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How Corporate Legal Departments Can Prepare for the Brexit

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By Casey C. Sullivan, Esq. on June 20, 2016 6:59 AM

The United Kingdom will go to the polls in less than a week to decide whether to stay in the European Union, or not. And current polling shows that a Brexit, or British exit from the EU, is becoming increasingly likely, driven by concerns over immigration and contributions to the EU budget.

If your business does business in Britain, the Brexit could have major legal and practical consequences.

Britain Splits From the Continent

Over 6,000 years ago, Doggerland was submerged by rising sea levels, leaving what would become to British Isles cut off from mainland Europe. And Albion has maintained a tenuous relationship with the Continent ever since. And while EU membership spurred major integration between Britain and mainland Europe, that process could come to an end next week.

If Britain says "sod it" to the EU, your business could find itself well-buggered.

A Brexit would have few predictable consequences. One of the few expected outcomes would be a steep drop in the value of the pound and British stocks. Some predict the two could lose 15 percent of their value, and they've already begun falling precipitously. The Bank of England is currently making plans to aide financial institutions likely to face liquidity shortages.

Trade, too, could be heavily impacted. As the pound falls, British exports become more expensive. Meanwhile, a loss of EU membership would mean that Britain would have to renegotiate trade agreements throughout Europe.

Many European workers in Britain would also be affected. EU membership allowed enterprising Spaniards and Germans and Poles to relocate to and work in the U.K. easily. A Brexit would put those workers' status in jeopardy, possibly resulting in an exodus of European talent.

Preparing in the Face of Uncertainty

The main difficultly in dealing with a Brexit is that its effects are uncertain. To this day, no one has left the EU and no one knows just what the legal and economic repercussions will be.

Some companies are planning on relocating, should Britain quit the EU. Jamie Dimon, CEO of JPMorgan Chase, said that, should the Brexit become a reality, "we may have no choice but to reorganize our business model here. Brexit could mean fewer JPMorgan jobs in the U.K. and more jobs in Europe."

Many companies are retaining hordes of lawyers to handle coming legal questions.

And major law firms are ready. They've been preparing for months, covering everything from trade implications to the need to rewrite thousands of corporate contracts, all for what the Financial Times calls a "Brexit bonanza."

Smart in-house counsel might want to start vetting outside firms, if you haven't done so already. For if the Brexit happens, it will, as the New York Times writes, "set off proceedings so complex that the only guaranteed winners are the lawyers."

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