• Peter Watts, Partner at Hogan Lovells


• 22.06.2016 09:15 am
undisclosed

Opinion polls showing a swing and narrow lead to “Leave” mean the UK’s Referendum is now genuinely “too close to call” and the EU’s 2^nd economy could really exit the Union. One thing that’s certain is that no one knows for sure what would happen after a Leave vote. But thinking ahead is still vital.

What do we know?

Back in February, our Constitutional Change Task Force summarised the legal fundamentals, including some of the Brexit issues for the technology, media and telecommunications sector. At the bottom of this post you’ll find a few examples of potential sector impacts.

Divorced but still together?

Many commentators (including a number of my colleagues) make a strong case that, in many of the areas most relevant to TMT, Brexit will mean little real change. The UK is so deeply integrated within the single market that it will always align with the EU’s approach to issues like privacy, technology product standards and consumer protection for digital content. And in other areas – competition and economic regulation – the UK’s approach has often led EU thinking; so why diverge now?

In short, business will see little underlying change as the UK and EU will remain, in practice, a single market. Divorced but still living under the same roof.

Smashing the crockery?

This is a powerful argument and there are good reasons to think it might hold true in some areas. But business should have in mind another scenario. One in which the UK smashes the crockery and storms out of the door.  Three things could take us there.

• If the vote is “Leave”, the most powerful voices in the UK political debate will be those who make a virtue of being different from Europe. Not following its rules slavishly. Reviving Britain as a global trading nation; aligning with the USA, India and China as much as with the EU.
• Law and regulation are not static but are continually evolving, particularly in a sector as dynamic as TMT. Sticking with the status quo won’t be an option for long. Pretty quickly there will be difficult choices to make; should the UK follow the EU’s lead, the USA’s lead or go its own way?
• The UK has been a strong voice within the EU arguing for an “Anglo-Saxon” approach to regulation. Promoting competition and avoiding excessive “red tape”. With that voice silenced, EU and UK perspectives could diverge far quicker than we might expect.

It’s not difficult to see a buoyant “Leave” led government arguing that the UK should align with a US, rather EU, approach on the grounds that would “make the UK a more attractive place for US technology companies to do business as well as freeing the UK from the tyranny of bureaucratic Brussels“.

Risks and opportunities

The risks for the TMT sector of a painful divorce in which the pan-European business models carefully developed over the last decade are torn up may be fairly obvious. But business should not forget there could be opportunities too.

Opportunities to influence a new regulatory construct for the UK; perhaps to align it more closely with the US than EU.

And for the remainder of the EU, an oppprtunity perhaps for a more settled policy regulatory environment, freed from the “disruptive” UK influence; offsetting the risk that policy might drift ever further in an “anti-business” direction with a growing gulf between EU and US perspectives.

What to do?

So far, watch and wait may have been a sensible strategy. But that will no longer be the case if next Friday morning brings a Leave vote. TMT sector business should stand ready to assess very quickly all of the areas in which Brexit could impact their business (bearing in mind both of the scenarios outlined above) and the opportunities, as well as risks, they may bring.

A few potential TMT sector impacts

The EU is central to many issues across the sector from telecoms regulation to e-commerce consumer protection. Here’s just a few potential conseqeunces of Brexit for TMT.

• Changes in the rules governing trade between the UK and the rest of the  EU: Would mobile roaming rights really be preserved in full?
• Changes in the way rules might impact business in other Member States: Would UK productions count as European works towards broadcaster quotas in other EU countries?
• Changes in the ways rules apply to trade between the UK and non-EU states: Would it become easier to export personal data on UK citizens to the US
• Changes in the rules which businesses have to follow in the UK: Would telecos continue to be subject to the existing regulatory framework?
• Changes in the development of EU policy: Would the debate over potential platform regulation develop differently without the UK at the table?
• Changes to interpretation and application of existing deals: How will current territorial agreements (from software licences to joint venture exclusivity) apply?