I have been in the UK this week. Each day I have dedicated the Daily Compliance News podcast to news items from UK newspapers. Today, I want to conclude with a few observations from the past week on the UK compliance scene with just over 800 hours left before Brexit and the growing likelihood of a no-deal Brexit. But first I want to say a few words about one of the first court jesters of rock and roll, Peter Tork of The Monkees, who died this week.
It is perhaps difficult to understand in this day and age how a network TV show could simply overwhelm American popular culture but The Monkees certainly did that in the mid-60s. As noted in his New York Times obituary, “The Monkees were an unabashedly manufactured band, created by Hollywood producers in the 1960s to capitalize on the astounding popularity of the Beatles. The members — Mr. Tork (the oldest, at 24), Davy Jones, Micky Dolenz and Mike Nesmith — were cast as the stars of an NBC sitcom, “The Monkees” (1966-68), in which they performed and dealt with comic situations with a childlike irreverence”.
Tork, if not an accomplished musician certainly a capable one, was hired because his good friend, Stephen Stills was not considered TV photogenic enough. However Stills recommended his friend who was “positioned as the goofy one, the court jester. The director Bob Rafelson, one of the show’s creators, compared him to Harpo Marx.” Just as there now two Beatles remaining, there are now two Monkees still with us, Texan Michael Nesmith and drummer Mickey Dolenz. As we once said, they were bigger than big and now they are two.
In the bigger than big category there are now approximately 35 days or just over 800 hours left before a no-deal Brexit is set to take effect. To say there is disarray in the British political establishment over this upcoming date absolutely belies the insanity which is being reported in the news here in the UK. While in America we certainly have been told about the lack of consensus among the UK political class for any one acceptable solution, here on the ground I can only say it is exponential more so. Indeed it was driven home most clearly this week with a group of (now former) Labor MPs leaving their party to form an independent group and three Tory MPs leaving their party to join this group. They all have not yet formed a new political party but that development seems only days away.
In meetings and presentations I have made this week, the Brits have been most interested in the US political scene and what might happen to Trump. However I have talked to numerous people about the impact of a no-deal Brexit on international business, the fight against bribery and corruption and compliance programs. Obviously, a no-deal Brexit will negatively impact the flow of goods and services from the UK to EU countries and vice-versa. Unless there is some deal, Ireland will revert to being split with a hard border. From long lines at Calais and Bristol for trucks, to lengthy delays at St. Pancras station for the Eurostar, to long passport control lines, the delays in transit will be one of the most public and no doubt irritating effects of a no-deal Brexit.
In one of the most disturbing aspects yet to arise in the fight against international bribery and corruption, German authorities have announced they will no longer extradite German citizens to the UK to stand trial. The Financial Timeshas reported that German authorities will no longer honor UK requests made under the European Arrest Warrant to send those charged with crimes under British law back to the UK to stand trial. The article noted that “Since 2010, the UK has made requests for the extradition of 15 German nationals, who were sought for offences such as child sexual offences, money laundering, fraud and drug trafficking. The European Arrest Warrant process can take as little as 48 days to complete in contested cases.” Unfortunately, this will be what one EU official called, “a “sign of things to come” when Brussels and London try to find ways to overcome obstacles to continuing police and crime co-operation.”
On the compliance front there will no doubt be a great number of challenges as well. From the mundane operation of an international business such things as Visas and Passport Controls will now again have to be considered for any internal investigation or even a more routinely scheduled audit. Of course, GDPR will now become a prime concern as the UK will not be a part of the EU. Companies will have to map out all data assets and revamp policies around collection, storage, or usage of EU resident personal data. If you uncover something involving an EU citizen, will you be able to turn it over to the UK Serious Fraud Office (SFO) or other regulators? If you do not, will you receive sufficient cooperation credit? Open questions at this point.
One of the larger compliance headaches will be in the related categories of product compliance and efficient and functioning supply chains. Currently under the Mutual Recognition Principle, goods which are compliant with the national laws of one EU Member State can be sold in another EU Member State, even if the national requirements of the latter are different to those of the former in relation to the goods. That ends on a no-deal Brexit, where UK businesses exporting goods only meeting UK standards would have to meet the national requirements of the first EU country where they are placed on the market. It may therefore no longer suffice that the goods meet UK national requirements and so this could add an extra layer of compliance for UK businesses.
Supply chains and their attendant compliance issues will be front and center with a no-deal Brexit. For those companies using a just-in-time EU based supply hub, there will be significant disruption simply from the delivery timing and business process perspective. But it is more than simply the movement of goods, but other considerations as well. In a PwC client alert, it stated, “Businesses have to be ready to assess a three-way legal impact on contracts, people and intellectual property. How easy is it to renegotiate existing contracts, or leave them if you need to? What safeguards can you build into new contracts to protect against uncertainty?”
The insanity of a no-deal Brexit was counting down even as you were reading this blog post. To help ameliorate this negativism, I suggest you plug in your headphones (or just be modern and go Bluetooth) and listen to some of the top hits of Peter Tork and The Monkees. It is guaranteed to put a smile on your face for at least a few minutes of the 800+ hours left before a no-deal Brexit takes place.
The Monkees Set List (from YouTube)
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© Thomas R. Fox, 2019