24 June 2016.  The UK has voted.  We will leave the EU.

For UK footwear retailers and footwear brands, the effect of this decision needs to be considered at two levels.

Let’s start by looking at the position so far as retailers are concerned.

Commercially it is possible that this decision will result in a drop in the foreign currency value of sterling.  If so, those footwear businesses which will receive in late Summer/Autumn invoices for AW16 stock delivered payable in US dollars or Euros will have a larger sterling amount to pay.  In contrast, if invoices are payable in sterling, it is possible that overseas suppliers will try and squeeze UK retailers to pay a post-contract premium to take account of the currency lost to the suppliers.

A similar point arises if an overseas supplier has taken out credit insurance.  It is possible that an insurer will try and increase the premium charged resulting in a corresponding pressure being applied to the UK retailer.

Whilst it is possible that a UK decision to Brexit will result in an overseas supplier refusing to supply AW16, such an action would suggest that the supplier decided not to have all orders for AW16 made up and is using the referendum decision as an excuse to allocate available stock to non-UK customers.

What then of the legal position?  Can overseas suppliers seek to take advantage of contracts made with UK retailers?  The answer here is “possibly”.

The starting point is what is the governing law of the contract.  If unspecified – as is often the case – the governing law will be determined by EU and international law.

If English law is the governing law then the vote on 23 June is unlikely to make any difference so far as AW16 contracts are concerned.  This is because:

  1. it is unlikely that a Brexit vote will have been specified as an event of termination.
  2. Whilst it could be claimed that such a decision had frustrated the purpose of the contract so making it impossible to perform the contract, the English courts have consistently been unimpressed by an argument that a contract is frustrated because it is more expensive to fulfil.
  3. For a supplier to claim that the vote amounted to the occurrence of an event of force majeure, it would be necessary either for it to be expressly stated to be so or for it somehow to come within a more usual force majeure event such as the act or decision of a government body. Unlikely, although not impossible.

Irrespective of this, a Brexit vote will necessitate changes in our laws but these can only come about if and when the laws are made by Parliament or changed by decisions of the courts.  Both will take many months, if not years, to come into effect.

In broad terms, the position for UK footwear brands and their contracts with overseas buyers is broadly the reverse.

But, 23/6/16 overlooks a more fundamental point.  It is critical for footwear businesses to appreciate what is in the contracts which they make for their goods which are the lifeblood of their businesses.


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Stephen Sidkin is a partner in Fox Williams LLP (www.fashionlaw.co.uk, www.foxwilliams.com).

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