There are several advantages to expanding your business into the UK, from access to new markets to business-friendly government incentives. Many overseas businesses extend their operations by setting up a UK based subsidiary to deliver products or services to the UK market.
Commercial contracts are vital tools to protect your business from risk. Where your business is seeking to expand into the UK, a key consideration is your contractual documents and how to adapt them to English and Welsh law.
This guide will explore some of the key questions you should consider as an international business when adapting your commercial contracts to operate in the UK.
Contents:
- When should you consider updating your commercial contracts?
- Why is it important for businesses to contract under local laws?
- What is the process for adapting a contract to the law of England and Wales?
- How should you handle contract negotiations during this process?
- Are there any other ongoing considerations when adapting contracts to English and Welsh law?
- What should you look for when engaging a law firm to support you?
- What’s next?
When should you consider updating your commercial contracts?
As an international business, you should consider updating your agreements when you decide to start trading in the UK.
As a practical example, let us imagine you are a large US e-commerce business, selling clothes online. Your business is thriving, and you now want to tap into the UK market and sell your products to UK consumers. When launching in the UK, there will be a range of new legal issues to consider from a contractual perspective. You’ll also need to consider other documents and policies to comply with mandatory laws. Here are some examples:
- You will need consumer law compliant e-commerce terms on your website. Further, you will need a privacy policy document to comply with local data protection laws, as you will be collecting a range of personal data from customers to deliver their orders.
- You may also need several business-to-business agreements, such as a warehousing agreement with a UK supplier to store your products. Or a manufacturing agreement with a local manufacturer who will produce the products locally in to save shipping costs.
- As such, there will be a range of commercial contracts and other documents you will need to implement to start your business up in the UK market.
Why is it important for businesses to contract under local laws?
England and Wales have specific laws relating to commercial contracts that you and your business must comply with. For instance – data protection laws, intellectual property laws, consumer laws and contract laws regarding unfair terms. When offering products or services within the UK, you should ensure your contracts do not fall foul of any such laws.
If your contracts fail to comply with local laws, you could face several negative consequences. For example, regulatory fines and enforcement action or customer complaints. Or your contracts could be deemed unenforceable if disputed, meaning you cannot rely on their protection.
What is the process for adapting a contract to the law of England and Wales?
It is advisable to work with a law firm qualified in English and Welsh law to help you adapt your contracts.
There are a couple of key approaches:
- Redrafting your foreign law contracts, so that they comply with English and Welsh law. Whilst possible, this option often takes considerable time as it requires a careful review of all areas of your agreements which need to be changed to comply with English and Welsh law. Various language may also need to be updated, and new clauses may need to be added. This can be a difficult and onerous exercise in practice, so legal advice is critical.
- Preparing a new suite of commercial contracts which are drafted under English and Welsh law and contain language consistent with English and Welsh law terminology, which businesses in the UK are accustomed to. This is often the quickest and easiest approach.
An experienced commercial contracts lawyer can guide your business on the best approach.
Contracts are designed to protect against different legal and commercial risks you could face when trading. To ensure your local contracts reflect your objectives, you can work with a law firm to adapt and tailor your contracts with careful consideration of your business objectives. For instance, a law firm can help ensure that your liability limitations under your English and Welsh law contracts are the same as your original international agreements (to the extent permissible under English and Welsh law).
Note that when you update your contracts to English and Welsh law, you will need to ensure you can comply with them. If not, your customers could potentially bring a breach of contract claim against you. For instance, your contracts may need data processing clauses to comply with the UK GDPR. If so, consider taking legal advice to determine if you can comply with such processing obligations before including them in your contracts.
A law firm can help guide you on your updated contracts, what they mean in practice and any wider legal rules you need to follow when trading in the UK.
You should also aim to, where possible, streamline your contracts and policies and identify any dependencies between them. For instance, should your UK consumer e-commerce terms refer to your privacy policy, and should your privacy policy reference your cookie policy?
Several other commercial and practical considerations will apply when adapting your commercial contracts. For instance, consider whether you will need to take out new insurance policies in the UK to cover the potential liabilities under your commercial agreements. An insurance broker can help advise you on this and implement the relevant cover.
How should you handle contract negotiations during this process?
You should approach negotiations with caution and care as an international business.
Be aware that customers in England and Wales will be more accustomed to using local legal documents and using foreign law documents may make negotiations more difficult.
For instance, US legal documents look very different to those in the UK and could confuse UK customers. Using international contracts may therefore increase negotiation time and costs. Instead, working with English and Welsh legal agreements could help you foster customer confidence, conclude contracts and secure business faster.
Commercial lawyers can help you negotiate contracts with UK businesses and suppliers and guide you on best practices on how to tackle negotiations as an international business.
Are there any other ongoing considerations when adapting contracts to English and Welsh law?
Once your contracts have been updated, you should also review and update them when necessary.
For instance, where your business activities change or there is a change in local laws. You will need to stay up to date with local legal developments and ensure your contracts are appropriately amended to comply with applicable legal requirements from time to time.
Further, you should consider implementing a contract management process to help manage and develop good governance practices of your local contracts. This is particularly significant if your business is new to trading in the UK.
What should you look for when engaging a law firm to support you?
Legal advice from experienced commercial contracts solicitors can add significant value when expanding into the UK.
Consider working with a law firm who:
- Has experience in helping international businesses launch in the UK.
- Appreciates the nuances of international contracts and the challenges international businesses face.
- Understands the process of adapting international contracts to English and Welsh law effectively.
- Can advise you on the wider legal issues around launching in the UK, such as regulatory compliance.
What’s next?
If you need to update your commercial contracts to comply with English and Welsh law, our commercial lawyers can help. We have experience advising international businesses across industries on bringing their agreements into line with local laws.
We take a commercially focused approach to guide you through the process of updating contracts smoothly and effectively. Our expertise allows us to identify considerations and overcome challenges related to meeting both legal and business objectives.
