Franchise Agreements and Brexit
The UK left the European Union on 31 January 2020.
We are currently in the middle of a transition period which shall end on 31 December 2020.
Fortunately, there is actually little regulation of the franchising industry within the UK and those that do exist, which had any basis in the European Communities Act 1972, shall continue as UK law for the foreseeable future – until Parliament decides to repeal or amend it. Consequently, it is unlikely that Brexit shall have a significant impact on franchising. That said, following Brexit, all EU laws shall be reviewed and a decision shall be made as to whether to modify or withdraw specific legislation, so the full impact cannot yet be ascertained.
Nevertheless, franchisors should take this opportunity to both take advice on the current construction of their franchise agreements, in light of the withdrawal from the EU and where necessary, and if possible, make any amendments to ensure that disputes which could arise can be avoided. This would be particularly important where the franchisees span EU jurisdictions, where choice of law and forum disputes could arise.
With the above said, Brexit may have an impact upon trademarks and design rights. Trademarks which have been registered by franchisors under unitary EU-wide trademark registrations are administered by the EU Intellectual Property Office. Until 31 December 2020, the existing intellectual property registration system shall continue to apply as normal. After this time, the UK Intellectual Property Office shall convert the EU trademarks and EU designs to the comparable UK rights. This shall be effective from 1 January 2021. The applicable trademarks and design rights shall, therefore, continue to be protected moving forwards meaning that on a practical level, there should be very little change for existing marks.
In addition, franchisors should be aware that Brexit does not prevent the appointment of franchisees in EU member states, but the franchisor will still need to comply with the current competition regime to avoid any disputes and to ensure the enforceability of their restrictive covenants.
At this stage, it seems that Brexit is unlikely to upset anything too significantly, but the bigger picture should become clearer over time.
It is important for Franchisors and Franchisees alike to keep on top of updates as and when such are implemented, to ensure they are protected from any possible disputes which may arise.
For further information about the services that we can offer, both in terms of assisting you in establishing a franchise brand, or in resolving a franchise dispute, please contact Samantha Pountney on 0121 306 0170 or at samantha.pountney@csklegal.co.uk.
