Brexit Webinar Series 1

© Allen & Overy 2016
Brexit: Understanding the context and
consequences of the UK referendum vote
Richard Cranfield, Marc Feider and Sarah Garvey
18 October 2016
Brexit Webinar Series
Presented in partnership with
the U.S. Chamber of Commerce

© Allen & Overy 2016 222
Brexit webinar series 2016 – Programme Agenda
6
2
3
1
Brexit: Understanding the context and consequences of the UK referendum vote
Tuesday, 18 October 2016
Trade, tariffs, and taxes
Employment, data protection, and data transfers
Tuesday, 1 November 2016
Securing the best legal frame work for your businesses
Thursday, 17 November 2016
4
Antitrust, intellectual property, and environmental regulations
5
Commercial contracts

23rd June 2016 – 51.9% of UK electorate vote in referendum for
UK to leave the EU
Brexit – an historic moment

The European Union – a recap
Map from The Economist
– European Union is a club of 28 countries
– UK originally joined in 1973
– UK is not in the eurozone (common currency)
– EU members apply common laws and
regulations overseen by a European Court of
Justice
– EU members make financial contributions
– EU members agree 4 fundamental freedoms:
– free movement of goods
– free movement of services and
establishment
– free movement of citizens and workers
– free movement of capital
– Other groupings European Economic Area
(EEA) includes Iceland, Norway, and
Liechtenstein; European Free Trade
Association (EFTA) includes Switzerland

An historic moment - retreat from globalisation?
David Cameron resigned the next day, and Tory party leadership context
commenced
Theresa May (who was on the ‘Remain’ side) won the contest and on 11 July
2016 became the UK’s second female PM
23 June 2016 - UK electorate surprise vote to leave the EU 51.9% – free
movement (immigration) and sovereignty (‘taking back control’) key issues

The Brexit process – straight forward in theory
Under the EU Treaties, the UK must serve a notice (Article 50 notice) to start
formal exit process
After service of the Article 50 Notice, the UK and EU 27 have two years to
negotiate a withdrawal agreement
UK and EU 27 may also enter a separate agreement about the future relationship

The Brexit process – an uncertain path with lots
of variables
Legal challenges over Article 50 Notice may delay exit (see below)
What deal will be negotiated? EU 27 will not want to set a precedent. Soft Brexit
(status quo) or hard Brexit (no access to single market/WTO arrangements)? PM
May wants a “bespoke deal”
What impact will the German and French elections in 2017 have on the process?
When will Article 50 Notice be served? UK PM Theresa May now suggests
March 2017, meaning exit 19 March 2019?
How do businesses contingency plan in this context?

Legal challenges
Judicial review proceedings brought against the UK Government re Article 50
EU treaty provides that a member “may decide to withdraw in accordance with its
own constitutional requirements”
Claimants argue that Parliament should pre-approve service of Article 50 Notice,
the Government argues that it is a matter of the royal prerogative and its decision
alone
UK has a largely unwritten constitution
Referendum Act silent on what happens after the vote and referenda advisory
under UK law

Legal challenges (cont’d)
Further legal challenge against the UK Government brought in Northern Ireland
Also legal challenge against Mr Juncker in Luxembourg re his prohibition of
Commission officials from negotiating with UK prior to service of Article 50
Majority pro Remain MPs in Parliament but many have constituencies that voted
Leave
Potential to delay the process but maybe not halt it

The Brexit negotiators: “Brexit means Brexit”

© Allen & Overy 2016 111111
Sharing of sovereigntyMarket access
Swiss model
Norwegian
model
Turkish model
(customs union)
− Significant market access
− EEA membership
− Extensive application of EU laws
− Significant financial contribution
− Only consultation in legislative process
− Access to parts of market
(depending on outcome of negotiations)
− Complex array of agreements
− EFTA membership
− Application of many EU laws
− Partial financial contribution
− Only consultation in legislative process
− Access to goods market
− Some EU law applied
− No financial contribution
− No say in legislative process
Canadian
model
− Deep free trade agreement
− Access to market in goods and certain services
− UK remains in control of tariff arrangements
with other (non-EU) countries
− Not bound by EU law
WTO model
− No application of EU law
− Reduced tariffs on goods
− General Agreement on Trade in Services
Post-Brexit models – Hard Brexit v Soft Brexit

© Allen & Overy 2016 121212
The scale of the task – the biggest de-merger in history
40+ years of EU legislation deeply entrenched in legal landscape – directly applicable
Regulations/UK enactment of Directives, plus ‘soft’ law, eg case law
Much depends on the model, but even the Norwegian model likely to involve some “repatriation”
of EU laws
Former head of UK civil service quoted as saying “the job is vast” and as an administrative
venture it would be “absolutely all consuming”
Need to address impact on EU and non-EU trading relations
Impact on EU post UK exit – reshaping of world’s biggest trading block
PM May said she will enact “Great Repeal Act” transposing EU law into UK domestic law and
then pruning but many uncertainties
EU27 have said no informal negotiation before Article 50 Notice served

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There are certain assumptions that can be made
Largely consensual process (unilateral exit in breach of Treaties would be highly
controversial)
UK will remain a Member State until Brexit and be bound by EU law
UK influence on new EU law is already decreasing
The impact will extend beyond the UK’s relationships with the EU – global
relationships will be affected

Overview of post-Brexit implications for business
− Finance
− Employees
− Tax
− R&D and other EU
funding
− Sterling drop means
imports more expensive,
but exports cheaper for
UK companies
− UK targets - more M&A
activity?
− Derivatives
− Pension schemes
− Public procurement
− Intellectual property
− Data protection
− UK-incorporated group
entities
− Contracts
− Insurance
− Law and regulation
− Product safety
− Environment and
climate change

© Allen & Overy 2016 151515
Trade – there could be a big impact on market in
goods and services
Freedom of access to EU single market from the UK may well be restricted
(although extent difficult to predict until “model” is chosen/agreed)
UK company access to non-EU markets may also be affected if current access is
via Free Trade agreements (FTAs) with the EU (although there may be
workarounds via sister companies in continental Europe) or other jurisdictions
2
Europe to UK UK to 3rd state
with EU FTA
1
UK to Europe
3
e.g. South Korea

Dual regulation as new norm
EU regulation significant in following areas, what happens on Brexit?
Product
safety
Exit arrangements should clarify the position and the UK
may well retain much of the existing regimes
Environment Antitrust
Public
procurement
IP/Data
protection

© Allen & Overy 2016 171717
An era of greater complexity
Financial sector – ‘passporting’ rights from UK into EU 27 may not be maintained
Dual regulation (UK and rest of EU) likely to become the norm in many areas (see
above)
May be more difficult to recruit or move employees from UK into EU (and vice versa) –
possible skills gaps
EU R&D funding likely to switch to UK Government
BUT impact on commercial contracts likely to be limited - English contract law largely
unaffected by EU law and no need to change English law/courts selection

© Allen & Overy 2016 181818
Does Brexit offer any opportunities for
U.S. investors?
Sterling fallen to lowest level against USD for 30 years - UK assets may look
attractive
Uncertainty and market volatility can present opportunities
Possible introduction of favourable corporate tax rates in UK (at a time of
harmonisation in Europe)?
New trade deals signed by the Brexiteers?

© Allen & Overy 2016 191919
US reaction
We respect the choice the people of the United Kingdom have made. Our first task has to be to make
sure that the economic uncertainty created by these events does not hurt working families here in
America.
We also have to make clear America's steadfast commitment to the special relationship with Britain
and the transatlantic alliance with Europe – Hillary Clinton
“
”
"great thing" that the people of the UK have "taken back their country" in voting to leave
the EU. – Donald Trump“
”
I think it’s fair to say that maybe some point down the line there might be a UK-US trade
agreement, but it’s not going to happen any time soon because our focus is in negotiating with a
big bloc, the European Union, to get a trade agreement done - The UK is going to be in the back
of the queue. – Barack Obama
“
”

© Allen & Overy 2016 202020
If you have a UK base / exposure - steps to be taken
Identify aspects of the business most affected by Brexit – mapping
Consider approach to lobbying or contributing to government or industry
consultations on post-Brexit regime
• How can you best make your voice heard? Will lobbying continental EU
governments be more effective than lobbying at a UK level?
• Note antitrust/lobbying rules
Prepare strategy for responding to employee and other stakeholder queries and
to enquiries from the media. Every investment decision seen through eyes of
Brexit vote by UK media
Take a view on timing – when do you need to take any necessary steps?

© Allen & Overy 2016 212121
Brexit webinar series 2016 – Programme Agenda
Brexit: Understanding the context and consequences of the UK referendum vote
Brexit: Trade, tariffs, and taxes
Brexit: Employment, data protection, and data transfers
Brexit: Securing the best legal framer work for your businesses
Thursday, 17 November 2016
Brexit: Antitrust, intellectual property, and environmental regulations
Brexit: Commercial contracts

Contacts
22
Richard Cranfield
Partner
Corporate – London
Tel +44 (0)20 3088 200
richard.cranfield@allenovery.com
Richard is global chairman of A&O's Corporate practice and co-head of A&O's financial institutions
group. He has over 30 years' experience in mergers and acquisitions, and in capital markets (both
international and domestic) for equity financings. His corporate client base includes FTSE 100 and
FTSE 250 companies and banks in the UK and large public and private corporations and financial
institutions outside the UK.

Contacts
23
Marc Feider
Partner
Corporate – Luxembourg
Tel +352 44 44 5 5411
marc.feider@allenovery.com
Marc heads the Luxembourg corporate practice. He specialises in private equity, mergers and
acquisitions, securities and stock exchange-related work, takeovers and joint ventures. He has 30
years of experience advising clients across all sectors, particularly financial institutions, private
equity, insurance, energy, communications, media and technology.

Contacts
24
Sarah Garvey
Counsel
Litigation – London
Tel +44 (0)20 3088 3710
sarah.garvey@allenovery.com
Sarah is an experienced litigator with particular expertise in conflict of laws, state immunity issues
and EU laws. She regularly advises clients on topics such as governing law, jurisdiction, immunity
and arbitration. Sarah is part of Allen & Overy's core Brexit team and has been heavily involved in
advising clients on the legal implications of Brexit. Sarah is Chair of the Law Society's EU
Committee and sits on the Lord Chancellor's Advisory Committee on Private International Law.
Sarah edits the Forum Chapter of Butterworths' Encyclopaedia of Banking and is secretary to
Allen & Overy's Global Legal Opinions Committee. Sarah is a Board Member of the London
Women's Forum.

Contacts
25
Marjorie Chorlins
Vice President, European Affairs
+1 202-463-5305
mchorlins@uschamber.com
Garrett Workman
Director, European Affairs
+1 202-463-5639
gworkman@uschamber.com
The U.S. Chamber of Commerce's European Affairs team champions a
pro-business agenda across Europe and in Washington to expand
commercial opportunities for members by advancing open and
competitive markets, economic growth, and transatlantic cooperation.

© Allen & Overy 2016 262626
Questions?
These are presentation slides only. The information within these slides does not
constitute definitive advice and should not be used as the basis for giving definitive
advice without checking the primary sources.
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term
partner is used to refer to a member of Allen & Overy LLP or an employee or consultant
with equivalent standing and qualifications or an individual with equivalent status in one
of Allen & Overy LLP’s affiliated undertakings.

Brexit Webinar Series 1

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