How Brexit could affect your legal contracts
The UK has voted to leave the European Union. As the dust settles after this seismic event, we want to reassure Juro customers throughout Europe that we will continue to offer you access to our service. We are a pan-European team ourselves and are proud to have European customers that we are passionate about serving. The Brexit vote will not change this one bit.
We will be putting together a series of briefings for our customers in the coming weeks to help you navigate legal challenges for your business that Brexit will bring over the short and medium term. In the meantime, here are a few thoughts on some of the concerns and questions that have come in this morning.
Juro provides electronic signing that complies with, among other things, pan-European regulation. In 1999, the EU passed the eSignature Directive (1999/93/EC), which aimed to harmonise e-signing law and regulation throughout the European Union. The legislation implemented by member states resulting from this was eventually replaced by EU Regulation No 910/2014, known as eIDAS.
As the UK seeks to extricate itself from EU regulation, the UK would be within its rights to change the law on e-signing. We believe it is very unlikely that this would happen. The benefits that this EU harmonisation exercise gave in standardising the way documents can be signed online are obvious, and we can see little reason why this would change. We will, of course, continue to monitor the situation and ensure our e-signatures are always legally binding.
Termination of contracts
Two types of contract clauses that may be triggered by Brexit are material adverse change clauses and force majeure clauses. The consequences of these clauses being triggered include, among other things, the possibility of a contract being terminated and potential loss. This is obviously a major concern for customers, especially for contracts of significant value.
Whether or not Brexit would constitute the kind of event that would trigger these clauses will of course depend on the wording in the contract itself, but we would recommend reviewing all contracts to minimise this risk and, if necessary, engage with counterparties to negotiate any solution. We will shortly release advance search functionality in the Juro dashboard where you can search through text in contracts to find any relevant clauses that might be affected.
Application of EU law to contracts
Perhaps also worth searching for is any express mention of the EU in your contracts. If for example in a licensing contract, your business gave the exclusive right to a counterparty to use your software throughout the EU, that party would have expected the definition to include the UK.
We don’t expect this to affect the majority of everyday contracts but it is a risk worth thinking about nevertheless. It may be that a Court would interpret this as the intention of that clause even post Brexit, but if you need certainty on the point, best again to engage with your counterparties who probably have the same concerns as you.
Governing law & jurisdiction
Most contracts processed through Juro are governed by English law. The construction of “English law”, post Brexit, may change from including laws made both in England and Wales and by the EU, to simply those made in England and Wales. If it was assumed when drafting the contract that certain EU regulations would apply, post Brexit the contract’s meaning may change or even make it impossible to perform the contract.
It is also worth noting that the main regulation around governing law and jurisdiction comes from Europe.
Known as Rome 1 and Rome 2, these regulations impact the drafting of governing law clauses in the boilerplate of contracts. In terms of contractual provisions, we are not particularly worried, not least as the English common law position is broadly similar to that of Rome 1. But for Rome 2, which governs ‘non-contractual’ obligations — wording you might have seen in clauses at the end of your contracts — the position is less clear. The Government may well act to implement Rome 2, or its own equivalent, unilaterally but we will have to wait and see.
A final word…
Brexit is unlikely to have a significant impact on contracts in the short term, but as the negotiation of Britain’s exit (whether under Article 50 or not) progresses, businesses should start preparing for the legal impact.
There will no doubt be commercial considerations to consider if you trade with European partners or have European employees but there are also legal implications that will need to be dealt with, especially in your contracts. We hope Juro can help make the process as easy as possible.
Please get in touch if you have any questions regarding contracts and we will do our best to help. In the meantime, keep strong :-)
Richard and the Juro team