How the impending Brexit impacts the legal framework of doing business with the UK – the German perspective: Anti-trust law/law on state aid

The field of anti-trust law is traditionally characterized by a strong interaction between national law and EU competition rules, between national case law and the jurisdiction of the European courts, between the administrative practices of national anti-trust authorities and those of the European Commission. At the same time, the English legal tradition of Common Law, with its strong orientation towards case law, has had a major influence on anti-trust law - previously oriented towards both German and French dogma - since the UK joined the EU on January 1, 1973. This makes Brexit a challenge in logical thinking for experts in anti-trust law. It is hardly conceivable that EU anti-trust law will continue to function in future without the contribution of British colleagues. On top of this is the fact that a major part of all communication in the field of anti-trust law is now conducted in English, and most of the literature is written in English.

In the short term, the consequences of a Brexit for anti-trust practice are likely to be somewhat unclear. However, if one visualizes the medium to long-term consequences of a Brexit, the potential difficulties for continental European and British companies appear very serious.

Consequences in the field of merger control

A future withdrawal of the UK from the EEA will initially end the application of EU merger control with regard to the UK. The big advantage of the "one-stop-shop" principle of obtaining a uniform approval decision from Brussels given exceeding of the merger-control thresholds as per Art. 1 Regulation 139/2004 (Merger Regulation), will therefore be nullified in terms of the economic activity of the amalgamation parties in the UK. Nevertheless, the fact must not be overlooked that the merger control system in the UK does not have any mandatory registration requirement, but rather is designed as voluntary merger control. The UK therefore already has a significant special role in the field of merger control in the context of the European merger control regime. If this makes the consequences in terms of registration requirements in the UK clear given continued existence of the British voluntary system, there may be significant consequences for the application of the EU merger control thresholds under Art. 1 Merger Regulation, as sales of the amalgamating parties in the UK will no longer have to be included following a Brexit. This can result not only in the advantage of the "one-stop-shop" principle disappearing with regard to the UK, but can also mean that the sales thresholds of the EU merger control are not achieved overall, with the result that merger control registrations will be mandatory in a whole series of EU member states.

Scope of application of the ban on restrictive practices (cartels)

At first glance, the least noticeable consequences of a Brexit can be expected with regard to the ban on restrictive practices (cartels). Thus far, the prohibition areas of Art. 101 EU Treaty, of the ban on restrictive practices under EU anti-trust law and of the UK Competition Act 1998 have ex-isted parallel to one another, and describe an almost identical area of prohibition. However, while the ban on restrictive practices under Art 101 EU Treaty refers to agreements, coordinated conduct and/or decisions by associations of undertakings that are designed to limit international trade, the national anti-trust regulations are applicable especially to corresponding forms of conduct below the threshold of international dealings. Nevertheless, sounding the all-clear concerning the areas of application of the EU ban on restrictive practices and of the ban on restrictive practices under Brit-ish law would be premature. In practice, the areas of prohibition are defined to a very great extent in accordance with the block exemption regulations as well as with the guidelines and announcements of the EU Commission. In so far as the block exemption regulations, guidelines and an-nouncements have thus far come about with British involvement, we see only a manageable risk of the UK automatically leaving the scope of application of these rulings following a Brexit. However, whether London will automatically take over the rulings approved in the EU after a Brexit takes ef-fect, is a matter of doubt. This would result in forfeiting of the advantage of the harmonized ban on restrictive practices. The consequences for execution of the ban on restrictive practices affect both British as well as continental European companies. If British companies operate in continental Eu-rope following a Brexit and restrictions on competition in the EU Single Market apply, British com-panies will also be subject to the executive power of the European Commission following Brexit, and can be fined for their violations of EU anti-trust law as a standard procedure. Following a Brexit, continental European companies will have to pay attention to ensuring that they observe British anti-trust rules that potentially deviate from EU anti-trust law, if their conduct has an effect on the British market. This is not exactly facilitated above all by the strong orientation of Common Law towards case law.

The effects of Brexit on enforcement of the ban on restrictive practices at administrative level appear to be far more serious than the consequences in the substantive area. While companies inside the EU Single Market are protected against parallel investigations by the European Commission and the national anti-trust authorities, and double fines are not possible within the EEA based on the "ne bis in idem" principle, this benefit will cease to apply to the UK following withdrawal from the EEA. This will create more than just the possibility of double fines. Companies will also be faced with time-consuming and expensive investigations by the UK Competition and Markets Authority (CMA) on the one hand, and national continental European authorities or the European Commission on the other hand. British companies may of course consider it an advantage if the European Commission is no longer able to carry out dawn raids in the UK in future. Conversely however, British anti-trust law practice must live with the fact that the CMA will no longer be a member of the European network of anti-trust authorities ECN - at least given the complete Brexit notionally presupposed here. It remains to be seen whether the attraction of the UK or England as place of jurisdiction for follow-on damages claims can ultimately be maintained in cases of violation of the ban on restrictive practices under EU law. The enforceability of UK court decisions in the EU will play a decisive role in this respect. Conversely, it is unclear to what extent British courts will take decisions of the European Commission, or of the continental European national anti-trust authorities, as binding in their follow-on damages proceedings. Against this background, there is a certain irony in the fact that the EU Anti-Trust Damages Directive, approved in 2014 after long discussions, facilitates British procedural ideas to a significant extent.

Consequences in the field of the law on state aid

Following withdrawal from the EU, the UK will no longer be subject to the ban on state aid under Art. 107 of the EU Treaty. This ban on state aid is intended to prevent that competition between companies or entire branches of industry being impaired or even distorted through state privileges. From the perspective of the law on state aid, withdrawal from the EU could therefore create greater freedom for the British government in terms of financially subsidizing home-based companies, and thus increasing the attraction of the country. However, in the event of an association model based on the Norwegian or Swiss example, it is more likely that the binding to EU law on state aid will remain to a major extent, even following completion of Brexit. Nevertheless, the UK government would then have to allow the question of whether Brexit would then actually achieve the politically intended greater flexibility.