Brexit - are you ready for departure?
As a result of the Brexit vote, followed by the recent hung parliament, the future of business in the UK in uncertain – and the aviation industry is no different. To date, much of the focus has been on the impact of Brexit on airlines, traffic rights and access to routes. Attentions may be turning to the Single European Skies project (SESAR), but what of the wider aviation industry? Little thought appears to have been given to those providing services to the airline industry. Aircraft parts suppliers and maintenance, repair and operations providers take full advantage of the EU’s open borders and free trade - aviation components regularly cross the EU without hindrance and free from import duties. Will the European Aviation Safety Agency (EASA) still have oversight in safety regulation, including the design and manufacture of aircraft, maintenance of aircraft, certification of components, operation of aircraft, licensing of crew and air traffic control?
So what implications might Brexit have?
Clearly, if an early agreement on the future of the airline industry cannot be reached, the economic repercussions will be felt throughout the aviation industry. However, could we also see aircraft parts held up in Customs, leaving aircraft grounded, or costs spiralling as multiple import duties are applied?
While much remains unclear, businesses can still take steps to minimise the commercial and financial impact of Brexit.
What steps should you take?
In the first instance, the aim should be to ensure existing and future contracts remain commercially viable. When reviewing contracts some areas to consider are:
- EU Legislation and Regulation– what do “EU” and “EU law” mean? Reference to EU regulations will need to be reviewed.
- Sanctions – if an agreement includes a clause stating that a party is not subject to sanctions, ensure that the clause expressly includes the UK
- Tariffs, duties and taxes – who will bear the cost of import tariffs between the UK and the EU. What will be the impact of trade with non EU countries?
- Price – Brexit may trigger increased costs and there may be no mechanism for price adjustments.
- Payments – how will currency fluctuations be dealt with?
- Time frames - will delays or interruptions caused by Brexit trigger service level breaches or termination clauses?
- Force Majeure – Brexit is unlikely to be caught in the definition of force majeure unless specifically included
- Termination – will force majeure or material adverse change clauses be triggered by Brexit? What termination rights can you trigger?
- Enforcement – will you still be able to rely on the proposed methods of enforcement?
Having identified the commercial impact or risks, consider what steps can be taken to mitigate them, e.g. should existing contracts be amended or renegotiated? Going forward, protect new contracts by including express provisions which deal with the consequences of Brexit.
How can we help?
We can assist you in preparing for Brexit. We advise on:
- Risk mapping
- Contract reviews
- Contract drafting and negotiation
- Cross border trading arrangements
For more information on aviation law or related enquiries, contact Alina Nosek, Head of Aviation.
Published: 7 Jun 2017