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Brexit Interview: Michael Falter for Online Focus

The divorce of the British from the EU is unsettling many companies in the UK - Michael Falter, Managing Partner of DWF Germany, speaks to Online Focus about the legal consequences of the withdrawal of the United Kingdom from the European Community.

The interview can be viewed in German on the Online Focus website »

FOCUS: Mr. Falter, just last year your German law firm merged with one of the largest British law firms, will you now need to distance yourselves because of the impending Brexit?

MF: No. There are numerous international law firms in Germany whose head office is based outside of the EU, primarily US law firms. Our fusion with DWF will not be affected due to Brexit.

FOCUS: Nevertheless, the fear of Brexit is spreading.

MF: That’s true. Many of our colleagues and clients in Great Britain are becoming increasingly unsettled. They wonder how the British economy is going to be affected. Some of our clients have already moved their investments out of the UK and many are in the process of moving business operations to continental Europe. One of my American clients just transferred his Europe-wide distribution operations from England to Germany and opened its headquarters here with about 60 employees. This was done out of concern for the potential customs and taxes on the export of goods from the Great Britain to the EU.

FOCUS: Does Brexit really offer as many opportunities for the German economy as recently predicted by the auditing firm, Ernst & Young?

MF: Change creates opportunities. Ernst & Young predicted particularly positive developments in the real estate and financial markets. One reason for this is the fact that some large banks are geared towards Frankfurt. We should not celebrate too soon though. Great Britain’s withdrawal from the EU will also bring with it considerable burdens.

FOCUS: What dangers are threatening both the continental EU and the UK after the separation?

MF: The impact of Brexit is already noticeable with regard to the exchange rate of the British Pound. Similarly, negative developments can already be seen in the Euro. After the final exit of Great Britain, it is possible that the currency rates will continue to fall, depending on how negotiations with the EU go. There is also a possibility that customs barriers will make trade between the continental EU and Great Britain significantly less attractive.

FOCUS: What negative developments are there?

MF: Brexit has shattered legal standards which were painstakingly created. European primary law, for example, will no longer apply in Great Britain. This is also the case for EU regulations and directives. For example, the question of whether or not the British intend to maintain the status quo of valid contractual and criminal law standards as throughout Europe is entirely open. It is, however, to be expected that British law will distance itself from Europe.

FOCUS: What are the consequences of such move?

MF: Conventions negotiated and concluded by the EU for their member states will no longer be applicable for the UK after Brexit. Everything will need to be renegotiated by the British government. Cross-border contractual relationships are called into question since if two contracting parties should disagree, it is not clear which court of jurisdiction should be responsible. Imagine I have a contract with an English trading partner regarding the delivery of Spanish artichokes. The contract is decades old. Up to now, the artichokes could be shipped from Cadiz to Dover without paying customs fees. This could change if the old trade contract becomes invalid. In fact, you would need to conclude a new agreement, but how do you determine rightful termination? By European laws or British? Would the termination even be effective? Questions upon questions that are difficult to answer. All in all, after Brexit, we all must reexamine these questions.

FOCUS: Which means?

MF: As tedious as it sounds. But the Brexit scenario also upsets traditional corporate law. No one knows whether a subsidiary of a German company which was founded in England as a Limited, will continue to be treated in accordance with British or local law. That’s a catastrophe.

FOCUS: In what ways do lawyers benefit from Great Britain withdrawal from the EU?

MF: The considerable legal risk leads to increased consultation needs. It is obvious that British lawyers are in high demand across Germany. Our clients include mainly internationally networked companies as well as parties to cross-border contracts. We are currently seeing that more and more UK companies are coming to us for advice in order to move their company headquarters to Germany.

FOCUS: How should the federal government deal with the British in the future?

MF: Great Britain is one of the most important business partners in Germany and will continue to be after Brexit. Dealings with Great Britain should certainly take this into account. However, the EU will also need to stand strong in order not to allow the departure of Great Britain to become the beginning of the end for the EU.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Michael Falter

Partner - Managing Partner (Germany)

I am the Managing Partner of DWF Germany. I also specialise in corporate law and have significant experience in commercial litigation and dispute management.