Begin Contract Repapering Initiatives Now to Mitigate Risk Due to Evolving Brexit Regulations

Published : 3 years ago, on 07/06/2021

By Laura Dickson, Animesh Kumar and Dean Nasser

Some may think Brexit is already done because the United Kingdom (UK) has now separated from the European Union (EU), but this is a myth.  In reality, Brexit and its many reverberations are far from over – for most businesses, they have just begun.

Even though the UK made its much-publicized exit from the EU on the 31^st January, 2020, followed by an 11^th month transition period , many questions still remain as to what the UK government’s  changes to existing regulations or the introduction of  new ones will look like.  Therefore, UK-based financial institutions find themselves on shifting sands as they attempt to plan for accommodating Brexit-related change, and to brace for the necessary remediation these differences will certainly require.

Organisations must be mindful of the shape and dimension of their Brexit risk, both now and in the future.  This awareness will help them create a game plan to ensure that their remediation is relevant, scalable and future-proofed as both EU and UK legislation continues to evolve and diverge.

The regulatory impacts of Brexit will also ripple across the corporate horizon.  Organisations must start to assess some of the key areas which are already affecting their business model.  Financial institutions are well-advised to revisit how they have been conducting business in the EU and determine its continuing relevance.  This process includes the marketing and selling of their financial services and products, scrutiny of their supply chain model, resourcing, pricing and more.

Even though the UK is still in flux regarding Brexit, financial organisations can best begin by assessing the potential impact to all their contracts, both internal and external.  On a more granular level, they can begin identifying specific clauses in contracts which reference EU, UK and other territories.  Drawing a clear picture of their existing contracts and pinpointing which clauses may change or be needed in light of Brexit will help them design a remediation roadmap and mitigate contractual risk.

The best time for organizations to prepare for UK regulations coming in Brexit’s wake is now.  As the clock ticks down on forthcoming events, there is an opportunity for clear thinking before new regulations come and the water is muddied again.

One example is in respect to GDPR (General Data Protection Regulation) which deals with personal data protection.  The perceived end of temporary bridging mechanism protection for data transfers from the EU to the UK is scheduled to arrive by the end of June 2021, the longstop date.  The UK has already launched its own GDPR legislation, commonly known as “UK GDPR”.  With the June deadline looming, there is little time left for organisations to implement contractual changes to reflect the new regulatory landscape which will follow afterward.

From a risk management standpoint, organisations can be vigilant and anticipate addressing onshoring risk caused by Brexit.  Onshoring is essentially previous EU law retained by the UK after Brexit, in the form of regulations derived from the Brexit withdrawal agreement.  Adopted and revised by the UK, some parts of EU legislation will persist after Brexit in a UK-specific form.

Organizations need to be mindful of the impact onshoring will have upon their business relationships and activities.  In many scenarios, UK and EU versions of the same regulations (i.e. GDPR) will continue to apply and each may require ongoing, separate compliance.  This will include onerous tasks such as repapering contracts to “future-proof” their language and include standard contractual clauses as regulations permit. Companies at an organisational level will have to be mindful of changes and may need to comply with EU and UK versions of regulations Onshoring creates a need for careful examination of contracts and the potential need for repapering initiatives.

Again using GDPR as an example of risk, UK GDPR is still a bit “up in the air” and has not been formally accepted by the EU as being adequate.  Since the EU had not made an adequacy decision on UK GDPR prior to the end of the Brexit transition period, the UK has been given a temporary reprieve against being treated as a third country. This reprieve gives the EU time to determine the adequacy of UK GDPR’s rules.  Though a favorable preliminary determination was announced by the European Commission in February 2021, even if the EU does accept and adopt UK GDPR soon, their decision would only remain effective for four years and then become subject to more periodic review.

The Information Commissioner’s Office (ICO), the regulator of UK GDPR, recommends that organisations repaper their contracts facing EU counterparties now to introduce standard contractual clauses containing regulator-determined, mandatory EU protections.  This proactive step removes the need for a positive EU adequacy decision and mitigates EU adequacy review risk both now and in the future.

Repapering contracts due to Brexit requires an integrated combination of process, technology and human resources for best results.  Integreon’s Brexit Transition Support teams collaborate with all types of organisations to help them review and remediate impacted contracts, leveraging state-of-the-art technology and proven workflow processes for measurable results.  Integreon’s team includes contract operations experts and Six Sigma process specialists who understand how to build efficiency, accuracy and productivity into every step of the repapering process.

The best way for organizations to protect themselves from risk is to begin their Brexit contract repapering efforts now.  Being proactive and doing what they can to address the impact of Brexit on contract language will stand them in good stead as regulations evolve.

For more information on how Integreon can assist organisations with risk and regulatory compliance related to contracts, visit
https://www.integreon.com/what-we-do/risk-regulatory-services/regulatory-events-support/.

For information on how Integreon is helping clients with specific issues related to Brexit including Brexit Contract Management Services, visit:
https://www.integreon.com/what-we-do/risk-regulatory-services/regulatory-events-support/brexit-contract-management-services/.

About the Authors:

Laura Dickson, Animesh Kumar and Dean Nasser are Vice Presidents in Contracts, Compliance and Commercial Services at Integreon.  Laura Dickson is a subject matter expert in process design, product development, and workflow standardization. Animesh Kumar’s core competency lies in transformation of legal operations by leveraging AI and CLM platforms and automation.  Dean Nasser is a regulatory expert who supports business development through the provision of substantive subject matter expertise.

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