Brexit would throw up plethora of legal and regulatory risks for European firms: lawyer

Speaking at the Risk Frontiers Madrid conference organised by CRE and Igrea this week, Jaime Bofill, counsel at Hogan Lovells in Spain, said: "From a merely legal point of view, we do not see Brexit producing any positive impacts for companies." The main theme of the conference sponsored by XL Catlin, Mapfre and Marsh was the rise in volatility across the world. The UK heads to the polls today to decide its in/out referendum on EU membership. At the event in Madrid, Brexit was singled out as a major potential source of disruption for risk managers. In Mr Bofill's view, there are five main issues that must be taken into account should the UK vote to leave.hideFirst of all, contracts may need to be reassessed once the Brexit process takes place. "Many contracts have force majeure clauses. Will they be triggered? That could be the case in some contracts," he remarked. A second risk concerns labour force. Large EU-based companies would have to make decisions about the legal situation of their staff in the UK. "It will be necessary to review their current situation, any benefits that could be originated by Brexit, wage implications and migration issues, for example," Mr Bofill said. Tax matters are another area, with current agreements between the EU and UK likely to change in the event of Brexit. Mergers and acquisitions already underway, or in the pipeline, could also be affected, said Mr Bofill. Finally, risk managers need to prepare the board and other stakeholders about the impact of Brexit on their company, he said. The Brexit process would likely take several years, according to experts. Throughout this period uncertainties could disrupt companies. One key issue is the extent to which the EU would cut trade and regulatory ties with the UK, according to Nick Greenwood, an economist at consultancy AFI. "The European Union can play hard ball and decide to punish the UK so that no one else will try to copy Brexit," he said at the conference. "That is to some extent the French position." He noted that the German government tends to favour keeping things as close as possible to the current status quo. The shockwaves created by Brexit could fuel demands from other countries to either leave the EU or change their relationship with the single market. Rafael Docavo-Malvezzi, global head of risk and Americas regional product lead, political risks and trade credit at XL Catlin, noted that such uncertainty creates an unfavourable environment for companies to make investment decisions. Concerns have been raised by the International Underwriters Association about the future of the London insurance market if the UK leaves the EU. However, Ramón de la Serna, a senior manager at telecommunications group Telefónica, believes there is little reason for buyers to worry about their coverages in the short term. "There is no need for insurance buyers to panic (if Brexit wins)," he said. "The market will remain the same, it is not going to change. In the middle to long term, negotiation models would have to be adapted, but nothing needs to be changed in the short run. Unless, that is, the pound devaluates so much that it affects the ratings of carriers in our programmes. But I doubt that will be the case." He said that his company has taken measures to mitigate the effects of a possible devaluation of the pound after Brexit, but added that more drastic decisions, such as the sale of assets, have not been implemented.

Brexit would throw up plethora of legal and regulatory risks for European firms: lawyer

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