Since the announcement of the result of the UK’s referendum about its future with the European Union so far as UK fashion is concerned, there has been no discernible change in the previous pattern of doing business. But the designs of business will change irrespective of what replaces the UK’s existing trade relationship with the EU.
Already there are forecasts of an increase in inflation for fashion and footwear prices. It follows that a supplier which fails to build into its contracts an inflation indexing provision is simply giving its customer an opportunity to make a greater margin on resale!
Correspondingly, UK fashion businesses sourcing clothes, footwear or accessories from overseas which do not include a currency conversion clause in their purchasing contracts are asking for trouble. The immediate fall in GBP on 24 June 2016 has been nowhere reversed.
But on the plus side, buying UK fashion assets – brands or trophy stores – in USD or pretty much any currency (excluding Bank of Toytown) has become a whole lot cheaper.
For those British fashion businesses not falling prey to overseas buyers, uncertainty can be expected to translate itself to an increasing use of pop ups and the taking of concessions in department stores.
And what of legal issues? The UK’s ‘affection’ for lawyers (”The first thing we do, let’s kill all the lawyers,” Henry VI, Part II, act IV, Scene II) is likely to grow. This is because whilst the referendum will not in itself have any immediate implications in legal – terms – it could take years before the UK exits the EU officially – good lawyers who look to try and achieve their clients business objectives will consider what the referendum means.
As such, can it be said that the decision to leave the EU has or will frustrate the purpose of a contract so making it impossible to perform the contract? Possibly. But the English courts have consistently been unimpressed by an argument that a contract is frustrated because it is more expensive to fulfil or more difficult to perform.
But then does the Brexit vote constitute an event of force majeure? Unlikely as it would be necessary either for the contract to expressly state it to be so or for it to be interpreted as falling within a more general force majeure category, such as the act or decision of a government body. However, this has still to be tested in the English courts.
Will English choice of law and English court jurisdiction clauses continue to be upheld in the English courts given that these are currently governed by EU regimes? For the time being – yes. But in the future?
Equally, how will the intellectual property rights of fashion brands fare? The EU trade mark and the EU design, both pan European rights will almost certainly cease to cover the UK and this will result in a need to secure separate rights in the UK. The conversion of existing EU IP rights to national UK rights is likely but on what basis this will be implemented and whether it will involve re-examination of the rights is unclear.
The enforcement of IP rights may also throw up some interesting issues. What happens to a pan European injunction granted in favour of a non-UK company pre-Brexit? Does it automatically cover the UK post-Brexit or will it need to be registered in the UK to continue in place? This has the potential for re-opening a number of hard won disputes by designers and fashion brands alike.
Finally, what about grey imports? The UK could become a haven for parallel imports and worse if any transitional provisions on the protection of EU trade marks leave gaps in protection, the rights could be left unprotected if the fashion brand does not already have a UK trade mark in place.
A few years ago a successful telecoms company – Orange – claimed, “The future’s bright. The future’s Orange.” Today the future is grey as we try and see through an interesting period in the history of the UK.
The Fashion Law Practice appreciates this guest post from Fox Williams LLP (London, UK).