What are indemnity provisions?
Indemnity provisions, also known as “indemnities” or “indemnity clauses”, are commonly included in contracts to allocate risk between contracting parties. If properly included, the indemnifying party (the “indemnifier”) will be obliged to compensate the indemnified party for losses which may occur as a result of a specified event, sometimes referred to as an indemnified event.
In the business world, the law of commerce underpins all commercial dealings. Commerce lies at the heart of a democratic society and having effective legal recourse when things don't go to plan is essential. However, the established model for facilitating this needs to change and law firms must bear the brunt.
There's currently a very real dichotomy between supply and demand. Availability, cost, and accessibility are the three key watchwords and the Legal Services Consumer Panel has taken the unprecedented step of recommending regulatory intervention after figures showed that just 17% of law firms are being transparent about their fees by displaying prices on their websites.
State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities. Therefore, subsidies granted to individuals or general measures open to all enterprises are not covered by this prohibition and do not constitute State aid (examples include general taxation measures or employment legislation). (The European Commission)
Many of a business's most important decisions are influenced by law as it relates to state aid. So, with that in mind, we take this opportunity to ask what, if any, will be the impact of Brexit on state aid law?
Not many people are aware that state aid rules impact across pretty much the full spectrum of corporate, commercial and business activities in Europe, but with the UK's decision to undertake Brexit, state aid law has inevitably fallen into sharp relief.
Of course, with Article 50 yet to be invoked and the UK's post-Brexit arrangements still to be negotiated, there is no clear indication yet what the future of state aid law in the UK will look like.
However, most experts predict with reasonable confidence that the UK will be able to negotiate a free trade agreement ensuring it is able to trade with the EU as part of a single market despite no longer being a member of the EU.
The UK would not be alone in this situation. Iceland, Switzerland, Norway and Liechtenstein are all non-EU members who manage to integrate successfully with the rest of Europe as members of the European Free Trade Association (EFTA). Furthermore, if the UK also joins the European Economic Area (of those countries listed only Switzerland is not an EEA member) it will ensure effective state aid law that is almost indistinguishable from that which applies to EU member states.
However, in the event that the UK finds itself facing an intransigent EU unwilling to negotiate a successful free trade agreement it will have to fall back on the rules laid down by the World Trade Organization.
State aid is a notoriously grey area. Commercial lawyers could spend more time than is useful arguing over which measures constitute unfair advantage – for example, regarding some grants and subsidies – and that which contributes usefully to a stronger EU economy, so-called "compatible aid".
It will be a difficult balancing act to achieve. For example, a European Commission report found that state aid increases manufacturing employment by around 7% in regions where it is granted, but being able to convince the EU that Brexit Britain's state aids are compatible may be more difficult than when we were part of Europe.
If the UK negotiates a post-Brexit free trade agreement with the rest of the EU, the state aid framework will depend heavily on the details of the free trade agreement:
Although nothing can be certain at this time it seems that the impact of Brexit on state aid law will be minimal – although companies and commercial lawyers may have to make some changes to their commercial law considerations.
In his 2004 book "The Paradox of Choice - Why More Is Less" American psychologist Barry Schwartz argues that elimination of choice is key to reducing anxiety in consumers.
He writes, "Autonomy and freedom of choice are critical to our well being, and choice is critical to freedom and autonomy. Nonetheless, though modern Americans have more choice than any group of people ever has before, and thus, presumably, more freedom and autonomy, we don't seem to be benefiting from it psychologically."
Whatever your views on the rightness of decision, we must now move on from the polarised pre-referendum debate and accept that Britain has, however marginally, voted to leave the EU.
But alongside Brexit comes an enormous number of challenges and uncertainties, not least for the UK's legal sector, which, it is fair to say, will never be quite the same again. In fact, there are so many implications for the UK's legal sector, from intellectual property, data protection and trademark law, to litigation, employment law, commercial law, environmental law and contracts that it is in some ways difficult to know where to begin.
The good news is that now is not the time for panic but for sober consideration. Article 50 is yet to be invoked and Brexit negotiations are still only at the rough planning state – the most UK's lawyers can do is to keep a cool head and help steady the ship so that the process is as smooth and beneficial as possible. Who knows, perhaps we may even decide to remain subject to EU Treaties, while Directives are likely to remain valid until repealed or superseded. Let's face it, the UK Government is unlikely to want to repeal and replace the majority of EU legislation.
Of course, there will come a time when lines must be laid down, but right now there is no harm in feeling optimistic about what a post-Brexit legal sector might look like. Yes, there is no certainty and, yes, with the loss of EU membership and, potentially, the framework provided by its top-down hierarchy of Treaties, Regulations, Directives, Commission Decisions and Court of Justice case law, we may have many voids to fill and bureaucratic hurdles to overcome over the next decade. However, the reassuring truth is that the British legal system has long been one of the world's best and the history that underpins it is not about to suddenly disappear, and this includes the legal impact of our more than thirty years of EU membership.
It may not currently feel like we are about to enter a brave new world, but we can at least allow ourselves some sense of excitement that we might be about to move forward with purpose and positivity by making the most of our age-old traditions while also seizing the opportunity to embrace innovation, whether it is online courts or democratic online legal platforms, of which Oratto is just one.
Undoubtedly, once Article 50 of the Lisbon Treaty is invoked many of the same newspapers that decried the EU will seek to scare the public with shock headlines of administrative Armageddon, but the fact is that by taking stock and planning as carefully as possible, the UK's lawmakers and lawyers can ensure that we are prepared to enter a new legal environment.
It is up to us – that is, everyone with an interest in the legal profession – to take the lead on the crucial questions so that we can tackle all the most important challenges with knowledge and with confidence. It does not matter how opposed you were to Brexit in the first place – now is an opportunity for all our finest and most enthusiastic minds to come to together to ensure the legal impact of Brexit does not undermine what remains of perhaps the world's greatest and fairest legal system.
Of course, holding uncertainty and managing change present enormous challenges – as much psychological as logistical – but with the right groundswell of action there can be little doubt that as a profession the UK's lawyers are more than capable of meeting the challenge. Yes, it will require flexibility, open-mindedness and a willingness to listen, but we must see the challenges presented by Brexit as an opportunity to define a new era – and who wouldn't want to be part of that?
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