Legal Experts on Brexit: The Risks for Bulgaria

Novinite Insider | July 6, 2016, Wednesday // 14:32| Views: | Comments: 0
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Bulgaria: Legal Experts on Brexit: The Risks for Bulgaria Kamen Shoylev, partner at the New Balkans Law Office (R), and Irina Stroyanova, Director of the Sofia bureau of the law firm.

It is now clear - Brexit will affect the lives and businesses of many people not only in Britain but also in countries of the European Union. Bulgaria is among the countries that could be defined as vulnerable - because of the significant number of companies that include structures in the UK, and because many Bulgarians in recent years have chosen to live, study and work there.

Following the Brexit vote on June 23, for people whose businesses and personal affairs tie them to Britain, a number of questions arise as to the practical and legal implications. A team of law firm New Balkans Law Office -  with offices in Sofia and London, with lawyers qualified in two jurisdictions - presented today to members of Bulgarian business and public organizations their expert comments on these issues.

One of the alarming questions now is what are the implications of Brexit trade amid the shock experienced by the British economy. Confidence among British businesses sharply declined after the vote to leave the European Union, shows a study cited by Reuters and the Bulgarian News Agency and published today in support of the view that the economy may be facing tough times after the historic decision.

The share of companies pessimistic about the British economy over the next 12 months jumped to 49 percent in the week after the referendum compared to 25 percent before the outcome of the vote, according to the study of YouGov and the Centre for Economics and Business Research (CEBR). Confidence among British consumers also dropped sharply during the first days after the country decided to leave the EU, reported earlier YouGov and the Centre for Economics and Business Research.

Trade between Bulgaria and Britain was EUR 250 M in 2015, according to the Ministry of Economy. However, there are risks in services, finance, the situation of companies in the UK, said Kamen Shoylev, a partner at New Balkans Law Office. Currently Bulgaria and Britain are members of a common market, not just a customs union. With the withdrawal of London from the EU, this will change and will adversely affect the business through a number of tariff and non-tariff barriers.

Tariff ones include the charging of duties and likely payment of VAT in certain cases of imports or exports. According to the expert, the problem with duties may be overcome in four ways - signing of an Association Agreement between Britain and the EU; application of the Swiss model, which means negotiating a special status for Britain in the EU; London to become a member of the European Free Trade Association and thus to get trade concessions. Last option - as a member of the World Trade Organization, Britain can apply its rules.

Tariff ones include the charging of duties and likely payment of VAT in certain cases of imports or exports. According to the expert, the problem with duties may be overcome in four ways - signing of an Association Agreement between Britain and the EU; application of the Swiss model, which means negotiating a special status for Britain in the EU; London to become a member of the European Free Trade Association and thus to get trade concessions. Last option - as a member of the World Trade Organization, Britain can apply its rules.

Shoylev argues it is non-tariff barriers that can have a more serious impact on Bulgarian businesses. Bulgaria uses a lot of British experience and expertise in financial, consulting and legal services, and they will be influenced largely by non-tariff barriers. In the financial sphere for example, passporting will be lost which enables one that has registered in a EU counttry to work in all others, the legal expert explaines. This may affect companies from the sectors of electronic payments between Bulgaria and the UK, and some companies in the field of gambling. According to Shoylev after 6 months to 1 year there will be more clarity on these risks.

There will certainly be implications for corporations that include structures in the UK, even though they will not be immediately adn directly affected by the event of Brexit. There are three potential negative effects, Shoylev explains:

- It will be more difficult to apply British law in solving disputes;
- The participation in public procurement will be hampered;
- There is a risk for Britain to increase a number of its taxes, since upon its move to leave the EU the budget will undergo some hardship.

The expert still reassured the business community, explaining that Bulgaria will remain a member of the EU and it will apply Brussels Regulation determining the applicable law. So if the contract specified English applicable law, this will be accepted by Bulgarian courts. In British courts there is the practice of applying the agreed applicable law, explained Shoylev.

It is possible for disputes to become more unpredictable, the experts says. But when there is an agreed contract law, practice will continue. In the Bulgarian courts, however, the procedure that will apply will be the one for recognition of the decision of the English Court.

The advice of experts is that if you want a quick and uncomplicated solution to the dispute, you should choose an arbitration clause.

The law firm has also made the clarification in regard to the implications in the field of labor law and immigration (both ways). This is very important, considering that 3 million European citizens live in Britan and 1.2 million Britons reside in EU countries. In Bulgaria, in particular, there are 5000 Brits. Bulgarians in the UK, however, are over 77 000. Brexit will change the lives of these people.

The most likely result will be that the free movement principle will remain unchanged, but it will happen under conditions of registration, as in Switzerland, according to the lawyers.

The advice of experts to Bulgarians living in the UK is to trigger as fast as possible the procedure for acquiring citizenship and permanent residence. In the first case they must have been resident in the UK for six years, and the second one the minimum period is 5 years. If their stay is shorter, you have to rely on their status to be settled by future agreements, said Kamen Shoylev.

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