FINANCE, INSURANCE & LEGAL WHAT COULD BREXIT MEAN FOR THE SHIPPING INDUSTRY?
One issue that has already provoked much public debate between those supporting and opposing a British exit (“Brexit”) is whether the package of measures and reforms negotiated by Mr Cameron before Brexit is legally binding: that is a political hot topic and one on which we do not intend to comment, but we at Giambrone & Law have been thinking about how Brexit might affect our own clients’ businesses from a practical point of view.
As the debate develops and we get a better idea of the shape of any post-Brexit UK, it will be easier to assess its likely impact: the discussion below is therefore necessarily tentative but is intended to be helpful to contingency planning.
The EU is currently made up of 28 Member States and some of the world’s largest container and passenger ports are situated in its territory including Rotterdam, Hamburg, Antwerp, and Piraeus. Four of the world’s five largest shipping companies are based in the EU.
According to a recent Parliamentary Briefing, the EU is the UK’s largest trading partner, accounting for around 45% of exports, and 53% of imports, of goods and services. Over three million jobs in the UK are linked, directly or indirectly, to exports to the EU.
Shipping is also extremely important to the UK. The sector contributes around €12 billion annually to the UK economy. Around 240,000 people are employed in the sector in the UK. The UK is one of the top 10 ship owning nations according to UNCTAD with about 3% of the world tonnage.
European Union law, in the form of Treaties, Regulations and Directives, affects a wide number of commercial issues including trade, environmental regulation, international trade sanctions, competition law, employment, tax, immigration and infrastructure projects.
What might change?
Should the UK cease to be an EU Member State, UK businesses would no longer benefit from EU internal trade access without a bilateral agreement between the UK and the EU. Although it is possible to be a member of the European Economic Area (EEA) as an associate state of the EU, it is not clear whether the UK would seek to do this or seek to enter into an entirely new free trade or association agreement with the EU. Those operating in the UK and also in the rest of the EU would face the burden of having to comply with both EU and UK laws on trade, rather than complying with the current harmonised EU system. UK businesses would also not be able to benefit from the network of EU bilateral and multilateral external trade agreements with other countries,
p38 |
www.dockyard-mag.com | July 2016
as the UK would have to negotiate its own individual trade agreements with those countries.
So, it is not just a matter of negotiating a single trade agreement, it would be a matter of negotiating a range of agreements. The UK would continue to benefit from World Trade Organisation agreements, but these would not cover the detailed preferential bilateral arrangements that exist in current EUagreements with other countries. Exporting UK goods and services would become a more complex process than at present and, during the UK’s negotiations for its own individual trade treaties as a non-EU state, there would likely be uncertainty, which could be for a lengthy period.
It is possible that some of the legislation will remain in place (for example, because it is already part of UK law (such as where a directive has been implemented) or because the UK has opted into that piece of legislation) or it may simply disappear from the UK legislative environment.
Indeed, if the EU legislation is retained by the UK, it may be somewhat “frozen” in time if amendments or interpretations by the courts are not also taken on board. There is little doubt that EU shipping law and UK shipping law would diverge in a post-Brexit environment but it is not yet clear (and would not be for some time) as to the extent of that divergence. Contract Terms: Many shipping contract (for example voyage and time charters) provide for trading to certain countries or geographical regions. Should Brexit occur, there may be uncertainty as to whether a contract signed pre-Brexit (which contains such a clause) which refers to the EU will continue to include the UK. The impact of Brexit on any related contracts will need to be assessed, including those intended to be on ‘back to back’ terms, in which relevant clauses may not be similarly defined.
Dispute Resolution: The rules by which the UK courts determine jurisdiction over, and the law applicable to, the majority of disputes arising between parties within the EU (both for contractual and tortious claims) are currently determined by EU Regulations. Should the UK withdraw from the EU, its courts may no longer be bound by the EU Regulations that achieve this. In the event of Brexit, it is not known whether the UK will continue to apply similar rules on applicable law and jurisdiction as the current EU rules, or whether a system similar to that adopted in relation to disputes arising with companies in states outside the EU will apply. An exclusive law and jurisdiction clause in all contracts therefore remains of fundamental importance.
Competition Law: EU competition law applies to agreements and market conduct that affect trade between Member States, and the EU Commission has primary jurisdiction to enforce EU competition
law, including granting clearance to mergers and investigating cartel activity. Where the effects of an agreement or market conduct are confined to a single Member State, national laws apply. Brexit would likely lead to a separate competition regime applying to the UK and to competition enforcement in the remaining 27 Member States, leading to the need for dual clearances in the case of mergers and exposure to regulatory investigation under two parallel, but distinct, regimes.
Employment: A significant amount of UK employment law is based on EU rules, for example the Working Time Directive and the Agency Workers Directive. In the event of Brexit, it would be open to the UK to redraft any aspect of its employment law. The UK would have to negotiate appropriate arrangements in relation to residence and employment of UK nationals working in the EU and EU nationals working in the UK. Given the significant number of international employees engaged by the shipping community, both onshore and offshore, the potential changes to UK employment law may therefore have a significant impact. For maritime operators with European operations both in the UK and in the rest of the EU, two separate (and not necessarily complementary) employment regimes may apply to their workforce.
Insurance: Any insurer in the EU is automatically entitled to write insurance business in other member states. Brexit would undermine the passporting and the idea that the insurer’s “home” regulator would regulate that insurer’s activities, which would in turn mean that each insurer shall be regulated in each Member State.
Trade: Under EU law, trade within the Union is liberalised as between Member States, allowing goods and services to be traded within the EU without internal customs barriers or tariffs. In addition, EU citizens can move freely, establish themselves commercially or as residents and can trade without restrictions (except for certain professional qualification rules). EU membership therefore gives UK businesses access to the EU “Single Market”. As to external trade with non-EU countries, the EU benefits from a wide range of bilateral and multilateral trade treaties, allowing preferential access to EU goods and services in these countries, as well as reducing or eliminating customs or tariffs.
Alessandra Bellanca - Partner 0207 183 9482
alessandra.bellanca@
giambronelaw.com www.giambronelaw.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52