BREXIT: Highlighting legal risks for your business (Part 2)
As mentioned in Part 1, there are many areas that businesses should be actively reviewing in advance of the final agreement between the UK and the EU. Almost all areas of the legal relationship between the UK and the EU will be affected to some degree by Brexit. The following areas should be addressed at an early stage in order to avoid difficulties that may arise if and when the final status of the relationship between the UK and the EU is determined.
Employment Law: in many respects Irish and UK employment law are quite similar. For example, on a transfer of the undertaking of a business currently the Transfer of Undertakings Regulations apply (which are based on EU law). These apply automatic transfer rights which protect the existing terms and conditions of employment of employees on a transfer of a business which often arises on certain takeovers or acquisitions. It is too early to speculate but it appears that the most likely scenario is that the UK will enact reduced protection for employees on a transfer of business and an abbreviated notification procedure. EU legislation and judgments of the European Court of Justice imposing various restrictions on the maximum working time of employees are likely, based on past performance in the UK, to be reviewed post Brexit.
So far, all indications are that it is likely Brexit will curtain the current EU-mandated free movement of workers. In practice, many Irish companies who employ staff in the UK are likely to be subject to greater employment law-related restrictions and costs in continuing to do so. Conversely, UK firms employing workers in Ireland may encounter greater restrictions and costs.
Data Protection: the existing EU Data protection legislative framework will be fundamentally reformed in 2018 pursuant to the General Data Protection Regulation (GDPR). In summary the new GDPR and related EU Directive will impose higher standards for data processing and greater data-related obligations (and costs) on companies together with increasing the penalties for breach. Post-Brexit, if the UK remains a member of the EEA, it is likely that the GDPR will be adopted by the UK.
Alternatively if post-Brexit the UK is not a member of the EEA, the likelihood is that UK data protection law will evolve separately to EU law and significant differences could arise. A possibility is that the less “consumer friendly” United States data model where in general safeguards on the use/disclosure of personal data are lower than under EU law will be adopted. UK-based companies might look more closely at moving to Ireland or elsewhere in the EU or EEA or establishing a subsidiary or branch in the EU/EEA if benefiting from EU data protection law suits their business model. This may also allow them to avoid the legal obligations arising under EU data protection law on the migration of personal data outside the EEA.
Capital markets: UK-based companies may no longer have unrestricted access to the EU Single Market for capital. It is certainly possible that if the UK is no longer a member of the EU Single Market, the existing EU Capital Markets Union may be divided between London and the rest of the EU. In addition, a related area is the offer and trading of equity securities which is based on the EU regulatory regime including the Prospectus Directive, the Market Abuse Regulations and the Transparency Directive.
Under the Directives and Regulations (as transposed into Irish law) an Irish incorporated company may use a single prospectus (if no exemption is available) to market and have securities admitted to a stock exchange in one EU member state which is then valid in multiple EU member states, without the need to prepare a separate prospectus for those states (this is the right of “passporting”). After Brexit it is possible that the right to passport prospectuses in the EU may no longer apply. On this basis, in the case of an Irish plc with shares admitted to trade/listed on a stock exchange in the UK – if the shares are to be offered to the public or listed in another EU member state any prospectus would have to be approved in each such EU state. This would result in increased costs and delays for Irish companies.