Avv. Francesca Pecora

The Impact of Brexit in International Commercial Contracts Many businesses are wondering whether Brexit will constitute an event which operates to discharge parties from their obligations under commercial contracts and whether Force Majeure Clauses or Material Adverse Change (MAC) clauses can be activated as a result of Brexit. It is unlikely that the very fact of Brexit would activate such clauses, absent specific wording to that effect. It might be argued that Brexit constitutes an unforeseen adverse event ( justified through a Force Majeure Clause) in contracts that were entered into prior to the original Brexit vote. After Brexit vote and during the transitions period, ended on January 2021, it will be more difficult to argue that an unforeseen adverse event, occurred due to Brexit, could not have been foreseen. That’s why “Brexit clauses” have been included in commercial contracts more frequently in recent months to activate automatic changes to a contract. For such clauses to be effective and enforceable, it will be essential to define the “trigger event” clearly, such as the upcoming unprofitability of the contract for one party, a change in Law or a substantial change of prices due to a sudden increase of tariffs or taxes. It will be also efficient to consider in such contracts the governing law and jurisdiction clause. Parties of a commercial contract need to consider the events which may directly impact them and their business, but also their supply chain. They have to identify the fundamental elements of the contracts governing their agreements and be sure that these elements provide sufficient protection against Brexit and eventually consider the necessity to renegotiate or amend the contracts to deal more tailored solution and face safely the implications of Brexit. Bespoke legal advice is mandatory in these types of business relationships.