Will the UK Vote Raise Speedbumps on the Business Information Data Highway?

Jun 27, 2016 | Blog

Business in 2016 depends upon a free flow of digital information, and many US entities set up UK businesses for that stream of data between the EU and the UK. Has Brexit raised a large speedbump or pothole in that information highway and, if so, should US entities reconsider the UK as a place to set up shop?

The UK was, once upon a time, seemingly an ideal place for a US company to establish a business and place assets. Data, including personal data, could be sent from one EU country to another without additional safeguards (subject to certain exceptions in local laws), and with relative ease to the UK provided access to EU markets and data, relatively transparent corporate formation and tax rules, and in a language most Americans speak. That was then.

Now what? True, the UK “divorce” from the EU will take two years or more from the time the separation proceedings under Article 50 begin, but two years is a short time in business. Britain has privacy laws in line with the EU Privacy Directives, but once the UK is out of the EU protected data can no longer be sent from EU countries to the UK without a data transfer agreement or a decision from the European Commission that the UK provides an adequate level of privacy protection, obviating the need for such an agreement. In light of well documented hurt feelings on the EU side, will the EU be in a hurry to grant that adequacy determination? Probably not, and this will cause uncertainty in budget projections due to the costs of preparation of data transfer agreements while the UK awaits an adequacy decision.

Reaching for the aspirin yet? No? Then consider the effect on the free flow of workers, guaranteed to EU members. What will happen to non-UK nationals who currently staff many positions and could staff future positions in UK companies? Will US companies consider moving UK facilities to Ireland, a country that retains its EU membership while providing many advantages of the UK with regard to relatively liberal laws for transfer of personal data to the US?

The above is probably a very small tip of a very large iceberg.

If you have questions regarding the status of your business, assets and/or data in the EU, please call Kenneth N. Rashbaum.