Adjustments for Kenya businesses post-Brexit

Anti-Brexit protesters on January 30, a day before the official exit. AFP PHOTO  

By CATHY MPUTHIA
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The United Kingdom formally left the European Union on January 31. However, a transitional period that ends in December 2020 has been allowed to enable post-Brexit negotiations and trade
agreements between the European Union and the UK.

Trade agreements and contracts that had been entered into designating the EU law as the choice law, will be significantly affected especially if the place of performance is the UK.

Kenyan businesses that signed contracts designating EU law as the choice law will have to carefully consider contractual provisions in existing contracts and post-Brexit contracts.

This is because the legal environment post-Brexit will change.

While the UK is geographically a part of Europe, legally, Brexit creates a new environment in so far as European-Kenyan trade is concerned.

Some people have used divorce to describe the legal environment after Brexit. A marriage creates a new unit guided by laws. When a divorce takes place, then the unit is shaken up or ceases to exist and the two parties go their separate ways.

This means that after a divorce, marital laws would cease to apply to the two individuals.

The events surrounding Brexit are relevant to Kenyans. For example, if a Kenyan company entered into a contract with a European multinational that carries on trade in Germany, France and the UK and having designated the EU law as the applicable law, then there may be a need to amend the contract to designate UK law in addition to EU law.

Many international contracts include the Brexit clause that governs the performance of the contract in the event material terms of the agreement change due to an event triggered by the exit.

The post-Brexit legal environment is difficult to predict and many contracting parties are including the a related clause to hedge any risks that may arise due to Britain leaving.

If the exit affects your contract, then a Brexit clause allows parties to negotiate or terminate the deal.

The UK may need to enter into new trade agreements. Perhaps this is why the just concluded UK-Africa Trade Summit discussed possible trade partnerships between various African States and the UK.

UK investors seemed to have keen interest in investing in environment-friendly ventures.

Kenya just listed a green bond at the London Stock Exchange last year to raise funding for the construction of 5000 eco-friendly student hostels. The bond was well received.

The Brexit may be a good thing for Kenya-UK relationships.

As the UK ceases to be a member of the EU, it will have to seek stronger alliances with individual nations.

Brexit may be an opportunity for a stronger Kenya-UK relationship.

It is not clear if there will be a need for Kenya to negotiate separate trade agreements with UK that remains Kenya’s largest trading partner in Europe with trade volumes running into hundreds of billions of shillings.

It is early in the day to tell what the impact of Brexit will be on Kenya.

However, it is prudent to prepare and hedge risk and also seize every opportunity the Britain exit has to offer your business.