The UK left the EU on 31st January 2020, and the impact of Brexit on business agreements is likely to be significant. Contractual agreements with third parties serve as a framework for underlying day-to-day business operations. Brexit will affect organisations from every sector and every geography, whether based in the UK or simply trading with the UK.
Trade negotiations between the EU and the UK will continue throughout 2020, and deals will be negotiated in 2021 when Brexit will continue to have an impact on contracts. There are three possible directions for the UK-EU trading relationship from January 2021:
- A limited EU-UK free trade agreement with limited tariffs, but no trade frictions.
- No Deal and default to World Trade Organisation terms, with tariffs and only basic trade access.
- An extension of the 31 December 2020 deadline to allow more time for negotiation and a continuation of the transition period. (Although the UK is currently ruling this out.)
Impact of Brexit on contracts
The magnitude of the impact of Brexit on contracts should not be underestimated. It will require huge resource needs in terms of drafting, negotiation, evaluating and amending Brexit clauses in contracts.
Some of the areas where businesses could see the impact include regulations, trade in goods and trade in services. Brexit could impact every aspect of doing business from location, operations across borders, how a business sells its goods and services and duty and tariffs.
With so many changes, companies need to consider how they will tackle the large volume of contracts that need to be reviewed. Some of the key clauses impacted by Brexit include:
- Territory definitions and locations
- Currency and pricing
- Duties, tariffs and taxes
- Material adverse change
- Governing law, jurisdiction & dispute resolution
- Force majeure
Digital technology can help businesses prepare their contracts for Brexit
Implementing digital technology in advance of the changes can help businesses prepare their agreements and get ahead on the volume of work required. There is often a lead time to implement digital solutions, which can take several months. An end-to-end agreement cloud solution such as the DocuSign Agreement Cloud™ can help to simplify several common agreement workflow processes.
Here are some of the ways digital technology can help:
- Artificial intelligence helps to provide visibility of contracts. Leading solutions apply sophisticated machine learning to extract contract clauses and terms by concept, helping to identify a range of contract provisions that might be significantly impacted by Brexit.
- Contract lifecycle management solutions such as DocuSign CLM can help streamline the generation, negotiation, renegotiation and review of revised agreements.
- Electronic signature solutions such as DocuSign eSignature have features that allow organisations to gather individual consent from a large number of users with a bulk send feature. What’s more, automated reminders help to keep approvals on track.
- From 1 January 2021, GDPR may also change. The free flow of data between the EU and the UK may depend on an adequacy decision of the authorities, which can be withdrawn at any time. Partner and customer consent that has already been collected may need to be recaptured. A clickwrap agreement such as DocuSign Click allows an organisation to manage and collect consent to contract changes with ease.
In collaboration with Fieldfisher, DocuSign published a report evaluating the impact of Brexit on the agreement process. You can learn more about the impact of Brexit on the agreement process, and the digital solutions that can help get your business Brexit ready.