The potential impact of Brexit on the e-commerce sector

Commercial analysis: Adam Richardson, barrister at Whitestone Chambers, assesses the implications for practitioners advising on the e-commerce sector, in both a withdrawal agreement scenario, and a no deal Brexit scenario.

 

What is the current situation?

The current circumstances surrounding e-commerce regarding provisions of goods and services were harmonised under various EU Directives, but primarily the E-commerce-Directive 2000/31/EC. The purpose of the Directive is to remove obstacles to cross-border online services in the EU and provide legal certainty to businesses and citizens in cross-border online transactions. Present harmonisation has allowed easy, transparent trade between nation states within the EU. What are the potential legal implications of Brexit for the e-commerce sector under the withdrawal agreement scenario and no deal scenario?

Withdrawal agreement scenario

On 19 March 2018 the draft withdrawal agreement was published. It is important to first note that this document is a draft and a loose one at that. It is arguably more of a diplomatic document than legal effect but gives an indication of the direction of travel the EU intends to take within the negotiations ahead. Regretfully, this still leaves a great deal of uncertainty, particularly for those within the ecommerce sector–in fact it provides very little clarity or comfort for those in the sector.

With growing uncertainty surrounding a withdrawal agreement scenario, it is increasingly unclear what requirements will be beholden on the UK after 29 March 2019. The draft agreement does make clear certain provisions.If the text and the duration of the transition period remain unchanged, the UK would be subject to EU data protection legislation, including the General Data Protection Regulation (EU) 2016/679 (GDPR) until 31 December 2020.

It also makes provisions for the ongoing protection of personal data through compliance with various pieces of existing legislation that will apply to data processed in accordance with EU law before the end of the transition period or processed in the UK after the transitional period has ended, but on the basis of the withdrawal agreement as written.

Data will continue to be shared for the purposes of law enforcement and regulatory functions. The same is true of obligations concerning data confidentiality, data restrictions, data limitations and data retention, which will apply to data obtained before the end of the transition period, or on the basis of the withdrawal agreement itself.

This will have very little impact on the e-commerce sector during the transitional period other than to guide on how data must be handled in some transactions prior to and subsequent to the end. Outside of that, based on the current draft of the withdrawal agreement the difference between the withdrawal agreement scenario and no-deal scenario are at present not broadly different until specific provisions are negotiated for the e-commerce sector.

The e-commerce Directive is not specifically mentioned in the documents itself.

No deal scenario

A no deal scenario is the less uncertain eventuality. Without specified terms negotiated in the final withdrawal agreement, the UK would either need to negotiate specific terms with EU countries or in the meantime revert to World Trade Organization (WTO) rules presently described as:

‘The WTO Work Programme on Electronic Commerce covers all issues related to trade arising from global e-commerce, including enhancing internet connectivity and access to information and telecommunications technologies and public internet sites, the growth of mobile commerce, electronically delivered software, cloud computing, the protection of confidential data, privacy and consumer protection. The programme also explores the economic development opportunities afforded by e-commerce for developing countries, particularly least-developed countries.’

This Work Programme on Electronic Commerce was convened in 1998 and has still not produced a definitive internationally codified set of rules. As a result, this has been criticised as out of date as recently as 13 December 2017 at the Ministerial Conference in Buenos Aires, where 71 members said they would initiate exploratory work towards future WTO negotiations on trade-related aspects of electronic commerce, with participation open to all WTO members. Proponents said a first meeting would be held in the first quarter of 2018. Together, the group accounts for around 77% of global trade. But it is doubtful that any meaningful measures would be in place by 29 March 2019.

Given Brexit and uncertainties surrounding the withdrawal agreement scenario and future trade arrangements, how are practitioners adapting their advice to clients?

It is essential that practitioners are at the forefront of developments. The greatest amount of certainty anyone can have would be based on breaking news developments as the negotiations continue. The amount of high politics surrounding these negotiations is damaging for confidence and damaging for practice.As with all industries, a select few practitioners will lead the field and help establish the ‘cutting edge’ but until further information is forthcoming practitioners must advise frugally and cautiously.

Are there any related issues which practitioners advising on the e-commerce sector should consider?

There may be some merit in preparing for the worst and therefore establishing platforms to engage with the rest of the world. In a no-deal scenario, e-commerce would have to rely on either individual agreements with the respective member state, compliance with the general European Economic Area standards as a minimum requirement or conforming to WTO rules. This would be no different from how e-commerce currently engages with the USA, the East and the Commonwealth. While a front-loaded exercise, it is likely to be rewarding in the long run to have an adaptive e-commerce platform capable of translating currencies regardless of whichever scenario comes to bear as the UK will be free to forge trade agreements with the rest of the world.

 

This article was first published on Lexis®PSL Commercial on 1 August 2018.