EM Law Brexit

Brexit - Protecting Your Business

Despite this, the chances of the UK leaving the EU without an agreement is still a serious possibility because the agreement will need parliamentary approval. So what are the consequences of a no-deal Brexit and what can you do to minimise disruption to you and your business if it does happen? Our team at EM Law can help mitigate the risks you may be facing with Brexit - please get in touch if you need any help.

What is a no-deal Brexit?

As stated in Article 50, there will be a no-deal exit if the UK and the EU fail to reach a withdrawal agreement. If there is no withdrawal agreement, there will be no transition period, and EU law will stop applying to the UK at 11pm (UK time) on 29 March 2019. While it may seem easier to wait and see how everything works out, putting a plan in place now could make a big difference to how your business copes with the changes to come.

Movement of goods

The key concern for most businesses will be ensuring that they are legally permitted to continue to supply their products and services or can continue to be supplied with the products and services that they need for their business. If the UK leaves the EU without a deal there would be immediate changes to trading with the EU. The free circulation of goods between the UK and EU would cease and the UK would fall back on World Trade Organisation (WTO) rules. There would be no preferential tariffs, goods would have to meet each jurisdiction’s regulatory requirements, and the UK and the EU would treat each other as ‘third countries for services.’ The cost and administrative burden of doing business with the EU is therefore likely to rise. The exact nature of how your business should prepare for this will differ depending on the nature of the business’s operations.

For goods entering the UK from the EU an import declaration will also be required, customs checks may be carried out and any customs duties must be paid. Businesses exporting goods to the EU will be required to follow customs procedures in the same way that they currently do when exporting goods to a non-EU country. Businesses should consider registering for a UK EORI number, ensuring that their International Terms and Conditions of Service reflect that they are now an exporter, and using a customs procedure. A customs broker, freight forwarder or logistics provider can advise whether one of these procedures would be suitable for your business.

Movement of people

If the UK leaves the EU without a deal, there will also be consequences for the free movement of people. If you are a British passport holder, you will be considered a third country national under the Schengen Border Code and will need to comply with different rules to enter and travel around the Schengen area. According to the Schengen Border Code, third country passports must have been issued within the last 10 years on the date of arrival and have at least 3 months validity remaining on the date of intended departure from the last country visited in the Schengen area. If you plan on travelling to the Schengen area after 29 March 2019, it is worth checking that your passport complies with the new validity rules.

Despite departure day being less than 5 months away, for those who don’t have British passports, the future is less clear. When asked recently what would happen in the event of a no-deal, the government was unable to answer whether free movement of people would immediately cease on 29 March 2019.

Contracts

Brexit planning is likely to identify specific aspects of existing contracts that need to be risk assessed or amended. There will also be implications for new contracts being negotiated to continue after Brexit. For example, definitions or clauses defined by reference to the EU will need to be amended. Contractual terms also commonly include references to EU legislation and this will need to be able to be interpreted to include that EU legislation incorporated into UK law.

Rather than relying on force majeure or material adverse clauses in your contract, you should consider including express provisions that cover specific consequences of Brexit. A bespoke Brexit clause has the advantage of being capable of being drafted to cover a wide range of potential future relationship outcomes.

If your business-critical suppliers are over-exposed to currency risk or price increases, they may also try and pass these onto you, re-negotiate their terms, or be unable to fulfil their obligations. You should check whether your existing contract gives you the right to adjust pricing to cater for the effects of tariffs and inflation.

Data Protection

If the UK leaves the EU without an agreement in place, there would be no immediate change in the UK’s own data protection standards. This is because the Data Protection Act 2018 would remain in place and the EU Withdrawal Act would incorporate the GDPR into UK law to sit alongside it.

Transfers of personal data from the UK to the EU would continue without interruption. In recognition of the unprecedented degree of alignment between the UK and the EU’s data protection regimes, the UK would continue to allow the free flow of personal data from the UK to the EU.

However, the framework governing transfers of personal data from the EU to the UK would change on exit. In the event of a no deal Brexit, the UK will cease to be part of the EU. For data protection purposes, it will be a ‘third country’ and be subject to the same restrictions that apply to any other non-EU country. The European Commission has stated that if it deems the UK’s level of personal data protection essentially equivalent to that of the EU, it would make an adequacy decision allowing the transfer of personal data to the UK without restrictions.

However, given that this adequacy decision is not certain, it may be wise to identify an alternative legal basis for those transfers. For the majority of businesses, the most relevant alternative legal basis would be adopting EU-approved model contractual clauses for the transfer of data. Either way, this is something to start thinking about now.

If you have any questions around Brexit or would like us to carry out a quick health check on your business please contact Neil Williamson.


EM Law SaaS

Software as a service (SaaS)

SaaS is now the model that most software suppliers are aiming for. From the supplier side, SaaS helps protect intellectual property rights, it makes things easier when it comes to support and maintenance and the supplier retains greater all-round control. If the customer doesn't pay then the supplier can switch off access easily. From the customer side, support and maintenance and service availability is less of an issue because the supplier is servicing hundreds or thousands of other customers. Customers can rest assured that the supplier will be doing all they can to ensure the system is working. This article gives a very brief overview of SaaS and the things you should be aware of if you are thinking of signing a SaaS contract. Our lead software lawyer is Neil Williamson who is an expert in all software law matters.

What is SaaS?

SaaS (software as a service) is a software supply model through which a supplier hosts software applications on its platform and permits its customers to access and use that software over the internet. A SaaS customer will not receive a physical or installed copy of the software. Instead, the software is available via the internet using a standard browser. The customer will login to the supplier’s platform using credentials provided by the supplier and, once logged in, the customer can then use the software on the platform.

Access to SaaS is provided to customers on a subscription basis. When you stop paying the subscription fee, your rights to access the SaaS will end. Additional fees may also be payable, for example, in respect of any additional or enhanced user subscriptions or for any data stored in excess of any data storage limit that may be imposed.

Examples of popular SaaS applications include Dropbox, Amazon Web Services and Salesforce however there are many niche providers in the market now. These suppliers tend to be offering a platform where customers can upload and process data.

Advantages of SaaS

There are numerous advantages to SaaS. Commonly, SaaS providers host their services and store all of their customers’ data in the cloud so the data can be accessed and processed from anywhere with an internet connection.

This structure also allows providers to offer customers major cost savings as a result of economies of scale achieved by managing multiple customer solutions in a single operation.

SaaS eliminates upfront costs of purchase and installation and means that customers do not have to invest heavily in hardware, software or professional skills to obtain a wide range of functional capabilities. Additionally, the SaaS “pay as you go” model allow businesses to pay only for what they are using. This can be particularly advantageous for small businesses because it provides access to expensive, technical software that might have been otherwise unobtainable through conventional purchasing methods.

As well as being able to offer cost savings, SaaS providers can benefit from only having to support one version of their software and delivering their service on a single platform. SaaS providers can make changes to their software easily, especially when compared to a model where the software is installed on the customer’s servers. The provider can also implement enhancements at its data centre and make those changes available to its entire customer base. SaaS is designed to be user-friendly and should therefore minimise specific training requirements.

Other advantages include protection of intellectual property rights and general overall control for the supplier. Under the SaaS model, the customer does not receive a copy of the software making it much harder for the customer to copy it. As software is delivered as a service, the service can be switched off at any time by the supplier disabling the customer's log-in credentials.

Disadvantages of SaaS

There are also disadvantages to SaaS. Although some SaaS providers offer customer-specific customisation services, the majority of services provided are a “one-to-many” model. SaaS is therefore generally regarded as more useful for standardised software applications such as email, data processing and accounting. You will need to evaluate each application individually to make sure that the SaaS offers the features that you need to do business.

Some businesses may also be concerned about the lack of control and security of SaaS. In-house software applications give business owners a high degree of control. When you use a hosted solution, you give much of that control over to a third party provider. If you aren’t comfortable relying on a third party to manage critical business applications, a SaaS model may not be right for you. There may also be compliance (for example, data protection) issues and a risk of hidden extras for additional users, storage and so on.

What do I need to consider when entering into a SaaS agreement?

As SaaS providers usually have high numbers of contracts globally, they generally seek to offer their services on standard terms. These terms tend to be strongly advantageous towards the provider and exclude liability for data loss, corruption or service failure. Consider the following provisions in particular:

• Charges and payment (including any price increases);
• The treatment of customer data;
• Service levels;
• Confidentiality provisions;
• Term and termination; and
• What happens to customer data when the contract ends.

From the supplier’s perspective, a SaaS model is lower risk than other forms of software supply. However, as with all contracts, careful drafting is needed. All of the above provisions are important from the supplier’s as well as the customer’s perspective and, in addition to these, appropriate intellectual property rights provisions should be included.

Licensing

Although in a software as a service model software is not being physically supplied to the customer, appropriate software licences still need to be granted. This is because the customers are using the software at a computer and, without a licence, this would be copyright infringement. These licences are usually very narrowly defined and limited to use of the online application for their own business needs. The supplier should warrant to gain and maintain all necessary licences, consent, and permissions necessary for the performance of the agreement.

If you have any questions around software as a service agreements or you need support drafting a software as a service agreement contact Neil Williamson.