Marcello Mantelli
Avvocato in Milan and Turin

After the Italian Trade Agency’s analysis of the risk areas for commercial contracts following Brexit (and the signing of the TCA, “Trade and Cooperation Agreement“), today we are examining specifically the legal tips to keep in mind in managing present and future relationships with English partners.

Knowing the main changes caused by Brexit and intervening – if necessary – on current or future agreements will in fact guarantee to protect the business from any risks.

CONTRACTS IN PROGRESS

As regards the contracts already in place at the signing of the TCA, the main changes and therefore the – possibly – necessary interventions concern:

1) the territoriality of the agreement: it is possible that in the current contract a certain territoriality is generally included within the European Union. In such case, it will therefore be necessary to modify the contractual text, expressly providing for the extension of this territoriality also to the United Kingdom;

2) prices: Brexit will almost certainly determine an increase in trade barriers, consequently it will become necessary to establish customs controls for goods in transit between the UK and the EU. This will lead to delays and increased costs for companies operating with the UK.

It will probably be necessary to check whether the price renegotiation or hardship clauses are foreseen in the current contracts or whether the prices can be freely changed upon notice or, possibly, whether it is possible to withdraw from the contract as a last resort.

If there are no specific clauses that allow freedom of action, it will be appropriate to examine the applicable law and the rules it provides in such situations to assess the practical consequences (see for example the institution of “frustration” in English law);

3) the law applicable to the contract and the resolution of disputes: the indication of English law or of an English tribunal in a commercial contract should in principle not be affected by Brexit, thus remaining valid the choice made in the contract. However, a different choice must be considered when renegotiating or renewing the contract, which takes into account the fundamental aspect that the United Kingdom is no longer part of the EU.

It must in fact be considered that the European Regulations directly applicable to the EU States will no longer have any validity for the United Kingdom.

For example, as regards the resolution of disputes, it should be emphasized that the EU Regulation 1215/2012 (Brussels I bis) – which governs the automatic recognition of judgments issued within the EU – will no longer be in force for the United Kingdom. To obtain recognition of the sentence issued by another State, it will therefore be necessary to resort to an enforcement procedure, with long timing and higher costs.

UNDER NEGOTIATION/FUTURE CONTRACTS

With regard to contracts under negotiation or future contracts, it is important to underline the need for companies to carefully evaluate the changes set out above and therefore act accordingly, by drafting clauses to regulate and eliminate possible risks of litigation.

In this regard, it will be useful to draft a series of specific clauses – so-called Brexit clauses – through which regulate relationships that will necessarily suffer consequences due to Brexit.

Consider, for example, the impact on the performance of companies and therefore, indirectly, on what the price of goods/services will be; or even the delivery times, necessarily lengthened due to the new border controls; etc.

To minimize the risks associated with Brexit and to safeguard the business with English partners, it is therefore essential to:

– analyze and, if necessary, renegotiate existing contracts;

– carefully draft future contracts from a “tailor-made for UK” perspective.

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