Business Directory

LEGAL MATTERS

Set of flat style vector business iconsDoing business in a new jurisdiction poses many challenges, with negotiating a foreign legal framework high on the list.

Aside from understanding the British common law system, it is also useful to bear in mind the legal differences between the UK and your home state.

One of the key principles of the EU is the incentivisation of cross border trade between member states. Pan-EU laws have been introduced over the past number of decades in an attempt to limit the amount of bureaucratic red tape that used to come along with trading to other European countries. In many ways this has been effective.

Elsewhere, we have discussed how the harmonisation of food and drink legislation has allowed for the easy trade of those products within the region. Another area where new legislation has worked extremely effectively has been in the area of importing and exporting goods. Exports are classed as acquisitions, meaning that – while exporters are required to pay VAT – they are exempt from import duty and do not need to use an import licence. But while there has been a lot of progress, the EU Commission still believes that there are barriers to trade within legislation that need to be addressed.

A fast-paced digital age has also brought a number of challenges that legislators are chasing to keep up with. This means that a business operating in the UK needs to understand how the Common Law system works, and important areas of difference such as consumer law and anti-bribery legislation.

COMMON LAW
Common law can be a complex idea for businesspeople to get their heads around. It is a legal framework that has its roots in ancient medieval law and has been worked on intensively during the industrial revolution rather than stemming from a single, relatively recently written, constitution. It relies heavily on precedent when it comes to decision making. Membership of the EU has also altered the system. It can be extremely complex to navigate, even for British companies operating solely inside the UK.

In order to have a legally binding contract, for example, each party must bring something of value to the table – this is known as consideration. In a business setting, this is usually not an issue as business transactions of any kind are an exchange of one thing for another.

If a problem arises within a contract, however, seeking redress through the courts will be an expensive process. In fact, the Court of Justice of the European Union (CJEU) found in 2014 that UK court costs were “prohibitively expensive” when it came to hearing environmental cases.1

Civil Court fees in the UK have recently increased dramatically, causing senior judges to express concern that the cost of litigation will drive work away from UK law firms and, according to the civil justice council, “be seen, by international standards, as a high entry price to begin a commercial case in this jurisdiction”. In certain cases, recent cost increases have run as high as 600%– indeed, the Government’s 2014 increases in court fees ranged from 25 to 100 times those in New York.

Along with uncertainty over further rises in fees and the possible introduction of daily hearing fees in the future, the current expense of litigation in Great Britain is a strong incentive for choosing partners carefully and ensuring watertight drafting of any legal commitments.3

CONSUMER RIGHTS
While basic consumer rights in the UK have much in common with other EU states, there are some subtle differences that companies should be aware of. Indeed, in 2011, the EU Commission attempted to address discrepancies with a proposal to introduce a Common Sales Law for Europe.Portrait of man using digital tablet and credit card in office

The aim of the law was to harmonise some of the barriers between inter-state trade. Research had found, for example, that only 9% of British consumers who bought online bought goods from other European countries, representing a small proportion of the approximately 53% of consumers who were purchasing goods online.4 The proposal sought to introduce certain rights that currently didn’t exist for consumers.

Under the Common European Sales Law, if a business failed to deliver a product, the consumer could ‘require’ the business to do so. This is not the standard practice in the UK; usually the courts will offer financial compensation to the consumer instead of insisting that the goods be delivered. This can be inconvenient for the consumer as they may have to look for another seller of the same product under similar conditions, which may be impractical.5 The British Ministry of Justice previously thought that this legislation was unnecessary, citing a lack of evidence that consumers really had serious issues with the situation as it stood.6 In 2011, however, the European Commission estimated that differences in contract law caused a loss of around €26 billion in intra-EU trade every year. This also has an impact on consumer choice.7

The EU Commission initially proposed to put an optional framework in place so consumers could opt-in to a contract with a seller and operate their contract of sale under the Common Sales Law, therefore bypassing the differences between initial member states that acted as a barrier (both real and mental) to transactions and boosting consumer confidence. The idea was to mimic the USA, where consumers and businesses in different states can trade freely with one another despite each having their own state law.8

However, when the Commission presented its Work Programme for 2015 last December, the proposal for a Common European Sales Law had been withdrawn. In fact, First Vice-President Frans Timmermans revealed that the Commission was working on a digital single market package which would focus on modernising copyright law and work on codifying a set of simple rules for consumers making online digital purchases from all member states.9

It remains to be seen what shape this will take and, if it is put forward, the proposal may well face opposition: there were a lot of vocal opponents to the Common European Sales Law both on the grounds that people felt that national laws were enough and also that the name of the initiative didn’t make it clear that this was an opt-in process.Exterior Of European Commission Building

For now at least, therefore, companies exporting to the UK should be aware of consumer rights as set out in the UK. The UK European Consumer Centre currently deals with problems encountered by UK consumers when buying from an EU company. Aside from providing consumer advice, the agency sometimes offers mediation services where a consumer is dissatisfied, and can work with its counterpart agency in the other company’s home state – the European Consumer Centre Network includes offices in all 28 member states. This counterpart office is empowered to make a full legal assessment of the case. In other words, it is important not to ignore or dismiss dissatisfied consumers from the UK (or any other EU jurisdiction) because consumer rights will be enforced across borders.

CHOOSING A SOLICITOR
Legal assistance is one area where the price of a service is really secondary to its value – good advice can pay for itself, while cheap-but-sub-standard advice will often prove more expensive in the long run. There are a number of considerations you should make when selecting a solicitor for any UK operation.

If you are doing any business of great complexity within the UK, a firm with experience of bridging the gap between laws in different jurisdictions (particularly that of your home jurisdiction and the UK) is extremely helpful. Therefore, it is often a good idea to select a firm that is familiar with the legal system in your own country.

Many UK law firms have international presences, and they may have an office in your country. This could be a good first port of call as their connections with their UK branch may make the process easier, and you may be able to have your legal issues resolved in your main country of business rather than tying up valuable time in the UK on legal meetings. Also make sure to find a firm that has sufficient expertise within your industry to meet your requirements.

Make sure that any prospective solicitor’s firm is properly accredited. Solicitors have to provide information to the Solicitor’s Regulation Authority, and part of this is identifying up to six areas of law in which they specialise.12 Your solicitor should be able to give you the kind of help you need – the ethical thing to do in the face of inexperience is either to refer you to a more specialised person or to partner with them.Lawyers shaking hands outside office building. Image shot 2010. Exact date unknown.

One key fact to remember,especially if you are doing business with more than one region of the UK, is that it contains three distinct jurisdictions – England and Wales, Scotland and Northern Ireland – with some subtle differences between them. It is important that you work with someone who really understands the complexities that this can cause.

It is worth checking with your local chamber of commerce regarding pricing and ways to find reputable legal representation that’s affordable, because legal fees in the UK are high.

ANTI-BRIBERY LEGISLATION
The UK introduced the Bribery Act 2010 in order to comply more fully with the requirements set out by the OECD in 1997. In an international context, it is one of the strictest forms of legislation on the subject.10

It is important as a business to be aware of the terms and conditions of this legislation. Sometimes there can be a thin line between a respectful gesture, such as gift-giving, and an attempt to unduly influence someone for material gain. Cultural differences can come into play, as in some countries gift-giving is expected and as everyone gives gifts the act does not give anyone an unfair advantage. Innocent mistakes can be made, and as the penalties for bribery are quite high, it is vital to ensure that you have a clear understanding of exactly where the lines are.

Section 7 of the Bribery Act sets out the requirements under this legislation who do business within the UK. The legislation is applicable to any organisation that is defined as a body incorporated under the law of the United Kingdom, a United Kingdom registered partnership, or any overseas business that carries out business wholly or partly in the UK.

It is extremely comprehensive; a foreign company can be prosecuted under UK law, even when bribery has occurred outside the UK, if the company does even a small part of its business within the UK. It is extremely difficult to determine these parameters yourself as the Act itself does not clarify precisely what ‘part of a business’ consists of.11 Ultimately, when doing business in the UK, a company will need to be extra vigilant against corrupt or even slightly untoward practices – securing legal advice if in any doubt, and implementing strong compliance procedures, is advisable.12

These considerations should not deter companies from establishing a presence and doing business in the UK. However, any company with serious designs on the market should seek out appropriate legal advice, and make sure that they allow for small but significant differences in business legislation to avoid entanglement in expensive litigation.


1) http://www.clientearth.org/news/press-releases/eu-finds-uk-court-costs-prohibitively-expensive-in-environmental-cases-2448
2) http://www.theguardian.com/law/2015/jan/19/dramatic-increases-court-fees-deep-concern-senior-judges
3) https://www.judiciary.gov.uk/wp-content/uploads/2015/01/20141219-lcj-response-tomoj-civil-fees.pdf
4) http://ec.europa.eu/justice/contract/files/common_sales_law/sales_law_uk_en.pdf
5) http://ec.europa.eu/justice/contract/files/common_sales_law/sales_law_uk_en.pdf
6) http://ec.europa.eu/justice/news/consulting_public/0052/contributions/310_en.pdf
7) http://ec.europa.eu/justice/contract/files/common_sales_law/i11_1175_en.pdf
8) http://ec.europa.eu/justice/contract/files/common_sales_law/i11_1175_en.pdf
9) http://www.epln.law.ed.ac.uk/2015/01/07/proposal-for-a-common-european-sales-law-withdrawn/
10) http://www.transparency.org.uk/our-work/business-integrity/bribery-act
11) http://www.transparency.org.uk/our-work/business-integrity/bribery-act
12) https://www.lawsociety.org.uk/For-the-public/Getting-expert-help/