Financial Services Industry Guide

Top considerations for January 2021 onwards 

The TCA does not cover, in the main, matters relating to financial regulation or licensing (safe for agreement elements such as on non-discrimination). Therefore, there are significant changes for financial regulation from the end of the transition period at 11:00 pm on 31 December 2020, as follows:

1. Client services to EU clients: Check all desks (equities/bonds/derivatives etc) have confirmed that they can continue to provide client services to EU clients (including in relation to derivative or repo life-cycle events); where they cannot, they must confirm they discontinued providing such services from 1 January 2021. This includes confirming that any relevant Member State exemption process has been complied with.
2. Service providers: Check service providers are continuing to provide services seamlessly and in line with any service level standards, such as clearing and settlement agents or providers.
3. Marketing material: Confirm controls are working in relation to marketing/promotional material, not being sent to EU jurisdictions where it is not relevant, would create a licensing obligation or would breach applicable legislation.
4. Intragroup services: Ensure (or reconfirm!) intragroup services are covered by an intragroup agreement (or outsourcing agreement) where relevant and these are being provided.
5. UK "onshoring" legislation: Confirm UK "onshoring" legislation has been reviewed and that necessary changes have been actioned where relevant. For example, trade reports for UK investment firms are not triggered by a trade in an instrument admitted to trading only on an EU trading venue.
6. Conflicts of law: Confirm the organisation has appropriate strategies in place for managing conflicts of law, for example, with regard to the derivative trading obligation (DTO), if relevant (note the FCA's temporary relief in relation to UK firms trading with EU clients in DTO products).
7. Operational switchovers: Confirm operational switchovers are working. For example, to any required provider (such as UK ARM/APA) and with the transaction reporting to FCA (where relevant). 
8. Brexit obligations from 1 January 2021: Refresh or review (where appropriate) the organisation's "reasonable steps" policy which sets out the actions the organisation has taken to comply with any new obligation arising on and from 1 January 2021 and that this has been taken into account in SMCR. For example, the organisation has documented steps it has taken to comply with new EU-UK relationship and mitigated associated risks.
9. Relevant exemptions in place: Confirm where the organisation is relying on relevant exemptions these have been made and documented. For example EMIR intragroup notification (where relevant) and the short selling market-making exemption (where relevant).
10. Governance committee: Confirm a governance committee has been established to monitor market and regulatory pronouncements throughout 2021.
    

Top considerations for January 2021 onwards

1. References in legal documentation to EU Regulations: As of 31 December 2020, EU Regulations applicable in EU Member States and those onshored into English law by the European Union (Withdrawal) Act 2018 (as amended) will begin to diverge. Consider whether references to EU Regulations are to the EU version, the English law version, or both, and distinguish between them as necessary. The same issue does not arise with regard to EU Directives as they are implemented via domestic legislation (although note that cross-references in English law contracts may no longer be appropriate, depending upon the circumstances).
2. Dual regulation: In many cases, market participants will be subject to dual regulation, with UK legislation broadly mirroring corresponding EU legislation. Care will need to be taken to ensure regulatory and contractual compliance with the applicable regime – or both regimes, where relevant – particularly where divergences between the two regimes occurs.
3. UK selling restrictions and legends: New additional UK selling restrictions and legends (as required, for example, by the Prospectus Regulation and the PRIIPs Regulation) will be needed, and transitional provisions may be required. Prospectus legends relating to securities with a credit rating or which reference a benchmark will likely need updating. Existing selling restrictions and legends referring to both the EEA/EU and the UK in relation to EU Regulations will need modifying.
4. UK's product governance regime: MiFID II product governance legends and contract clauses will need to be updated where the UK's product governance regime is relevant.
5. Contractual recognition requirements: Contractual recognition of bail-in and resolution stays will be needed in (i) in-scope English law-governed contracts entered into by in-scope EEA institutions; and (ii) in-scope EEA law-governed contracts entered into by in-scope UK institutions, unless standstill provisions apply.
6. Public offers / trading in the EEA: FCA-approved prospectuses will not be effective in EEA Member States. For prospectuses passported into the EEA before 31 December 2020, new approvals will be required for public offers which continue in the EEA after that date and/or admissions to trading in the EEA which are not completed by that date.
7. Prospectuses passported from the EEA: Issuers which have previously passported prospectuses into the UK from the EEA will need to consider preparing new prospectuses approved by the FCA when the validity of any current prospectus expires. It is possible that two prospectuses in one document or two separate prospectuses will be required. For any such new prospectuses, new representations and warranties will be required.
8. Legal opinions: Legal opinions will need to be revisioned to contemplate the post-31 December 2020 legal environment.
9. Exemptions: Where exemptions from specific obligations are in place (for example, intragroup exemptions under EMIR), consideration should be given as to whether transitional provisions allow these to continue to apply after 31 December 2020, whether they fall away entirely, or whether new regimes exist under which new exemptions may be obtained.
10. Apply for new exemptions: In the absence of transitional provisions for exemptions, new exemptions should be applied for as soon as possible.
11. Regulatory reporting obligations: Where reporting or similar obligations are applicable, UK market participants will need to ensure that they have the necessary arrangements in place to report to the relevant UK entity from the relevant date, if previous reporting was to an EEA entity.
12. The end of the Brussels regime: Consider the incorporation of exclusive jurisdiction agreements to ensure that, where possible, contracts are within scope of the Hague Convention on Choice of Court Agreements. 
13. Cost claims: Determine possible increased cost claims associated with the termination of the Withdrawal Agreement.
14. Tax: Most relevant tax provisions in this area were always areas of national competence. Thus the impact of Brexit on many arm's length transactions with third parties will be limited.  For example, the provisions of double tax treaties are unaffected by Brexit and the TCA, which is good news for the withholding position under most third party loans and derivatives.  One major exception is that there are a number of VAT impacts of leaving the EU. More particularly, an unappreciated piece of good news is that entities providing certain financial and insurance services to EU customers should be able to recover more of their input VAT on those of their costs that are attributable to those services than they were able to prior to 1 January 2021.
15. Financial and operating covenant implications: Determine the financial and other consequences of complying with the TCA on borrower/issuer businesses and any impact on compliance with financial and other covenants in financing documentation. Check that operating covenants referencing the territory of the EU do not unduly limit borrowers'/issuers' activities, given that the UK will no longer form part of it.
16. Status notifications: Consider whether counterparties need to be informed of any change in status under particular regulations, such as  EMIR.
17. Relevant equivalence decisions: Where transitional provisions fall away upon the making of a relevant equivalence decision, ensure that developments in the relevant areas are closely monitored.
18. Monitor UK notifications: Where powers that were previously exercised by EU bodies have been transferred to UK bodies, monitor the relevant websites and notifications.
19. Duration of transitional schemes: Where relevant, ensure awareness of the duration of any transitional regimes, such as those applicable under  EU and UK Benchmark Regulations.
    

Top considerations for January 2021 onwards 

The TCA does not cover insolvency coordination and cooperation. Therefore, there are significant changes to cross-border restructuring and insolvency from the end of the transition period at 11:00 pm on 31 December 2020, as follows:

1. Will UK insolvency proceedings be recognised in EU Member States?: From 1 January 2021, automatic recognition in EU Member States under the EU Regulation on Insolvency Proceedings (EUIR) will generally only apply where UK insolvency proceedings based on an entity's centre of main interest (COMI) located in the UK were commenced before the end of the transition period. For any new UK insolvency proceedings opened since 1 January 2021, the benefits of automatic recognition contained in the EUIR have fallen away. UK insolvency officeholders seeking recognition and assistance in EU Member States will have to rely upon the domestic laws of those Member States which grant assistance to foreign officeholders. These laws differ on a state-by-state basis. Where recognition is sought in Greece, Poland, Slovenia or Romania, the UK insolvency officeholder will be assisted by the adoption of the UNCITRAL Model Law on Cross-Border Insolvency in those countries (see below).
2. Will insolvency proceedings opened in EU Member States be recognised in the UK?: EU officeholders of entities with a COMI or an establishment in an EU Member State who need recognition and assistance from the UK courts can rely on the UNCITRAL Model Law on Cross-Border Insolvency (which the UK has implemented by means of the Cross-Border Insolvency Regulations (CBIR)). This gives representatives of foreign insolvency proceedings a right to apply to the UK courts for recognition and relief. The relief available is not as powerful as the effects of the EUIR, but it does facilitate cross-border effectiveness for European insolvencies needing assistance from the UK.
3. How will the recognition of winding-up proceedings and reorganisation measures for credit institutions change?: The above analysis applies to non-bank corporate entities. Credit institutions are excluded from the scope of the EUIR and instead have their own separate winding-up and reorganisation regime governed by the Credit Institutions Winding Up Directive (CIWUD), which (until the end of the transition period) was implemented in the UK by the Credit Institutions (Reorganisation and Winding Up) Regulations 2004 (CIRWR).
   
   From 1 January 2021, CIWUD and CIRWR apply only where reorganisation measures or winding-up proceedings in respect of a credit institution were already in flight at the end of the transition period. Any new winding-up proceedings or reorganisation measures of an EU counterparty credit institution will not be automatically recognised in the UK, and the CBIR would not help because they do not apply to credit institutions. Any assistance required from the UK courts, for example to deal with a UK branch of the insolvent European counterparty, would need to be sought under UK domestic law. It is likely that our courts would strive to assist, but there might be a need to instigate local parallel UK insolvency proceedings in respect of the UK branch.
   
   Likewise, for an insolvent UK credit institution with branches in a Member State, it might be the case that the Member State's regulatory authority would want control over a local insolvency process dealing with the branch’s assets and creditors/depositors. The absence of the CIWUD regime is likely to bring about the need for multiple parallel insolvency processes that may or may not coordinate and communicate with each other, resulting in inefficiency and unnecessary expense.
4. Will UK schemes of arrangement and restructuring plans be recognised in other EU Member States?: The Brussels Regulation was often relied upon to recognise schemes (and, by extension, restructuring plans) in EU Member States. From 1 January 2021, the Brussels Regulation no longer applies. If the UK were to accede to the Lugano Convention, this would provide a reasonable alternative to the Brussels Regulation for recognising schemes and restructuring plans. However, the consent of the EU to the UK's accession to the Lugano Convention remains  outstanding, which if it is not obtained,  will make the recognition of schemes in the EU more complicated.
   
   Other possible routes to recognition of UK schemes in EU Member States include the Hague Convention and the Rome Regulations (and possibly the UNCITRAL Model Law on Cross-Border Insolvency where recognition is sought in Poland, Slovenia, Greece or Romania), although these are not without their difficulties in the scheme-recognition context. Where these routes to recognition do not assist, recognition will rely on the domestic laws of the relevant Member States, which differ on a state-by-state basis. As a general rule, the prospects of successful recognition under these routes will be greater where the scheme (or restructuring plan) company's COMI is in the UK, and the finance documents contain an exclusive English jurisdiction clause and an English governing law clause. Where there remains a lack of certainty as to the effective recognition of an English scheme or restructuring plan in a Member State, it may be possible to use a parallel scheme process in that Member State to achieve the restructuring.
5. Will insolvency proceedings opened in EU Member States affect the enforcement of English law security?: From 1 January 2021, the "safe harbour" provisions in the EUIR which protect security rights no longer apply (except where insolvency proceedings based on an entity's COMI were already in flight at the end of the transition period). Notably, the CBIR basic stay, which is available in relation to foreign insolvency proceedings upon recognition, expressly does not affect any right to enforce security. However, the CBIR also entitle the foreign officeholder to apply for additional discretionary relief, which can include a moratorium on enforcement. This may give rise to complex issues when considering whether a bank's English law-governed security over a borrower’s UK-located assets should be affected by foreign insolvency proceedings. 

Top considerations for January 2021 onwards

1. New UK immigration system: Employers will need to understand the new UK immigration system.  This does not apply to Irish nationals, but anyone else coming to work in the UK from 1 January 2021 onwards, whether from the EEA or elsewhere in the world, will need to comply with one of the immigration routes provided for in the new rules. 
2. Settled and pre-settled status: Employees who are EEA nationals and who were living in the UK by the end of 2020 can apply for settled or pre-settled status, which gives them the right to carry on living and working in the UK.  Employers should continue to communicate with such employees regularly and offer them support in achieving such status. The deadline for applications is 30 June 2021 for most applicants. 
3. Effect of absences: Employers may need to assist EEA nationals who have lived and worked in the UK before January 2021 to review their periods of absence from the UK.  Absences of more than 6 months in any rolling 12-month period may break any period of continuous UK residency and may therefore impact an individual's ability to obtain settled status. 
4. Secondments: Employers with UK employees on secondment in the EU must keep up to date with any changes in the immigration requirements in each EU country where UK employees are seconded, and communicate those changes to the affected employees. Visas or local registrations may be required.
5. Policy review: Employers should carry out an immigration audit, including drafting, reviewing and amending policies to ensure they are compliant with the new immigration system. In particular, inclusion and diversity policies should be considered, especially in relation to recruitment. Employers should think about whether there are discrimination implications in their approach to recruitment, such as a blanket policy that refuses to consider applications from candidates requiring a visa, or paying a higher salary to an applicant in order to meet the requirements of the sponsorship system.
6. Sponsor licence:  Employers who have not previously held a sponsor licence should consider whether such a licence is now needed. A licence may be required to employ both non-EEA nationals and newly arrived EEA nationals under the new immigration system. Employers who already have a sponsor licence should consider whether it needs to be amended to include the addition of any branches, subsidiaries or a new route.
7. Intra-company transfers: Multinational companies should look at whether they might use the intra-company transfer route to transfer personnel to the UK. Applicants do not need to meet any English language requirements, but must satisfy specified criteria.
8. Business visitors: Employers who have EEA nationals who frequently visit the UK on business trips will need to understand the business visitor requirements for an intended visit from 1 January 2021. The new Frontier Worker permit will allow those who started to commute to work in the UK before 31 December 2020 to continue to do so (provided they meet the eligibility criteria) and the Business Visitor route will still allow limited activities to be carried out by a non-UK resident, including attending board meetings, signing contracts or undertaking a site visit.
9. Relocation consequences: Consider the impact of relocating any business operations to the EU, such as consequential restructuring and redundancy plans, and associated consultation obligations.
10. UK employment laws: Currently the UK government is committed to preserving existing employment rights so there is nothing really for employers to do right now.  However, employers should keep a watchful eye in case the situation changes.

Top considerations for January 2021 onwards 

1. Mergers, antitrust and state aid – Do EU competition laws still apply in the UK?: No. From 1 January 2021, EU law does not apply in the UK. The UK will be treated in the same way as a third country, like the USA, in relation to EU competition law, which means that businesses in the UK still need to comply with the EU merger control rules if they enter into transactions which meet the relevant thresholds, and with the EU antitrust rules in relation to conduct that affects trade within the EU.  EU state aid rules will be replaced by a new UK subsidy control regime, but the EU state aid rules continue to apply in full to the UK in relation to measures that have an actual or potential effect on trade in goods between Northern Ireland and the EU.
2. Mergers and antitrust – No immediate change to UK rules, but possible future divergence: There are no substantive changes to either the UK merger control or antitrust enforcement regimes from 1 January 2021. 
   
   The UK's competition rules set out in chapter 1 and chapter 2 of the Competition Act 1998 (CA98) are currently nearly identical in substance to Articles 101 and 102 of TFEU, but may diverge in the future. In particular, new EU case law is not binding on the UK courts and competition authorities, which may also depart from pre-2021 EU case law where it is considered appropriate to do so in light of relevant circumstances (for example, differences in UK and EU law prior to Brexit, differences between EU and UK markets, developments in the form of economic activity, generally accepted principles of competition analysis, and developments in EU case law). 
   
   Certain reforms to the UK rules may be introduced in due course, including potentially the compulsory notification of certain generally larger mergers to the CMA to ensure that the CMA commences its merger review of such transactions at the same time as other authorities that have jurisdiction. Merging parties should also take note of the UK Government's new National Security and Investment regime.
3. Mergers and antitrust – Validity of Commission decisions: All European Commission decisions adopted before 1 January 2021 remain valid and the European courts retain exclusive jurisdiction to review any appeals challenging such decisions. UK regulators cannot re-review an investigation into a merger or antitrust matter that the Commission has already investigated and in relation to which it took a decision before 1 January 2021. 
   
   The Commission will also continue to have responsibility for the monitoring and enforcement of any UK elements of commitments accepted or remedies imposed in connection with any Commission proceedings, unless it subsequently agrees to transfer those responsibilities to the CMA or the concurrent UK regulators, or they have been quashed by the European Court on appeal.
4. Mergers – Impact of parallel reviews: The EU Merger Regulation "one-stop shop" no longer applies in the UK from 1 January 2021, which will generally result in parallel filings with potentially differing outcomes. Planned transactions which would have triggered an EU filing on 31 December 2020 may now:
   
   o      also trigger the UK filing thresholds; and/or
   
   o      no longer trigger an EU filing, as UK turnover is no longer included in calculating the EU filing thresholds. If this is the case, it will be necessary to consider whether national filings in EU Member States are required.
   
   Where parallel EU and UK merger reviews take place, the regulators' assessment periods differ significantly and may result in potentially differing outcomes (at Phase 1, 40 working days for the CMA, compared with 25 working days under EU rules; and, at Phase 2, 24 weeks for the CMA, compared with 90 working days under EU rules, all excluding extensions).
   
   Where a merger has been formally notified to the Commission before 1 January 2021, the Commission retains exclusive jurisdiction over the merger until it reaches a final decision.
5. Mergers – What happens to the merger case referral mechanism?: From 1 January 2021, neither the Commission, the CMA nor the merging parties can request/make new referrals under Article 4(4) or 9 of EUMR (i.e. referrals from the Commission to the CMA), or Articles 4(5) or 22 of EUMR (i.e. referrals from the CMA to the Commission).
6. Antitrust – Jurisdiction to start new investigations: From 1 January 2021, the CMA and the concurrent UK regulators may only investigate suspected infringements of UK domestic competition law (i.e. chapter 1 and chapter 2 of CA98). UK regulators must drop the EU elements of any ongoing investigations on 1 January 2021.
   
   The Commission can no longer commence investigations into cases involving anti-competitive conduct in the UK (but it can continue those cases with effects in the UK initiated prior to 1 January 2021). However, the Commission continues to have the power under EU law to investigate UK businesses that it suspects are engaging in anti-competitive conduct that has effects on competition within the EU, and EU businesses operating in the UK must comply with UK competition law as they do today.
   
   For new cases, where the same conduct affects competition in both UK and EU markets, parallel investigations by the Commission (under Articles 101/102 TFEU) and UK authorities (under chapters 1 and 2 of CA98) are likely. 
   
   As was the case pre-Brexit, there is no "one-stop shop" for immunity/leniency. Potential applicants should therefore consider making separate applications to both the CMA and the Commission.
7. Antitrust – Can I still rely on existing EU block exemptions in the UK?: From 1 January 2021, seven EU block exemption regulations, including those relating to vertical agreements, research and development, and technology transfers, are preserved in UK law as "retained exemptions" from the UK competition prohibitions, subject to their current expiry dates. Existing UK agreements which have benefited from the parallel application of an EU block exemption continue to benefit from the relevant exemption, as will new agreements which meet the relevant criteria. 
8. Antitrust – Damages claims: Commission infringement decisions issued prior to 1 January 2021 can still form the basis of follow-on damages claims, but UK courts will no longer be able to rely on Commission decisions taken after that date as binding findings of an infringement.  Stand-alone actions (i.e. actions that do not follow on from an infringement decision) can still be brought in relation to an alleged infringement of EU competition law that occurred prior to 1 January 2021.
9. Mergers and antitrust  – Can the Commission conduct dawn raids in the UK?: From 1 January 2021, the Commission can no longer carry out inspections in the UK. However, the Commission is still able to issue formal requests for information to parties in the UK in connection with mergers falling within the EUMR and conduct over which it has jurisdiction in the EU. 
   
   The TCA provides that the EU and UK competition authorities will endeavour to cooperate and coordinate with respect to their enforcement activities going forward and may exchange information to the extent permitted by each party's governing law. 
10. State aid – Will subsidies granted by the UK require notification?: The TCA requires the UK to establish a new UK subsidy control regime, which will need to be closely modelled on the EU state aid regime.  It is not yet clear how that regime will operate or who will be responsible for overseeing it.  In particular, the UK will need to develop new rules governing how the new subsidy control obligations will be implemented and enforced in practice, including in respect of seeking approval for subsidy measures.  The UK Government is considering whether to bring forward secondary legislation in early 2021 to give legal certainty regarding compliance with the UK's commitments in relation to the granting of subsidies.  The UK Government also intends to launch a consultation on the UK's approach to subsidy control, which may result in further primary legislation.
    
     

Top considerations for January 2021 onwards

1. Governing law clauses: The validity and effectiveness of contractual choice of law will be unaffected by Brexit. The UK has implemented both the Rome I and II Regulations (together, the Rome Regulations) with minor modifications into UK law, and EU counterparties will remain subject to the Rome Regulations in any event.
2. Exclusive jurisdiction clauses: Formerly, the Brussels Regulation applied to ensure that EU/UK courts gave effect to the parties’ choice that disputes were heard exclusively by a specified EU/UK court (known as an "exclusive jurisdiction clause"). That position remains largely unchanged for exclusive jurisdiction clauses entered into after 1 January 2021. This is because, while the Brussels Regulation no longer applies in the UK, the UK acceded to the Hague Convention (to which the EU is already a party on behalf of all its Member States) with effect (indisputably) from 1 January 2021. Insofar as giving effect to an exclusive jurisdiction clause is concerned, the Convention has broadly the same effect as the Brussels Regulation – meaning that the parties’ choice of an exclusive jurisdiction clause after 1 January 2021 will be given effect in generally the same way as it is now. Giving effect to exclusive jurisdiction clauses entered into before this date, however, may be more problematic because of a potential timing issue with the Hague Convention (see further below).
   
   In addition, the Lugano Convention, which applied between the UK, the EU and the EFTA states (excluding Liechtenstein) and which is similar in effect to the Brussels Regulation, has ceased to apply. As none of the EFTA states has yet acceded to the Hague Convention, enforcing exclusive jurisdiction clauses in those states may also be problematic. The UK has applied to re-accede to the Lugano Convention, but the consent of all contracting states is required and the EU has not yet given such consent. 
3. Non-exclusive jurisdiction clauses: In the case of a "non-exclusive jurisdiction clause" (a clause that expressly provides for disputes to be heard in a specified court but without prejudice to the right of the parties to take a dispute to another court), the Brussels Regulation and the Lugano Convention give priority to the Member State court that is first “seised” of the proceedings, ie the court in which the proceedings are first instituted.
   
   However, as the UK is no longer a "Member State", the UK courts will now not benefit from this priority and EU/EFTA courts will not have to stay their proceedings pending the determination of UK courts, as they would now, even where UK courts are first seised. This gives rise to a risk of parallel proceedings – the same or very similar proceedings taking place in two different courts.  Bear in mind also that the Hague Convention does not apply to non-exclusive or "asymmetric" jurisdiction clauses (clauses that require one party to sue in a specified jurisdiction, but allow the other party to sue in any jurisdiction).
4. Enforcement of judgments: The Brussels Regulation and the Lugano Convention also deal with enforcement of judgments and, as these no longer apply, the automatic right to enforce UK judgments throughout the EU/EFTA states and vice versa will be lost. The effect of this is that:
   
   o      It should not be problematic to enforce an EU court judgment to which the Hague Convention applies in the UK, noting however the Convention's relatively narrow ambit. As a matter of UK law, the Hague Convention applies to all qualifying agreements entered into after 1 October 2015, when the Convention entered into force in the EU, and in the UK as a Member State.
   
   o      There is uncertainty, however, as to how EU courts will apply the Hague Convention in relation to UK cases. It may be that the Convention is applied in relation to all qualifying agreements entered into after 1 October 2015, or only to contracts entered into on or after 1 January 2021, when the UK’s accession to the Convention in its own right indisputably becomes effective. If the latter, then jurisdiction clauses in, or judgments given in disputes relating to, agreements entered into before 1 January 2021 will not be enforceable under the Hague Convention in the EU.
   
   o      In cases where the Hague Convention does not apply: (i) in the UK, the common law will apply to the enforcement of EU/EFTA judgments. The process to enforce a judgment is relatively straightforward, but there may be difficulties where the judgment is for non-monetary relief; and (ii) the party seeking to enforce a UK judgment in the EU/EFTA states will have to navigate the relevant local laws in the country in which it wishes to enforce its judgment, in the same way as it now does when seeking to enforce a judgment in a non-EU/EFTA country, such as the US. 
   
   Where possible and practical, consider amending or restating the jurisdiction provisions in your contracts to include/restate exclusive jurisdiction clauses to ensure the contract will fall within the Hague Convention as a matter of both UK and EU law. 
5. Arbitration: Arbitration is largely unaffected by Brexit as it is subject to international rules of arbitration under the New York Convention. As a result, parties may wish to consider using arbitration agreements (rather than court-based dispute resolution mechanisms) in their contracts.
6. Provision for service of legal proceedings: Where the English courts are the forum for disputes, and any counterparty resides outside England and Wales, include an agent or address for service provision for the service of legal proceedings in your contracts, if such provision is not already standard. The EU Service Regulation, which regulates the service of judicial and extrajudicial documents between EU Member States, no longer applies.
    

Top considerations for January 2021 onwards

1. Consider any tax impact of Brexit-driven restructuring: The impact of Brexit, even as tempered by the TCA, means that supply chains and/or group structures will need to be reconsidered and possibly restructured. The tax impact of any such reshaping of the group and its supply chains will therefore need to be considered.
2. Check VAT registrations: Suppliers will need to check where they should be VAT-registered.  While there are numerous caveats and exceptions, as a broad rule: (i) for those providing digital services to both EU27 and  UK consumers, it may be possible to have only two VAT registrations: one under the so-called mini-one-stop shop and one UK VAT registration in the UK; (ii) suppliers of goods to consumers (and other "importers") will have to consider whether they need to separately VAT-register in each of the EU27 countries and the UK where they are selling/importing; and (iii) suppliers of B2B services may only require registration in the countries where they actually have offices.    
3. Review loss of the EU Interest and Royalties Directive and the EU Parent-Subsidiary Directive: The EU Interest and Royalties Directive and the EU Parent-Subsidiary Directive no longer apply from 1 January 2021. The possibility of withholding tax on interest paid from EU entities to UK entities should be reviewed and any new potential gross-up risk evaluated and allocated appropriately. The loss of the EU Parent-Subsidiary Directive may impact the tax efficiency of repatriating cash from subsidiaries to parent companies where a UK entity is included in the structure. Companies relying on these Directives should review the domestic law in the relevant EU country and the terms of the applicable double tax treaty with the UK to determine the withholding tax position in respect of interest, royalties and dividends payments, and identify any additional withholding tax costs. Applications to benefit from any treaty relief should be filed on a timely basis.
4. Consider VAT recovery for financial and insurance service providers: The UK government has enacted legislation to enable businesses supplying specific services (i.e. certain financial and insurance services) to EU customers to recover their input VAT on costs associated with those supplies. Previously, this was only possible where these services were supplied to customers outside the EU. This change brings the post-Brexit VAT treatment of such supplies to EU customers in line with the ongoing treatment of supplies to customers in the rest of the world, with the stated aim of ensuring that UK companies will be able to compete for business in the EU on an equal footing with companies in other non-EU countries.
   
   This is a significant benefit for financial and insurance service providers with EU customers and such providers should consider how to structure their supplies to maximise their input VAT recovery after 31 December 2021, including undertaking a review of any cross-border VAT grouping arrangements to optimise partial exemption positions.
5. Review social security arrangements: The TCA contains provisions which ensure that cross-border workers are only liable to pay social security contributions to one state at a time.  This is generally the country in which the relevant individual is working, although there are specific provisions (the "so-called detached worker" rules) under which, if an EU Member State agrees to apply the rules, UK workers sent to work temporarily in that state remain liable for UK social security contributions for the duration of their posting and vice versa for nationals of that Member State sent to work in the UK.  Local payroll taxes may (subject to any protection under the relevant double tax treaty) also apply. Where employees are working abroad of their own volition (e.g. for COVID-19 reasons), the position may be different and should also be checked.
6. Review processes for cross-border sales of goods: From 1 January 2021, all B2B sales of goods between the EU and the UK that were historically treated as zero-rated intra-EU acquisitions will (with only very limited exceptions) become standard-rated imports and exports and liable to import VAT. Businesses which carry out trading between the EU and the UK should clarify incoterms and who is acting as importer of record for customs duty and VAT purposes on all cross-border sales. They should also check supply contracts and consider including, to the extent possible, provisions dealing with documentary requirements for such imports and the allocation of VAT risk.  Businesses will also need to ensure they have processes in place to satisfy all related procedural requirements for such imports.

Top considerations for January 2021 onwards 

1. Review changes to business processes: Have you read the revised UK legislation that affects your business? Does it require you to make changes to your business processes? By when? Does it allow you to do what you expected? If not, reach out to trade associations to see whether the industry takes the same view. Have you spoken to the Government about your concerns? Are you monitoring new EU and UK legislation designed to implement and operate the TCA?
2. Review supply chains: Have you understood your supply chain for goods? What changes will need to be made to (i) deal with new customs and regulatory checks on trade between the EU and the UK and (ii) meet the need for goods to "originate" in either the EU or the UK?
   
3. Consider tariff rates: What will happen to tariffs on finished goods and inputs for manufacturing under the TCA? The TCA only allows for "tariff-free" movement of goods between the EU and UK where those goods “originate” in either the UK or the EU. These "rules of origin" in the TCA are complex and lengthy. Many manufactured goods will currently not meet these rules of origin, and you may have to decide whether to pay the duty, or spend time and money re-tooling supply chains by, for example, setting up separate supply chains that do not require movement between the EU and UK. 
4. Consider additional component costs: Have you checked whether your UK suppliers might import components from the EU or a country with which the UK has an FTA? Are they going to charge you more as a result of the goods failing to meet the TCA "rules of origin"? What happens if they do?
5. Check input costs: If input costs change, for example as a result of failing to meet the rules of origin, who bears those costs? Have you checked any long-term supply agreements for provisions on price changes? Who is responsible for import procedures now that they are relevant?
6. Review import requirements: Have you completed all necessary requirements to import into the UK and the EU? Or are you intending to use a third party, and have you got relevant agreements in place? What about standards and product certification?
7. Consider available customs duty reliefs: Is any reliefs from customs duty available? What steps do you need to undertake to benefit from it? What is the lead time? Is the difference between paying any new tariff and the relief significant? If not, have you considered simply paying the duty and not spending time on the relief?
8. Review shipments and warehousing locations: If you import key components from the EU or a country with which the UK has an FTA, can you move shipments away from a ports that may be crowded, such as Dover, to one that isn't? Have you checked with your logistics provider that it has all the necessary paperwork to operate "hassle-free" imports in accordance with the new rules of the TCA? Should you consider stockpiling certain key inputs? Have you got space to do that? Do you need additional warehousing space? Do you need to consider funding provisions with banks in order to stockpile?
9. Consider provision of customs services: Do you have staff or service providers ready to deal with new customs procedures regarding trade with the EU? Are they trained in new UK customs rules? If you don't have staff, or they are not trained, can you get a third party to provide customs services? Are they available and how much will it cost?
10. Review export controls: Are any of your goods or technologies subject to export controls? If so, you will need to consider how those goods can move between the UK and the EU. Have you applied for UK licences for export to the EU? Have you registered under the EU system to move goods to the UK? Also, remember, licences obtained from the UK do not permit export of controlled items from the EU, and licences obtained in EU Member States do not permit export from the UK.  

Top considerations for January 2021 onwards 

1. Map data flows – How do we know which arrangements include cross-border processing?: You should map your organisation's international flows of data (including transfers between the EEA and the UK) in order to assess what action to take in respect of  transfers of personal data outside the UK. 
   
   The Information Commissioner's Office (ICO) recommends that you prioritise mapping data flows for transfers of large volumes of data, special category data, criminal convictions data and any business-critical transfers of data. 
   
   If transferring personal data outside the UK to third countries, you should put in place appropriate safeguards so that such transfers continue lawfully after 1 January 2021 (see point 2 below for transfers from the EEA to the UK).
2. EEA to UK transfers of personal data – What safeguards should we now have in place?: After 1 January 2021, the UK is considered a "third country". Under the Trade and Cooperation Agreement, the UK and the EU have agreed a "bridging" period of four months (with an additional two- month extension available by agreement) from 1 January 2021 permitting the flow of personal data from the EEA to the UK without any additional safeguards. The intention is that before the end of this period the EC will grant the UK adequacy status. 
   
   If your organisation transfers personal data from the EEA to the UK, you should prepare for the possibility that the EC may not grant the UK adequacy by taking steps now to implement appropriate data transfer safeguards before the end of the "bridging" period. 
   
   One of the safeguards available to you under the General Data Protection Regulation 2016/679 (GDPR) is to enter into the EC's approved Standard Contract Clauses (SCC).  If you choose to implement the SCC to enable transfers of personal data from the EEA to the UK, you should consider whether any necessary further requirements are needed as a result of the recent Schrems II decision (see point 3 below).
3. Schrems II – Do we need to undertake a transfer risk assessment?: The decision of the European Court of Justice in the Schrems II case requires organisations that transfer personal data to third countries to carry out case-by-case risk assessments of whether the relevant third country's law offers a level of personal data protection that is essentially equivalent to that provided in the EU.  
   
   This requirement does not apply to third countries that are already recognised by the EC as providing adequate data protection. The EC currently recognises Andorra, Argentina, Canada (commercial organisations), Faroe Islands, Guernsey, Israel, Isle of Man, Japan, Jersey, New Zealand, Switzerland and Uruguay as providing adequate protection. Therefore, unless the EC grants the UK adequacy before the end of the "bridging" period (see point 2 above), you will also need to conduct a risk assessment in respect of any transfers of personal data your organisation makes from EEA Member States to the UK.
4. EU-US Privacy Shield – Is the EU-US Privacy Shield still a valid safeguard for data transfers from the UK to the US?: The decision in Schrems II found the US-EU Privacy Shield to be invalid. This means it is no longer a lawful way to transfer personal data from either the EU or the UK to the US. 
   
   This decision will form part of UK law, and therefore you need to consider what other measures, such as the SCC should be put in place to cover transfers from the UK to the US to ensure that such transfers continue to be lawful. The same risk assessment as discussed at point 3 above should also be conducted in respect of these UK-US transfers.
5. EU representative – Do we need to appoint an EU representative?: UK-based organisations that do not have an establishment in the EEA, but which either (i) offer goods and/or services to individuals in the EEA, or (ii) monitor the behaviour of individuals in the EEA, will need to appoint a European representative in one of the EU Member States of those individuals. 
   
   This EU representative may be an individual or a company. The representative must be physically based in the EU, and be authorised to act on your organisation's behalf (including dealing with relevant data supervisory authorities) with respect to compliance with EU data protection law.
6. Customer documentation – Do we need to update our privacy notices?: You should update your organisation's privacy notices and other data subject-facing documents (such as standard terms and conditions) to provide details of your EU representatives, refer to the UK as a third country and make reference to either UK data protection law or EU data protection law, as appropriate.
7. Internal documentation – Do we need to update our policies and procedures?: You should review and update your organisation's internal data protection policies, procedures and records, such as data breach notification procedures and data protection impact assessments, to reflect changes to international transfers and supervisory authority notification requirements.
8. Data Protection Officers – Should we change our Data Protection Officer?: If your organisation was required to have a Data Protection Officer (DPO) prior to 1 January 2021, it will continue to be required to have a DPO. If your DPO is based in the UK, you should review whether your DPO can continue to be "easily accessible" to each EU establishment, the relevant supervisory bodies and EU data subjects.  Official guidance recommends that an organisation's DPO should be located in the EU, unless the DPO's activities can be carried out more effectively outside the EU.
9. EU supervisory authorities – Will the ICO remain our organisation's lead supervisory authority?: From 1 January 2021, the ICO is no longer an EU supervisory authority. If your organisation currently has the ICO as its lead supervisory authority, you should identify an EU supervisory authority if your organisation continues to maintain an EEA establishment and engage in cross-border processing after 31 December 2020. That EU supervisory authority is likely to be your organisation's lead supervisory authority now that the transition period has ended. 
   
   If a complaint was made before 1 January 2021, and your organisation's lead supervisory authority was the ICO at that time, the ICO will continue to be the authority investigating and bringing any enforcement action in relation to that complaint.  In these circumstances, a supervisory authority in another EU Member State will provide input, but would not be able to bring separate enforcement action.
10. Is EU data protection law still applicable in the UK?: The EU data protection legal and regulatory framework will continue to apply after 1 January 2021 for UK organisations that either offer goods or services in the EU or monitor the behavior of EU data subjects. The ICO has confirmed that organisations should continue to follow its current guidance regarding compliance with EU data protection law. 
    
     

Top considerations for January 2021 onwards

The UK-EU Trade and Cooperation Agreement (TCA) reached on 24 December 2020 2020 sets out, across 24 pages, the standards of IP protection to be applied by both the UK and the EU. In essence, the TCA reflects the Withdrawal Agreement. We set out below the key changes affecting IP rights from 1 January 2021. 

1. Trade marks – Changes to EU trade marks (EUTMs) from 1 January 2021
   
   UK marks: The territorial scope of EUTMs no longer covers the UK. UK businesses with a registered EUTM were automatically granted a comparable and equivalent registered UK trade mark by the UKIPO on 1 January 2021. These marks hold the same filing date, priority date and UK seniority as the EUTM. Comparable UK trade marks have also been created for international trade mark registrations designating the EU, without any action required from proprietors. The UKIPO register has already been updated with the new UK trade mark records and the registration details are available for rightsholders to view. Parties not wishing to obtain the new UK comparable mark may opt out by submitting a "Request for Removal" to the UKIPO.
   
   EU marks: EUTMs already registered prior to 31 December 2020 continue to be valid in the remaining 27 Member States but, in order to benefit from ongoing protection, owners of EU trade marks should monitor and ensure the EUTMs continues to be used within the EU – use in the UK alone will not suffice.
2. Trade marks – EU trade mark applications still pending on 31 December 2020: Applications for EUTMs still pending at the end of the transition period have not automatically resulted in a comparable trade mark application with the UKIPO. However, applicants may still apply for a corresponding UK trade mark during the nine-month grace period commencing on 1 January this year and will end on 30 September 2021. Applying within the grace period enables the applicant to retain the earlier priority date of the EUTM application. Applications made after the end of the grace period will not retain the benefit of the earlier priority.
3. Trade marks – Applying for a trade mark: Applications filed for an EU-wide trade mark only cover the remaining 27 Member States and no longer protect the UK upon registration. New applications should now be filed with the UKIPO for a UK-registered trade mark and the EUIPO for an EU-wide EUTM. Parties should consider the needs and territorial scope of their business, as well as future plans for potential market expansion. 
4. Designs – Registered and Unregistered EU Designs: UK-registered designs have been unaffected by Brexit. However, EU Registered Community Designs (RCDs) and EU Unregistered Community Designs (UCDs) no longer give protection in the UK. Similar to trade marks, holders of existing RCDs received a comparable "re-registered design" automatically with the UKIPO on 1 January 2021. "Re-registered International Designs" are also being provided in respect of international design registrations designating the EU that have already been registered and published by the EUIPO. The UKIPO has advised that applicants should expect a delay in re-registered designs based upon international designs appearing on the UKIPO register. 
5. Continuing Unregistered Designs: Existing Unregistered Community Design proprietors still protected at the end of 2020 automatically now have continuing protection in the UK via a Continuing Unregistered Design right for the remainder of the three-year term of protection attached to the UCD. The UK has also created a new "Supplementary Unregistered Design" right, from 1 January 2021, which gives similar protection in the UK to that provided by the UCD in the EU.
   
   Applications for RCDs that remained pending at 31 December 2020 have not resulted in equivalent application for a comparable UK-registered design. As per trade marks, holders of pending RCD applications now have a nine-month priority window to 30 September 2021 in which to apply for a comparable UK "re-registered design". 
6. Trade marks and designs representation: The UK Government has now introduced "Address for Service" rules. This means that those issuing new trade mark and/or design applications or proceedings with the UKIPO must provide an address for service that is within the UK, Gibraltar or the Channel Islands. Addresses within the EEA will not be accepted. 
7. Domain names – What is the impact on my .eu domain registrations?: Businesses legally established in a continuing EU Member State, or individuals with an EU residence or citizenship, have a continuing legal basis on which to hold a .eu domain. In the event this is not the case, .eu domains will no longer be registrable by UK-based applicants. UK-based businesses and individuals should have provided contact information to EURid prior to 31 December 2020 showing a continuing legal basis to hold a .en domain.
8. Copyright – Protection of Copyright in the EU: UK copyright law is based on national law and international treaties, which remain in place. The broad position regarding copyright protection therefore remains unchanged. However, the UK Government has noted that it currently has no intention of transposing the recent EU Directives on (i) Copyright in the Digital Single Market; and (ii) Copyright relating to Online Transmission and Retransmission on TV and Radio content, into UK law. In addition to changes to database rights (see below), the satellite broadcasting 'country of origin principle' will no longer apply to the UK, so UK based broadcasters will not be able to rely on obtaining copyright clearance in the Member State from which the signal is produced, and broadcasters serving EU customers may need to clear rights in each receiving country.
9. Protection of Database rights in the EU: UK businesses no longer receive protection in the EEA for newly created databases. Databases already protected at 31 December 2020 will continue to have protection for the usual term. The UK now operates its own version of database rights, but this protection will only apply within the UK. If your business also has establishments in the EU, it may look to rely upon them for continued EU database right protection.
10. Patents – Will my patents be affected after 1 January 2021: Patents continue to be protected under the UK Patents Act 1977, and the UK remains part of the European Patent Organisation (EPO) despite exiting the EU, because the EPO is not an EU institution. European Patent Attorneys based in the UK can continue to represent their domestic and overseas clients before the EPO, and the UK remains designated in European patent applications.
11. Exhaustion of IP rights: Once IP-protected goods have been put on the market in the EEA by the IP owner (or by consent of the owner), the owner can no longer prevent those goods from being resold anywhere in the EEA and the IP rights in those goods are effectively "exhausted". The UK is no longer in the EEA and so IP-protected goods placed on the market in the UK will not now exhaust the rights of IP owners in the EEA and their rights will still be enforceable against such goods if they are parallel imports into the EEA from the UK. Businesses may wish to consider obtaining a licence for exports from the UK into the EEA, or conduct cross-border trade from a continuing EEA member country (rather than the UK).
    
    As things currently stand, the UK continues to recognise EEA exhaustion and allows continued "parallel importation" from the EEA into the UK. The UK government has indicated that this position is likely to change in early 2021. 
12. IP licences and other agreements: IP-related licences, co-existence agreements and similar agreements should reflect the agreed territories of use and account for the fact that an agreement to license use in the EU will no longer include the UK (and vice versa). For example, if a licence grants an EU-wide right to use an IP asset, that right will no longer cover use in the UK.

Top considerations for January 2021 onwards 

Climate change and environmental law

There are few areas of UK environmental law and policy that have remained untouched by Brexit, as can be seen by the sheer number of statutory instruments created under the Withdrawal Act. While the immediate impact has largely resulted in a rollover of existing EU law, there are some significant changes afoot.

1. Environment Bill: The Government's flagship Environment Bill is still making its way through Parliament with no date currently set for the Bill's report stage. When enacted, it will introduce a requirement to set legally binding long-term environmental targets in the priority areas of air quality, water, biodiversity, resource efficiency and waste reduction, in addition to a target for PM2.5. These will be supported by interim targets. The Bill will also establish a new oversightbody,  the Office for Environmental Protection which is intended to hold the Government to account. Those businesses who measure and seek to improve their environmental footprint will be better placed to respond to these targets as they are implemented.
2. Emissions trading / carbon price:  Following much deliberation, the UK elected to establish a new UK Emissions Trading System from 1 January 2021 to replace the UK's participation in the EU ETS. As a smaller trading scheme, the UK ETS has the potential to have a more volatile carbon price and there is likely to be significant focus on the various market stability and price control mechanisms. Under the TCA, the UK and the EU have committed to give "serious consideration" to linking the UK and EU systems. Watch this space (and the carbon price). 
3. New UK-/GB-specific regimes: The UK's departure from the EU has largely resulted in the "onshoring" of the corpus of EU chemicals law. However, as the UK will no longer participate in EU regulatory functions via the European Chemicals Agency, it has established its own chemicals regulator via the UK Health and Safety Executive. This onshoring and amendment process has resulted in new regulatory systems. For example, the UK will now operate an independent "UK REACH", a GB Biocidal Products Regulation (GB BPR), as well as new GB regimes for Classification, Labelling and Packaging (GB CLP), Prior Informed Consent (GB PIC, the regime for the export and import of hazardous chemicals), and Plant Protection Products (GB PPP). 
4. Regulatory divergence post-Brexit?: Provisions governing regulatory divergence from EU environmental law have been set out in the newly agreed Trade and Cooperation Agreement (TCA). In summary, as a sovereign state, the UK asserts its right to set its own environmental and climate law and policy. However, the UK must do so with respect to the other terms of the TCA. In particular, the TCA contains a "non-regression" provision that the UK must not weaken or reduce the levels of environmental or climate protection "in a manner affecting trade or investment". The section in quotes is a notable caveat in the TCA, and would seem to be a ripe area for dispute, should the Government seek to weaken current levels of environmental protection. 
5. UK to host COP26: The UK's diplomacy on the world stage is in the spotlight as it prepares to host the next major climate change conference, COP26, where international leadership on climate change is both time- and business-critical. In his recent speech at the Climate Ambition Summit COP26 President Alok Sharma stressed the importance of laying down long-term strategies and further national contributions. We can expect new policy and legislation, such as the proposed anti-deforestation due diligence law, to be announced in the lead-up to the conference in the coming months.
   
   If all that was not enough to deal with on top of recovery from the coronavirus pandemic, the Government has also announced a reform of the planning regime and a reorganisation of local government, both of which have a significant interface with climate change and environmental law.

New 2021 regimes

Key changes to environmental law which will bite from 1 January 2020 include:

1. Carbon trading: A new UK Emissions Trading Scheme (UK ETS) replaced the UK's participation in the EU ETS on 1 January 2021. The UK ETS is presently not linked to the EU ETS; however, under the Trade and Cooperation Agreement (TCA), the UK and the EU have committed to give "serious consideration" to linking the UK and EU systems. Participants will need to comply with the new UK ETS, while continuing to comply with their final 2020 obligations under the EU ETS. 
2. Supply chains: Changes to waste exports and product safety regulation may have compliance costs for businesses and cause potential disruption to the supply chain. New arrangements are now in place for the movement of waste between the UK and the EU, and a new UK conformity assessed product marking regime now applies to goods being placed on the market in Great Britain, in addition to new importer responsibilities when placing a product on the market in Great Britain from the EU.  The EU circular economy package is also being transposed into UK law in order to increase recycling rates, introduce further restrictions on landfill and promote waste reduction. These changes create a huge opportunity for innovation and cost savings.
3. Chemicals: From 1 January 2021, the following newly established domestic regimes apply: UK REACH for the registration, evaluation, authorisation and restriction of Chemicals, GB Biocidal Products Regulation for placing biocidal products on the UK market, GB Classification, Labelling and Packaging, the GB Prior Informed Consent regime for the export and import of hazardous chemicals, and the GB Plant Protection Product regime in relation to the regulation of pesticides.  These domestic frameworks largely reflect the EU regimes but operate independently to them. The existing EU-derived rules for F gas and Ozone Depleting Substances will remain substantially the same from 1 January 2021.
   
   To minimise disruption resulting from these changes, businesses will need to address the continuing impact by:

1. evaluating key risks and identifying mitigating measures
2. prioritising critical pinch points and implementing contingency plans; and
3. monitoring government and regulator guidance and taking action where necessary.