Implications of Brexit on ASEAN investors


In light of the UK referendum held on June 23, 2016 and the decision for the UK to leave the EU, you probably have already been inundated from within your business with Brexit related questions. Lawyers at DLA Piper have been working hard to provide support on what the impact may be for your business or sector, and we have comprehensive information for you on our website.

The full implications of the decision will not be known for some time, as there will be a two year period to negotiate the terms of the UK's exit from the EU, which starts from the date the UK government invokes Article 50 of the Lisbon Treaty. David Cameron has announced that he will step down as UK Prime Minister by October this year and will leave it to his successor to invoke Article 50 to allow time for pre-exit negotiations. See our 'What happens next' section

The ASEAN region and the UK have a strong relationship, with three times more ASEAN investment being made in the UK than in Germany and the US combined. Currently, the UK accounts for half of all investment from ASEAN into Europe with that figure continuing to grow. UK Trade and Investment recently reported that Southeast Asia invests four times more than China into the UK each year with that investment worth about £28 billion. This means the long term impact of the UK's departure will likely be reflected in ASEAN’s trading relationship with the EU and the UK. 

For ASEAN investors, some potential immediate and long-term implications and opportunities may include:

  • Possible Trend re Foreign Investment in UK - in the short term an M&A market slowdown is likely following the UK’s decision to leave the EU, particularly for parties intending to acquire businesses in the UK as a gateway to the entire EU market (eg to benefit from the EU single market in goods and services or 'passporting' of financial services businesses and the related free movement of goods, services and labour). However, for other investors whose investment strategies are not driven by such EU market considerations, Brexit may create more attractive investment opportunities in the UK due to the short term pressure on valuation of UK assets (see second point below).
  • Re-valuation of UK Targets - with the pound sterling plunging to its lowest level in the past three decades, valuation of UK assets / businesses for sale may become more attractive for foreign investors (including those from ASEAN). However, the performance forecast of such UK targets will also need to be re-assessed in light of the implications of Brexit. 
  • Talent Pool for UK Employers - movement within the EU single market will be a key point of negotiation between the UK and EU. After Brexit becomes effective, the pool of talent and skills available to UK employers (including those invested in by foreign investors) may diminish as visa requirements would make it difficult to recruit employees from and move them within Europe (eg if you have an EU work force based in the UK or UK worked based in EU offices); also, individuals may prefer to be located in the EU where their movement would be unrestricted. 
  • IP Rights - in general, UK IP laws are predominantly constructed around European Directives or derive from European Regulations (which are directly applicable to member states and become part of their local law). Nothing will change immediately and these EU-derived laws will continue to have effect in the UK. It is likely that the UK would retain or implement new laws that largely mirror the existing regimes where possible. Brexit is likely to give the UK more flexibility in interpreting those laws and in shaping exceptions. Existing EU-wide IP rights, such as EUTMs and RCDs, are likely to be subject to arrangements which would mean existing rights continue to apply to the UK. However, EU-wide rights filed after the date of withdrawal will be unlikely to cover the UK, meaning that separate applications would need to be filed in the UK which would increase costs for business. Brexit has placed a significant question mark over the Unitary Patent and the Unified Patent Court and it remains to be seen whether the Unitary Patent will now proceed and, if so, how. 
  • Anti-trust Filing - foreign acquisition of UK businesses with significant presence in other EU countries (which exceed the relevant EU and UK merger filing thresholds) may be required to file both EU and UK notifications. Before Brexit becomes effective, mergers which exceed both the UK and EU notification thresholds benefit from the EU "one-stop shop" and need only be notified to the European Commission.
  • Dispute Resolution Forum - in contracts involving UK and/or EU parties, choice of English courts (or vice versa, the courts of a European jurisdiction) may become less attractive due to the uncertainty in enforceability of English court judgments in the EU (and vice versa) after Brexit becomes effective. On the other hand, arbitration may become more popular given that enforceability of arbitration awards is governed by another regime, namely, the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958. 
DLA Piper is monitoring the next steps closely and will update you periodically with new developments relating to Brexit as they arise. If there is any information that you need that is not immediately available on our website, please do let your usual contact at DLA Piper know.