The United Kingdom has voted to leave the European Union. Will this have implications for contracts between South African businesses and parties in the UK or the EU? It should be noted that nothing has changed yet. The UK must still formally exit the EU. In the meantime, EU law will still apply to the UK. However, many changes are on the horizon. South African businesses will have to keep this in mind when contracting with parties in the UK or EU.
For example, if a South African manufacturer appoints a distributor for “all countries in the European Union”, this area might not include the UK in future. Therefore, one must specify whether this area will cover all countries that are part of the EU when the contract is signed or whether the area will cover all countries that are part of the EU from time to time. The second option will mean that the UK will be excluded from the contract’s area at some point in the future.
The ‘Brexit’ will lead to many regulatory changes. In future, if a manufacturer will supplies to the UK and EU region, the products will have to comply with separate laws and regulations in the EU and UK. One would hope that the laws will not be too different. Customs and tariffs challenges will arise as well, and one will also have to try and deal with currency volatility in contracts.
Many transborder contracts are governed by the laws of England and Wales. Although EU law has been incorporated in English law in many respects, the UK’s exit from the EU will not necessarily cause an immediate and dramatic change to English law. It is possible that English law clauses will remain popular and parties may continue to choose to resolve their disputes in the UK’s courts or arbitration forums.
The future is uncertain and one will have to monitor developments closely, particularly when contracting with parties in the UK. However, drastic contractual ramifications might not yet be likely. For further advice contact our Commercial Law Department.