Brexit has returned to the news cycle recently (if indeed it ever went away) with the furore around the UK Internal Market Bill and the question of whether or not the Government is setting out on a path that will break international law.
The return of Brexit to the headlines, after months of wall-to-wall COVID-19 coverage, provides an important reminder that we are now less than four months away from the next key deadline in the ongoing Brexit saga.
This is because the transition period, agreed upon the UK’s departure from the European Union, will come to an end on 31st December 2020. Absent the UK & EU agreeing an extension, this clearly leaves little time for the UK and EU to agree a Free Trade Agreement. Should no such Agreement be reached – which appears to be the current direction of travel – we will therefore be left with what has commonly been described as a ‘no deal’ Brexit.
As the prospect of a no-deal departure from the EU is as great as it has ever been, it is important that travel companies are taking steps to prepare for this possibility and so we have set out below some practical steps that companies may wish to explore.
One step that you can take right away is to conduct a contract audit. This would involve reviewing your existing commercial contracts with third parties and determining the impact that ‘no deal’ may have upon those contracts.
For instance, this could involve:
- Identifying business critical, long-term or high-value contracts and determining whether there is a risk that they may become financially unviable or difficult for the business to perform, post departure.
- If any existing contracts will prove problematic for the business, determining whether the contract contains provisions that would allow you to terminate, on the expiry of the transition period.
- If there are no favourable rights of termination, assessing whether it is possible to enter into early negotiations with the other party to vary the contract – either to agree more favourable termination provisions or amend the commercials, so that they become viable once again.
- Even if a contract will remain viable in the event of a no-deal departure, it would nevertheless be sensible to review whether there are any wider issues that will need to be addressed. For instance, any references to the European Union or European Union law may need to be amended to either reference the UK or specific UK legislation. Further, consideration may need to be given to dispute resolution procedures and whether it is advantageous to have disputes dealt with via Arbitration, instead of the Courts of England and Wales, if Brexit makes the enforcement of an English judgment abroad more difficult.
Insolvency Protection for Packages
Under the 2015 Package Travel Directive (which paved the way for the new Package Travel Regulations in 2018) Package Organisers are able to obtain insolvency protection in the EU member state in which they are established and then rely on that means of insolvency protection when selling Packages across the EU. This is known as the mutual recognition scheme.
If there is a no-deal departure, the UK’s role in the mutual recognition scheme will come to an end. For those travel companies that are established in the UK and sell to UK consumers, this will have little effect. However, if you currently rely on a UK means of insolvency protection in order to financially protect Packages sold to EU consumers (or indeed an EU means of insolvency protection to protect Packages sold to UK consumers), this may prove problematic.
If you are a UK company selling Packages into the EU, careful consideration will need to be given as to whether it is desirable to obtain a means of insolvency protection in each separate EU country that you sell into; or whether it is instead desirable to move your place of establishment to an EU member state, in order to again rely on the mutual recognition scheme for all EU sales.
Selling Packages as Agent for an EU Package Organiser
At present, Regulation 27 of the Package Travel Regulations imposes an obligation on Agents who sell Packages on behalf of Organisers that are established outside of the EEA.
In short, Regulation 27 states that the Agent must be able to evidence that the non-EEA Organiser complies with the requirements of the Package Travel Regulations relating to: (1) performance of the Package; and (2) the need to provide insolvency protection for the Package.
If the Agent is unable to evidence that the non-EEA Organiser complies with those obligations, then they will fall on the Agent to meet them instead.
Upon a no-deal departure, however, this rule will change. Instead of applying to Agents that sell Packages on behalf of Non-EEA Package Organisers, it will instead apply to an Agent that sells a Package on behalf of an Organiser that is based outside the United Kingdom. Meaning an Agent will now need to evidence that any non-UK Organiser (on whose behalf it sells Packages) complies with the two obligations set out above.
Now, the first of those obligations is unlikely to be problematic where the Organiser is established in the EEA; as the Organiser will be used to complying (and so will likely have T&Cs drafted to show that they comply) with the rules around performance of a Package. However, demonstrating the second requirement – that the Organiser has in place a form of insolvency protection that meets the requirements of the UK Package Travel Regulations – may be more challenging.
Accordingly, if you are an Agent that sells Packages on behalf of an Organiser based in the EEA, it is certainly worth assessing now how this new obligation will be met, ahead of new Package sales in 2021.
The most immediate issue that a no-deal departure would present from a data protection stand-point applies to the transfer of personal data between the UK and the EU.
At present, data transfers can take place seamlessly between the UK and EU. However, upon the expiry of the transition period the UK will become a ‘third country’. This means that companies established in the EU will be restricted in how they can share personal data with companies based in the UK.
The UK Government is currently seeking an ‘Adequacy Decision’ from the European Commission which, if granted, would resolve this problem. However, it is currently unclear as to whether an Adequacy Decision will be granted in time to coincide with the expiry of the transition period.
If there is no Adequacy Decision in place on the expiry of the transition period, travel companies will need to assess the data flows that they receive from their suppliers (and indeed any other companies) in the EU and put measures in place to allow those personal data transfers to continue unimpeded.
One popular option to achieve this would be to look to agree ‘standard contractual clauses’ with the supplier or company in question. This is often a perfectly achievable approach to take but one that should be considered now, while time remains to put the necessary arrangements in place.
In December 2018 the EU Geo-blocking Regulation came into force across the EU which, in brief, restricted traders in one EU member state from blocking or limiting access to their online interfaces (e.g. their website) by customers in another EU member state.
The UK Government has already signalled that, if the UK departs the EU on a no-deal basis, this Regulation will be repealed in the UK. This means that UK travel companies, will be able to discriminate between UK and EU customers in this way, should they wish to do so.
That said, it is worth noting that for any travel businesses operating in the EU, the restrictions will continue to apply.
For the majority of people Brexit has become a tiresome topic – and indeed it has rather faded into the background given the events of the past 6 months.
However, we are rapidly approaching what may be the final stage of the Brexit process and the prospect of a no-deal departure in less than four months’ time is very real.
Therefore, if you have not yet taken steps to prepare for this possibility, now is a very good time to start, with the issues above being steps that you can consider and implement right away.
Naturally, the above is not an exhaustive list and so if you need any assistance in readying your business for the consequences of a no-deal Brexit, please feel free to get in touch.
Brexit returned to the news cycle last month – if indeed it ever went away – with the furore around the UK Internal Market Bill and the question of whether or not the government is setting out on a path that will break international law.