacetime political change, a series of constitutional legal challenges, constant media debate over soft or hard Brexit, a backlash from the so-called “remoaners”, and various amendment requests from the House of Lords, the path is finally clear to trigger the exit process.

Official commentators make the Article 50 process sound simple.  They would have you believe that Prime Minister May symbolically delivers a notice to the European Council to kick-start a two-year withdrawal process.  So far, so good, but it is that two-year process which will determine what Brexit actually looks like.


No precedent 

If only there was a precedent for the UK, and the EU for that matter, to follow.  The simple truth is that the exit process has never previously been triggered and by all accounts, the treaty provision was never intended to be used.  Whether another nation will follow the UK’s decision remains to be seen, but for now at least the UK and the EU are both entering unchartered territory.

Financial markets loath uncertainty although current thinking is that reaction to triggering the notice will be muted.  As every business that depends on imported products will tell you, the supply chain is already dealing with the Brexit devaluation, so in a certain sense, the process is largely priced in.

Article 50 itself is brief. Once triggered, it obliges the EU and the UK to negotiate and conclude an agreement “setting out the arrangements for its withdrawal, taking into account of the framework for its future relationship”.  Just two years are allowed for the process which can only be extended if each EU member agrees.  So at this point, if no agreement has been reached, any single EU member could veto and effectively prompt the UK’s exit without a deal.

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The implications of a 'Hard' Brexit

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Will we witness a 'hard' exit from the EU? Or will Britain go softly, softly?
 
Now seems to be the time to get thoughtful about the potential implications of the UK voting to leave the EU.  There could be significant repercussions for the way in which commercial counterparties within the European Union choose to contract with each other and for their ability to resolve international disputes. 


In January 2017, the House of Lords’ EU Justice Sub-Committee will hear evidence from two senior UK Judges on the significance of EU legislation designed to facilitate cross-border civil disputes.  However, it cannot be avoided that there is the smell of uncertainty about the detail of the consequences for us for ending the UK/EU relationship, if it ends hard.

For Contracts

At present, EU legislation protects parties’ abilities to choose what governing law there should be for their contractual relationships and the ability to choose forms a fundamental freedom offered by English law.

The current EU framework applicable to contractual and non-contractual obligations is enshrined in the Rome I and Rome II Regulations, respectively. 

It is not beyond the realms of possibility that a decision could be taken to leave the rules as set out in the above regulations intact after Brexit.  A possible consequence being that the English Courts would be the final arbiter of how the rules are applied - ultimately a job reserved for the European Court of Justice as things stand.  If that were to happen, then nothing immediate would change, but it is possible that the interpretation of the two regulations could start to differ between the UK and the remaining EU member states over time. 

If the Rome I and Rome II Regulations were no longer to apply following Brexit, then it is possible that the UK would revert back to the rules in force before those regulations became law.  As such, in regards to contractual obligations, the Rome Convention; which applied to the law governing contracts made between April 1991 and 17 December 2009 could apply, which, of itself, would not materially alter the present position as we know it. However, in regard to non-contractual obligations, the Private International Law (Miscellaneous Provisions) Act 1995 - which is a regime which is unlike to Rome II - could operate so that the parties would not have an express right to choose the law applicable to non-contractual relations between them. 

However, it’s anticipated that when the UK eventually leaves the EU, the courts of EU member states will continue to respect the parties’ choice as to governing law as before; so that on choosing English law the parties to a contract will still enjoy an application of the rules set out in Rome I and II.

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Brexit - the implications for employers

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The historic outcome of the Brexit referendum has left many questions on the implications of this decision for workers and employers within the EU.
 
Currently, EU citizens can live and work in the UK without the need for work permits or visas. Although Brexit might eventually mean an end or restrictions on this free movement of people, any changes are yet to be decided. In the meantime, both employers and employees will be looking for reassurance for what it means for them.

Alex Pearce, employment law specialist at Pinney Talfourd in Essex advises employers on what to expect and what you need to do in the immediate future.

No immediate change

Among all the uncertainty, one thing is certain; there is no immediate effect on employment law or the right of EU nationals to work in the UK. What is more, it is unlikely that we will see any changes to employment law or the free movement of workers as a result of the referendum for some time. The formal process for leaving the EU only starts once the UK government gives two years’ notice. Our legal framework will remain in place until at least the end of those two years.

How significant is EU employment law in the UK?

Much of our employment law is based on EU law. The UK is currently required to implement EU law. The Working Time Regulations 1998 and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are two significant examples of regulations based on EU law.

However, this is by no means the full picture. There are some significant areas of UK employment law that have nothing to do with EU law. The law on unfair dismissal is probably the most important. The right to request flexible working and the national minimum wage are further examples. What is more, the UK created employment protection in areas such as race discrimination, long before the relevant EU directive came into effect. Finally, the UK sometimes builds on the minimum standards in EU directives to give more generous rights. This is known as gold-plating. For example, EU law only requires employers to give workers 20 days’ paid holiday but UK regulations increased that entitlement to 28 days.

Possible changes to UK employment law

No one can say with any certainty what the future impact of Brexit will be on UK employment law. It all depends on the terms of the trade agreements that the UK negotiates with the EU or its individual member states. One possible outcome is that the UK would still have to apply most EU employment laws as a condition of accessing the single market. This is the case for non-EU countries such as Norway.

At the other end of the spectrum, the UK may be released from applying EU law. In this scenario, the consensus is that a wholesale repeal of all UK employment law based on EU law is very unlikely. Commentators broadly agree that likely targets for changes include the regulations on agency workers and elements of the working time regulations and TUPE. However, this will depend very much on the politics of future governments.

Employing EU nationals

In the short term, EU nationals from outside the UK can still continue to work in the UK. This right of free movement of people remains until the end of the formal withdrawal process.

In the longer term the situation is unclear. EU nationals who have exercised the right to work in the UK before the UK’s withdrawal may point to a precedent in international law. This is the principle of acquired rights; having exercised rights under an EU treaty, an individual may continue to benefit from those rights even after the treaty has ended. This potential protection for the existing workforce could encourage an increase in immigration from the EU before the UK leaves the EU.

After the UK’s withdrawal, the terms of any future trade agreements will determine whether the right of free movement will exist at all or if it will be restricted. Non-EU countries, such as Norway and Switzerland, have to allow free movement of EU nationals in order to access the single market. However, countries such as Chile are not required to honour free movement under their trade agreements with the EU.

Next steps

Employees may be anxious about their rights, particularly those employees whose right to work here depends on the UK’s membership of the EU. Employers should consider issuing a statement to reassure employees and set up meetings to deal with any concerns.

Employers who are heavily reliant on non-UK EU nationals may wish to audit the basis of their employees’ rights to work in the UK. This could be followed up with a review of recruitment practices. Many employers are concerned that the impact of Brexit on the UK economy will trigger a downturn in business. You may want to consider any staffing efficiencies or increasing flexibility in your workforce to ensure that your business is as resilient as possible in these uncertain times.

We can help with writing staff communications and advise on the extent to which you can offer reassurance to your staff.


More information 

For advice on avoiding any discriminatory pitfalls in changing your recruitment practices, as well as advice on steps to increase your workforce flexibility, such as restructuring, redundancies and changing terms and conditions of employment or any other employment law issues, contact Alex Pearce in our Employment Law Department on This email address is being protected from spambots. You need JavaScript enabled to view it. or call 01708 229444.

This article was written by Alex Pearce our Employment Law Specialist at Pinney Talfourd Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law at July 2016. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
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