Taking Brexit’s Legal Temperature
Brexit isn’t just about operational and commercial changes. There are plenty of legal knots that need to be unpicked, not least the rewriting reams of EU law out of UK law.
Jeremy Kelly, associate at London-based law firm HFW, explained the sticking points to Breakbulk, the first being understanding how tariffs and duties will be affected post-Brexit. After the transition period through to the end of 2020, duties may be applied to goods moving between the UK and the EU and also on imports into the UK of products from countries with which the EU currently has a free trade deal, such as Canada and South Korea.
“Whilst average global customs duties — which are usually calculated as a percentage of the good’s value — are not high, the total amount payable may be significant when applied to high-value project cargo,” Kelly said. “As there is no guarantee that the EU and the UK will agree that all trade should be tariff-free following the end of the transition period, or that the UK will be able to benefit from the EU’s free trade deals.”
Kelly recommended that breakbulk and project cargo businesses check any long-term contracts to see who is liable to pay in the event of increased duties, and to give this issue consideration when negotiating new contracts.
Despite all the uncertainty, companies can — and should — use the temporary respite offered by transition to take steps to protect their business interests.
“We are recommending companies to consider whether a Brexit clause, which triggers certain rights and obligations in the event of defined events, should be included in new or existing contracts,” Kelly said.
A Brexit clause could, for example, provide a right to renegotiate a contract if a trigger event occurs which may cause an adverse impact and to terminate the contract if amendments cannot be agreed.
“As the potential effect of Brexit will vary significantly depending on the subject matter of the contract, this will need to be reflected in individual contracts,” he said.
Further uncertainty surrounds the jurisdiction of disputes, as there has not yet been an agreement on the Brussels Regime, which governs enforcement of judgements in the EU.
“There is a danger that courts in the EU will not recognize English jurisdiction and/or the decisions and awards of English courts in certain circumstances,” Kelly said.
However, the Rome I Regulation, which gives effect to parties’ choice of law in a contract throughout the EU, will continue to apply to the UK during the transition period.
Finally, Kelly raised an issue that could affect shipowners and equipment manufacturers. Generally certain categories of equipment — such as machinery and pressure equipment — must be certified to have met certain standards in order to be sold in the EU Authorized “notified bodies” test equipment in order to certify that it meets the required standards.
However, “there is a risk that UK-notified bodies — which include Lloyd’s Register and ABS Europe — will no longer be able to certify that the relevant standards required by the EU have been met unless mutual recognition agreements are put in place,” he said.
Photo credit: Shutterstock
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