March 7, 2017
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About this seminar
For any business, staying local but going global presents a number of challenges and opportunities. In this series, Gowling WLG lawyers from around the world discuss, regulatory, tax, employment and IP issues that Canadian companies need to consider before entering these key international markets.
This seminar counts for up to 0.5 hour of Substantive Credit under the CPD rules of the Law Society of Upper Canada, up to 0.5 hour of CPD credit under the rules of the Law Society of British Columbia and up to 0.5 hour of CLE credit under the rules of the Barreau du Québec.
Scott Jolliffe: We’re going to turn to the UK now and I’d like to introduce you to our partner, Chris Towle. It’s a much more reasonable hour there. I believe it’s about 2:00pm in the afternoon. Chris is a partner who splits his time between Birmingham, where we have a substantial office in sort of the manufacturing center of the UK, as well as London, the financial center in the UK. I should also say that Chris spends a fair bit of time over here in North America, including just last week. Chris is a corporate transaction lawyer with deep experience in cross border transactions, acquisitions, private equity and transactions involving real estate. Chris, over to you.
Chris Towle: Thank you Scott. Same with Jamie, I hope everyone can hear me all right. Thanks for having me. Nice to see you all. Unlike Jamie I don’t have a beard, indeed like Scott, I don’t have a beard to distinguish me. To distinguish myself from all the other handsome gentlemen on screen I’ve taken my tie off and I hope that makes it slightly easier for you. As Scott said I’m going to try to give you a little bit of context, background, to what’s going on in the UK at the moment. What we think that means for ongoing trade opportunities, in particular what we think that means is relation to opportunities for North American investment and trading into, and via, the UK. Context, I guess. What’s happened of note in the UK this year? You would be forgiven for thinking probably the most interesting thing that has happened in the UK, or relating to the UK this year, is the Royal visit to Canada and the little blue shorts that George was sporting every day of that. You know, that was probably more interesting in many ways but the other big news, slightly overshadowed by slightly bigger news in the US recently, the same ilk, of course
was the shock, I say, referendum in the UK and the decision to leave the EU. What does that mean for trading? From a personal perspective, and in relation to our North American clients in particular, as you will understand, as you will fully appreciate. That’s the question that we’re getting asked, day after day, time and time again. Although happily less and less as the months pass.
Brexit. What does it mean? In terms of the process, the short answer is, we don’t really know yet. We don’t really know who can trigger the Brexit process. There’s a court case underway, well publicized at the moment, deciding whether or not the government can go ahead and do it, whether they need to have a conversation with Parliament, whether they might want to come back and talk to the individuals that voted one way or another. Again, seems unlikely but possible. What are the government’s plans in relation to that process. We don’t know. Theresa May’s intimated that actually know she might give us an indication of what those are before she enters into negotiations but again, even the educated guess is very quite significant at the moment. What’s the timing in relation to Brexit? We don’t really know, I’m afraid. We all anticipate, as we are told, that the trigger insofar as the government is allowed to exercise that trigger without other consent, will be pulled by March of next year. Which will push us into a 2 year process of negotiations with the rest of Europe but does that mean we’ll have a decision? Does that mean we will have exited within 2 years? Possibly. Possibly not. It could be 2 years, it could be 3, it could be 7, it could be 8. It just depends where we get to. What are the trading implications of that? Again, with fear and risk of sounding like I really haven’t got a clue what’s going on here at the moment, we don’t really know. The discussions are does it end up looking like something which is pretty much exactly the same as to what we’ve got at the moment? Do we negotiate a new deal which allows us freedom of movement, access to whatever we need access to, allows the rest of the Europeans access to our market in the same way they currently have? Possibly. Do we enter into a number of separate trade deals which gets us to a similar place? Possibly. Do we enter into none of the above and just try to trade freely and hope that everybody plays nicely? Well, that has been suggested. Seems slightly less likely, perhaps, but possibly again. All of that added together sounds pretty unhelpful and pretty unsure. But actually post the first month or so, the reality has been it’s kind of business as usual and I wouldn’t dare say, especially with my friends and German colleagues on the line, that it’s entirely business as usual and nothing has changed because, of course, a lot has changed and a lot will still have to change in the coming months and years. But the reality is actually, for most of our clients and in particular our North American clients, we can’t just stop and wait for the next 1, 2, 3, 4, 5, year period to understand exactly what’s happening before we continue with our daily lives and our daily businesses and our daily investments. So actually what we’re seeing the markets at the moment it kind of really is business as usual. Is the UK still the world publicized gateway to Europe that it was previously? For now, hopefully. Will it continue to be in the future? Possibly not in the same way that it always has been but actually we would anticipate, yes, to a sensible degree. What does it mean for UK trade investment into the UK generally? Is it doomed? I don’t think so. Is it growing? In some sectors, yes, very much so actually. Again, is it business as usual? Well, kind of, kind of yes, kind of no. I appreciate that’s not in many ways particularly helpful. Having spent the week in the US myself last week with our lead European lawyer, who lives and breathes Brexit, and he’s very excited about it and talks about it non-stop, you might think I had a slightly better idea of what’s going on. I don’t, I’m afraid. It’s an entertaining time to be a lawyer. It’s an entertaining time to be in business. But it’s not necessarily a negative or bad or worrying time to be any of those things actually. What we are finding is the investment into Europe and investment into the UK is pretty much back where it was pre the Brexit vote and some areas is actually increasing and encouraging. And against that I would, without wanting to end my first context introductory slide in even more doom and gloom, just I guess mention that against the backdrop of exit, Brexit is a wider backdrop of global uncertainty in relation to markets, generally so, in the US. Slightly shock election, you know. Germany, France have got elections coming up. Obviously things are going on in Italy which 12 months, 2 years ago probably wouldn’t have been expected. Austria is having similar discussions. So, this isn’t a UK phenomenon. This is worldwide phenomenon and it’s something which possibly, if everybody stops, standstill and does nothing, has the ability of course to get into the way of what you do in your daily lives and your business and your plans for investment and expansion. But at the moment I think we say it doesn’t necessarily need to do and from what we’re seeing most of our clients are accepting that it doesn’t really need to and moving on.
Opportunities. Are there any? We would say absolutely yes and, you know, from what we’re seeing in the various markets, all of our clients seem to be saying absolutely yes. Should we worry about the UK market going away? Should we all be focusing on other parts of Europe? Well, not just yet we would say. However, again mindful of the fact that I’ve got French and German colleagues on the line, absolutely, if that’s what you want to do. Then fantastic, they’ll be very happy to advise you and between assumptions we can work out whatever the answer might be. From a UK selfish, personal perspective, the fact of the matter is the UK continues to be one of Canada’s top trading partners. It continues to be one of America’s top trading partners. It continues to be seen as one of the lead destinations for investment from North America and, indeed, that’s investment into the UK and that’s investment into Europe via the UK. It’s still ranked as the lead destination in Europe for doing business. That’s in terms of ease of doing business, employment regulations, obtaining finance, business focused tax. Key sectors are alive and doing actually really rather well at the moment. So, real estate investment for example, is a huge sector in the UK. We had a quiet summer, as you would expect post Brexit, people were waiting to see what would happen with pricing. The reality is the pound is slightly depressed which means investment opportunities, if you are a North American investor, are actually better than they were a year ago. Everything is 15% cheaper than it was a year ago. Actually what we’re seeing from our North American clients is that having had a period of 2, 3, 4 months where people quieted down a little bit to wait to see what was happening, actually now they’re returning with vigor. The same is true with the tech market, the life sciences market, the investment markets generally, albeit that they probably suffered slightly less of an immediate post Brexit hangover. I guess one of the messages there, one, the pound is lower than it has been for some time. So, if you’re looking to invest in a overseas market and the UK is on your list, now is not a bad time if you want to get bang for your buck. Are there things that you should be worried about in relation to the UK and Europe? Well, of course there is uncertainty, but at the moment I don’t think it’s uncertainty that should be leading decisions or blocking decisions. I don’t think our colleagues elsewhere would disagree with that necessarily. I don’t think it’s likely that the UK is going to seek to be a lead trading partner with North America, be that Canada, be that Central America, or elsewhere. I would say just keep coming. It’s a great place. Why would you not want to be here?
The slightly more boring bits, which I promised I’ll cover, the legal considerations. I’ve got a fairly easy job here actually I think. Without worrying too much about the background context and what may or may not be going on in the wider world, the fact of the matter is, the UK is and continues to be recognized as a safe and reliable and quite easy place to do business. The harsh reality is whether we, or other people like it or not, it is one of the overseas destinations for North American investment which is closest to what you would recognize as being normal back home. The way that we do business, the way that we do M&A, the way that we deal with contracts, is more similar to the North American way than other parts of Europe and the wider world. I don’t think that’s going to change. The UK tends to have a, I use the word “sensible” advisedly, not suggesting that anybody else is less sensible, but a sensible, straightforward approach to contracts. Essentially, in the UK you can kind of agree with whatever you want to agree, so long as everybody’s onboard with that and within sensible limits. If you want to acquire a company in a particular way, if you want to set up and do business in a particular way and agree arrangements with third parties in a particular way, most of the time you can. So long as there are other people on board. Of course there’s frameworks within which we need to act but actually slight less prescriptive than other destinations.
We have, I don’t think it’s untoward suggesting this, but we have a very well established, very well respective legal system. Enforcement in the UK is not typically an issue and enforcement of UK judgments elsewhere is not typically an issue. You will see in a number of agreements, for example, which are not UK based agreements or UK based businesses even, UK law is still imported as the law of choice. That’s not going to change anytime soon, we would say. The World Bank still says even right now that the UK is the best place to do business in Europe, the easiest place to do business in Europe, for a number of reasons. We still have, apparently, the most business focused courts, tax system is coming on line, is increasingly competitive, finance is readily available and is very business focused and very business friendly. The message there is we’re just here to be your friends. We’re not here to try to stop you doing business or unnecessarily put roadblocks in the way that would prevent you doing what you want or what you need to do.
When it comes to acquiring or setting up a business in the UK, again, it’s a relatively straightforward process. It’s similar to the North American process. It’s arguably slightly less aggressive, if we’re taking about M&A, so slightly less buyer friendly for example. But it is a lot closer to the North American way of life than many other countries in Europe and beyond. What are the key legal considerations? I’ll touch on each of these briefly. Even more briefly than Jamie did because frankly there are less issues, I would say, for you to be worried about if you’re doing business in the United Kingdom, because in each of these areas, without suggesting that China is a scary place to do business for example, the United Kingdom is not a particularly scary place to do business.
Intellectual property which will be key and critical to most businesses, it’s still key and still critical in the United Kingdom, but unlike in some other jurisdictions, you don’t have the backdrop of being terrified that actually somebody else is going to be able to take your intellectual property and stop you getting it back. We have a normal, well recognized sophisticated and respected regime. It’s not expected that will change. Certain parts of it might change, as and when the UK leaves Europe, but if they do change they will probably keep step with whatever the rest of the world, the sensible and fair, we say, parts of the world are doing. From a firm perspective, as our Canadian colleagues will tell you, have a ridiculously strong worldwide, world beating IP practice, so there aren’t many issues across the globe from an IP perspective that we can’t look at it and deal with for you and protect you against. Data protection obviously key and critical especially in relation to North American businesses who are doing business elsewhere and even more so for the US than Canada, terrified that their secret/sensitive information might be stolen or misused. The reality is in the UK the regime, again, is pretty much as thorough and sophisticated as you’re going to find. The current date protection directive, which of course is a European directive, is in force in the UK. The new general data protection regulations which are coming into force soon will be in force in the UK and that won’t change unless and until the UK leaves Europe. And even if the UK does leave Europe, or probably I should say when the UK leaves Europe, I should probably just accept reality, even if we decide to adopt something which is slightly different to that, the reality is because of the views of the rest of the world, data protection isn’t going to go away. It’s not something the UK’s going to stop protecting so ultimately we will inevitably negotiate some form of privacy shield which will be very similar/the same as the regulations. Data protection we would say not something that you need to be concerned about. Absolutely it’s a key point but it’s something that we are as alive to as you will be.
Employment issues. Again, without wanting to point the finger elsewhere, actually employment issues in the UK, they’re not particularly scary. We don’t have perhaps quite the same ability as you might have in North America to deal with employees in exactly the way we might like at any given time but it is a sensible, straightforward contractual approach with basic minimum rights enshrined in employment law. Essentially, unlike China and the picture that Jamie was just painting, if you have got a seriously underperforming employee you can deal with them. If you’ve got an issue you can probably deal with it. To the extent that there’s an issue which cannot be immediately dealt with under the contract we can probably deal with it anyway, mitigate whatever risk might flow from that. Employment law, whilst it is a scary topic in many countries and some of my colleagues I have no doubt will touch upon that in relation to their jurisdictions shortly, in the UK it’s not really something you need to get too uptight about. Work councils here are very, very, rare. That’s not necessarily the case across other parts of Europe but here it’s not that big a problem.
Tax I will touch upon very briefly. And, again, really only to say that the UK tax regime, love it or hate it, it’s sensible, it’s middle ground, it’s becoming even more business focused. It’s becoming increasingly competitive, so whilst we are not a tax haven, we are not a destination which incoming businesses fear in relation to the tax implications. Where does that leave us? I think we would say, and this is what we’re seeing in relation to our clients and they business they’re doing, there continues to be just as much opportunity in the United Kingdom as there has ever been. I can’t gaze into a crystal ball and tell you that will continue forever and ever more and whatever happens in the rest of the world, the rest of Europe, the UK leaving the European Union, will not necessarily affect that. Well, there might not be the odd bump in the road. I think what I can tell you is that we are confident that there won’t be any major problems and even as things change solutions will be found to enable the UK to trade with the rest of the world in the way that it has always enjoyed doing and vice versa. From a firm perspective, what I would say is genuinely, to the extent that the UK is the right destination choice for you, fantastic, we’d love to help. To the extent that for whatever reason you feel that France or Germany or other areas of the world are the right place for you then, equally, we’d love to help. It’s not a one size fits all solution but we do have a solution in most of those jurisdictions. To the extent that you want assistance in the UK, all day long, please let us know. But to the extent that you fall reason, which of course I would not be able to fathom, decide that France or Germany is a better choice then we have the people here that can help. Thank you.
Scott Jolliffe: Well, no, thank you Chris. That’s terrific.
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