15 October 2019

Five Elements for Chinese Companies trading with UK counterparts Part 2: Wood

This article was written by Dorothy Murray and Valentine Kerboull.

In our work with international companies supplying goods to the UK, we see a number of common issues arising regularly.  In this second of five articles based on the five elements of the Wu Xing, we take the theme of Wood, the symbol of early childhood and spring, reminding us of the need to start well and plan ahead for future uncertainty.

Wood: lay a strong foundation with a clear contract that protects you from uncertainty by allocating Brexit risks in your agreed terms

The UK may leave the European Union (“EU”) on 31 October 2019.  The exact nature and therefore impact of this so called “Brexit” are uncertain, and the political situation remains very fluid. That said, clients can take steps now to allocate certain risks in their contracts and terms of business.

We recommend that - when entering new supply or distribution contracts or reviewing or renegotiating existing terms of business between now and Brexit - clients consider:

  • Whether any references to territory are clear (for example in an exclusive distribution agreement).  Does a reference to the EU include the UK or not?   Does a reference to “EU law” cover how such law is to be applied and interpreted in the UK after Brexit?

  • Whether they will be able to vary prices in the event of increased customs or other tariffs or taxes? 

  • Who is responsible for customs clearance and consequent potential delays in delivery times? 

  • What regulatory requirements the goods must satisfy (in the event of divergence between the UK and EU) and who is responsible for conformity assessments? Consider if the use of UK or EU components might have an impact on rules of origin for tariff purposes.

In relation to existing contracts, Brexit or its effects may trigger a renegotiation clause or a force majeure clause or may even amount to frustration of the contract (if performance becomes impossible).  The English Court dismissed a frustration argument in the recent case of Canary Wharf v EMA [Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch)], showing that each case will be very fact specific, so we recommend advice is taken before ceasing to perform under any contract. 

Belt and Road Hub

We explore the opportunities the Belt and Road Initiative brings for your business, and provide our comprehensive, professional services to help.

Belt and Road

A Guide to Doing Business in China

We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

Doing Business in China
Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    It’s official. On 5 March 2021 the UK Financial Conduct Authority (FCA) announced that all LIBOR settings will either cease to be published by any administrator or no longer be representative, with...

    09 March 2021

    Keepwell deeds, also known as letters of comfort, are a credit protection tool commonly used by Chinese companies issuing debt offshore.

    23 February 2021

    This article was written by Patric McGonigal and Ramon Garcia-Gallardo. At a virtual ceremony on 11 June 2020, Singapore's Minister for Home Affairs and Law, K Shanmugam SC and the President of the...

    22 June 2020

    The UK officially left the European Union (“EU”) at 11pm on 31 January 2020

    20 February 2020

    Legal services for your business

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.