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Brexit: Preparing for the end of the transition period

Risk & Analytics|Financial, Executive and Professional Risks (FINEX)
UK Insights on Brexit

By Joanne Cracknell | November 16, 2020

How should law firms prepare for Brexit? This article provides guidance and insights to assist firms.

Brexit has understandably taken a back seat over recent months as the rolling news headlines have, of course, focused on the evolving COVID-19 crisis. But as the 31 December deadline for the United Kingdom (UK)/European Union (EU) transition period approaches, firms still have much to do to ensure the Brexit transition is smooth.

The SRA and the Law Society have both issued useful guidance, and, additionally, there is the Transition Checker Tool issued by the Government to offer businesses assistance with identifying the steps they need to take in order to be ready for the 31 December deadline. Country to country guidance is also available which includes the contact details of the relevant legal profession regulators, information on business and travel and visa requirements which can be accessed here.

So, if you have not already started preparing for the end of the transition period, we summarise below the keysteps recommended by the Law Society in their tenstep checklist for law firms1.

Is your business model fit for transition?

It is almost certainly the case that law firms will have considered their business models over the last few months as the pandemic has impacted businesses and individuals in an all-encompassing way. But while the turmoil of the lock down and trading through the pandemic subsides, firms with existing operations in the EU and European Free Trade Association (EFTA) should be revisiting their business models to ensure that they comply with the national company legislation, and appropriate professional codes of conduct for that specific country and are ready to go live on 1 January 2021.

What is the status of your employees?

Law firms will need to ensure that their solicitors and support staff who travel to EU member states to work have the correct visas in place. In addition, if law firms have employees currently working in the EU, the European Economic Area (EEA) or Switzerland then they should contact the relevant member state authorities to confirm whether those individuals are already registered to work and live in those areas.

Practice Rights and Insurance

On 31 December 2020 the Registered European Lawyer (REL) regime will cease. However, individual solicitors can continue to practice as RELs up until then, provided they renewed their registration with the SRA on 31 October 2020.

On 1 January 2021, the SRA will ensure that all RELs who have renewed their registration will automatically become Registered Foreign Lawyers (RFLs), unless that individual solicitor has indicated that they no longer want to be regulated by the SRA.

It is worth noting that UK lawyers will no longer have rights of audience in courts within EU/EFTA states following transition, unless they hold another qualification from an EU country. Therefore, law firms should be confident that their solicitors hold the appropriate documentation and qualifications to practice in EU/EFTA courts.

To assist, the Law Society has set up a dedicated International Team to answer any queries arising from practice rights; they can be contacted via international@lawsociety.org.uk.

Lastly on this topic, law firms and individual solicitors should ensure that they are compliant with the national law in each jurisdiction and that they have the appropriate professional indemnity insurance cover in place. It is recommended that law firms discuss this with their brokers to ensure that they have the correct policies in place.

Information Technology: Is it Brexit ready?

The guidance issued by the Law Society is to carefully consider the transfer of data and, to appoint a person responsible for data protection during transition. It is essential that personal data is safeguarded especially in the event of a no-deal Brexit. The Information Commissioners Office (ICO) has issued guidance on data transfers2 as well as designing an interactive tool to assist small to medium sized firms on their next steps3.

If you do not process any personal data from contacts or clients in the EEA, then no further action is required.

Data transfer and data privacy go hand in hand, and it is recommended that privacy policies are reviewed to ensure that clients understand what is happening to their data post transition. Furthermore, it will be necessary to review the language around obtaining consent for data collection to ensure that it is compliant. You may need to obtain fresh consent.

If your website or any technology services are hosted in the EU then review your service contracts and contact your service providers in plenty of time before 31 December 2020 deadline to ascertain whether the services will continue.

Furthermore, from 1 January 2021 you will not be able to register or renew .eu domain names if the organisation, business or undertaking is not established in the EU/EEA. It is recommended you check the Government guidance on domain names which can be found here.

What is the status of your Intellectual Property Rights?

It is recommended that firms contact the EU Intellectual Property Office (IPO) to confirm that any intellectual property rights registered prior to the transition period have been translated into the equivalent rights by the UK IPO. There is a nine month window from 1 January 2021 to register any trade mark applications that are pending before the EU IPO to ensure that the original EU filing date is recognised in the UK.

Review goods and services contracts

Given the uncertainty around the trade negotiations it is advisable to check with the suppliers of your European goods and/or services to see whether any revisions are needed, including contingency measures, to ensure the timely delivery/performance following the transition period. These measures should be correctly recorded in your contractual agreements.

VAT invoicing

The VAT treatment of business to consumer (non-land related) supplies by UK lawyers to EEA clients will change following the end of the transition period as they will move outside of the scope of VAT. A review of all applicable clients will need to be carried out to ensure that the correct amount of VAT payable is recorded when issuing invoices to individual clients post transition.

It should be noted that the VAT position on business to business (non-land related) supplies by UK lawyers to EEA clients will not change.

Check the jurisdiction of court proceedings

Any action before the EU courts pending at the end of the transition period will remain with the court for adjudication under the terms of the Withdrawal Agreement. However, it is advised that post transition firms will need to re-issue any Choice of Court Agreements.

It is clear that there is a lot to be done to prepare for the end of the transition period and the key message from both the SRA and the Law Society is for law firms to start preparing now as this will make the process feel less daunting especially in the current climate. Over the coming weeks the Brexit negotiations will be evolving daily especially as the deadline for the transition period draws closer. This is a moving feast and, as negotiations evolve, the advice will change, so it is therefore important that law firms regularly review the Government, SRA and Law Society websites for the most recent guidance. Let’s hope the transition will be smooth.

Footnotes

1 The Law Society. (2020). How to prepare for the end of the transition period: A 10 step checklist for law firms. Retrieved from: https://www.lawsociety.org.uk/topics/brexit/how-to-prepare-for-the-end-of-the-transition-period-a-10-step-checklist-for-law-firms

2 Information commissioner Office (2020). Data protection at the end of the transition period. Retrieved from: https://ico.org.uk/for-organisations/data-protection-at-the-end-of-the-transition-period/data-protection-at-the-end-of-the-transition-period/

3 Information commissioner Office (2020). Keep data flowing from the EEA to the UK – interactive tool. Retrieved from: https://ico.org.uk/for-organisations/data-protection-at-the-end-of-the-transition-period/keep-data-flowing-from-the-eea-to-the-uk-interactive-tool/

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