As parliament continues to debate Theresa May’s plan for exiting the EU, we’re commenting all this week on five topics that concern brands and Brexit:
Today is question five:
What about references to ‘the EU’ in my agreements?
Where the territory of an agreement is stated to be the EU (for example to define the commercial extent of a grant of rights in an IP licence agreement), there will be a tension between literal and purposive construction. A literal construction would take any reference to ‘the EU’ at face value, and would not see it as including the UK post-Brexit. A purposive construction would look more to the intentions and expectations of the parties at the time of drafting the agreement, and would allow for more flexibility.
Which approach will be taken will likely be determined by the agreement’s governing law provision, and the approach of the courts in that jurisdiction. Many jurisdictions, including England & Wales, tend to follow a trend of purposive construction. However, if any jurisdiction follows a more literal approach, then what happens post-Brexit? In those places, rigid construction may mean the UK is no longer covered by the agreement.
We are confident that a purposive interpretation will be adopted by the courts of England & Wales in such cases.
As a practical measure, you might consider agreeing amended wording for existing contracts, or any which are due for signature between now and Brexit, noting that the territory for the agreement includes the UK, rather than simply The EU.
Whilst there is likely to be a great deal of equivalent legislation and preservation of rights immediately following Brexit, it seems likely that some legislation will not be equivalently codified.
As such, where an agreement references certain EU laws, and where these provisions do not have equivalence or existence in domestic law following Brexit, disputes may be subject to multiple laws. Forum shopping may become more important in such cases.
As a practical step, equivalent law provisions should be reviewed, if present. Otherwise, the parties may wish to agree a new framework around governance of the agreement by reference to existing national laws.