Asian businesses rush to get advice from their lawyers

Pedestrians walk past an electronic screen displaying the Hang Seng Index in Hong Kong on June 27.
Pedestrians walk past an electronic screen displaying the Hang Seng Index in Hong Kong on June 27.PHOTO: BLOOMBERG

There will be a lot of work in the years ahead to deal with the consequences of Brexit.

Not just for the British government and European Union negotiators, but also for international law firms across the world.

Even here in Asia, lawyers say work has begun piling up in the wake of Britain's shock vote last week to leave the EU.

The potential departure of Britain from the EU single market, coupled with the sharp fall in the pound, has got corporate clients re-examining their business models, contracts and currency strategies.

Ms Sandra Seah, joint managing partner of Bird & Bird ATMD in Singapore, said businesses are still taking stock of the situation.

DON'T DELAY

We advise our clients to start without delay scanning through their business to map out their exposure in areas such as tax, contractual provisions and intellectual property, and consider mitigation measures where appropriate.

MS CLARA INGEN-HOUSZ, Hong Kong-based Linklaters partner.

 

None of the law firm's clients are in a rush to pull out of Britain or renegotiate ongoing deals that involve European or British parties, she said. But they are keen to make sure that their contracts now include clauses that take Britain's eventual secession from the EU into account.

"Clients are instructing us to review contractual provisions more closely: Are there rights to terminate for convenience? What are the consequences of pre-termination? Are there options such as escrow arrangements to protect their investment?" Ms Seah said.

Hong Kong-based Linklaters partner Clara Ingen-Housz said the rise in client queries about Brexit was marked. "Pre-referendum, interest in the topic was lukewarm in Asia. Since the Leave vote, however, we've seen a sharp increase in the number of clients reaching out to understand Brexit's impact on their business," she said.

"We advise our clients to start without delay scanning through their business to map out their exposure in areas such as tax, contractual provisions and intellectual property, and consider mitigation measures where appropriate."

The pound's sharp decline to 31-year lows against the US dollar over the past few days is also of great concern to clients, especially those in the finance sector, Ms Ingen-Housz noted.

"However, it is too early to tell the impact it will have in terms of contracts on mergers and acquisitions," she said.

At RHTLaw Taylor Wessing in Singapore, deputy managing partner Azman Jaafar said there will be a lot of deals that will have to be reviewed as the outcome of Brexit becomes clearer over time.

"In practice, Brexit will require negotiation of a wide range of new arrangements with the EU and other countries," he said.

His firm's clients have begun asking a long list of questions, ranging from "What regulatory changes are likely to occur in our sector?" to "Should our strategy on currency risk and hedging change?" and "What are our options for an investment, merger or joint venture and should it be in Britain or the EU?"

These are all good questions to ask. As Pinsent Masons MPillay partner Jon Howes noted, Brexit will likely have a significant impact on the operations of any company based in or doing business with Britain, from its commercial contracts to intellectual property, data protection, funding, employees and how it is affected by competition law.

"Any Britain-based business relying on a regulatory passport to operate in other EU states, or vice versa, is likely to be particularly affected," he said.

"Asian investors in the infrastructure sector will also be interested to see how Brexit will affect the procurement regime in Britain."

A number of businesses have Brexit-related clauses in their contracts, while some held back on inking deals until the results became clear, Mr Howes added.

Still, not many businesses prepared proactively, and his firm has been fielding a significant number of calls since the vote, he said.

The firm has even prepared for clients a checklist of issues that companies based in or doing business with Britain can think through. Baker & McKenzie has done the same, offering corporate clients a six-page list of questions they should be asking themselves now that Brexit is a reality.

For example: Who pays taxes and duties in the contracts you have? Does your business' supply of goods or services into the EU require establishment in the EU? Does your business receive any grants or subsidies from the British government and/or the EU?

These are all issues that will be affected by Brexit and could lead to higher costs or greater regulatory hurdles once Britain leaves the EU, the firm warns.

But for Asia on the whole, all the work stemming from Brexit could be a boon, noted Clyde & Co's managing director for Asia, Mr Chong Ik Wei.

"Asia-Pacific is a growth area for London and the Lloyd's insurance market. It is therefore entirely possible that, in the circumstances, British insurers will look to execute a meaningful pivot away from the EU towards Asian markets. That will provide enormous opportunities for brokers and intermediaries in the region," he said.

A version of this article appeared in the print edition of The Straits Times on June 30, 2016, with the headline 'Asian businesses rush to get advice from their lawyers'. Print Edition | Subscribe