Both countries are historic allies that share history and language. However, red lines have appeared on the negotiating table which may condition the success of the said agreement. Below, we analyzed key aspects of UK-US negotiations.

Import / export of food and agricultural products.

Britain expects to win lower tariffs on its agricultural exports to U.S.

US is not eligible to export food products to European countries due to that it does not meet the European regulations. Therefore, Washington considers Brexit an opportunity to exports that products to UK. However, standards campaigners are concerned that UK will import products which are produced with lower quality, such as the hormone treated beef and chlorinated chicken.

National Health Service

Initially, Trump expressed the interest of American companies in accessing to the British National Health Service (NHS), however, the British Government has repeatedly stated that the UK health system is outside the trade agreement. It seems that the American president has abandoned that requirement at the moment.

Huawei

In January 2020, Boris Johnson resisted pressure from US to ban Huawei in the UK market, which created friction between the two countries. However, the British Government is reviewing the decision taken in January, and according to the British Newspaper the Telegraph, Boris Johnson’s cabinet is planning to phase out Huawei’s equipment from 5G mobile networks. This decision would create losses for UK companies that have already invested resources in the Huawei 5G, such as Vodafone and BT.

Digital Tax

Since 1 April 2020, the UK has taxed 2% of the turnover of large technology companies, such as Google, Amazon or Facebook.

Steven Mnuchin, the US Treasury secretary, warned that if the UK applies the digital tax, the US could consider imposing "arbitrary tariffs" on imports of British vehicles, among other products.

When will the negotiations between the two countries be concluded?

The duration of negotiations leading to the signing of the agreement depends on a number of factors, including:

• The coronavirus pandemic.
• The result of the ongoing negotiations between the UK and the EU.
• The next US presidential elections scheduled for 3rd November 2020.

Written by Laura Gallego Herráez

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The agreement covers:

• trade in goods and services, including provisions on rules of origin, preferential tariffs and quotas
• intellectual property
• geographical indications
• geographical indications

The UK-Chile Association Agreement will help strengthen the trading relationship between Chile and the UK as it will grant businesses and consumers certainty. By entering this agreement, both countries ensure that there is no disruption of their trade flow. Additionally, UK manufacturers will benefit from preferential access to the Chilean market to sell their goods, and UK consumers will benefit from lower prices on Chilean goods as well as more choice on products like wine, fruits and nuts.

The UK-Chile Association Agreement replicates some elements of the EU-Chile Agreement, such as provisions on political dialogue, increased economic ties and other forms of cooperation between the two regions on issues like human rights.

Then International Trade Secretary Dr. Liam Fox commented on the event saying: “Today we have signed an important trade continuity agreement as we prepare to leave the EU. This will ensure there is no disruption to British business exporting to Chile after we leave the EU”.

When will the agreement enter into force?

The UK ceased to be a member of the political institutions of the EU on January 31st 2020. However, it will continue to be treated as a member of the single market and customs union until December 31st, 2020, which is the end of the transition period following its departure from the EU. The EU also requested that third countries with EU trade agreements treat the UK as a member state during this period.

Thus, the UK-Chile Association Agreement will not enter into force while the EU-Chile Agreement continues to apply to the UK.

Written by Lucía Fernández

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With trade totaling at £31.4bn and 9,500-UK based businesses exporting goods to Japan, it remains Britain’s 11th largest trading partner and 4th largest outside the EU. Discussion has been underway between London and Tokyo to determine the specificities of their post-Brexit trading agreement leading to what could potentially be the most advanced global trading agreement to date. The UK hopes to build upon the already established EU-Japan Economic Pact Agreement (EPA), whilst Japan affirms that it will not simply ‘cut and paste’ the same agreement it holds with the European Union and apply it to the United Kingdom.

Tokyo, however, does hope to see a number of procedures implemented during the Brexit process. They place great importance on the UK and EU maintaining market integrity and remaining attractive destinations for business where “free trade, unfettered investment and smooth financial transactions” are ensured. The Japanese Government requested that the EU and UK adhere to four general terms during the Brexit process:

• Transparency
• Sufficient transition periods
• The publication of any changes to the process
• Safeguarding market integrity
• The maintenance of free trade between Japan and the UK

What is clear is Japan and Britain’s interest in forming post-Brexit agreements, with British authorities predicting that a bilateral trade deal could increase GDP by around 0.07 per cent, or £1.5bn, in the long-term.

Britain’s interest in forming relations with Japan is not limited to simply gaining access to their markets. Britain hopes to join the Trans-Pacific Partnership (TPP), of which Japan is one of the 11-member states, in order to bolster its post-Brexit economy and form trading partnerships with economic superpowers.

Therefore, Britain may look to accept the inclusion of investor-state dispute settlement mechanisms suggested by Japan in their recent trade negotiations as these mechanisms have been adopted by the TPP. In addition to this, Britain may choose to accept Japan’s instant post-Brexit zero tariff suggestion on Japanese automotive products to keep the Japanese Government on side when it looks to join the TPP.

British and Japanese bi-lateral relations will remain strong and effective post-Brexit trade deals with regards to the areas of STEM will be drawn-up, what remains to be decided, however, is whether Japan will be subject to free-trade agreements with the UK.

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What are the advantages and disadvantages of free ports?

Supporters of free ports allege that it attracts business and boost trade and manufacturing industry.

For instance, the individual pieces of assembling a car are produced in different countries, in a free port scenario the manufacturer could import all those pieces, saving costs, to a factory within a free port area.

In a free port goods can be brought in customs free, processed or stored and then re-exported. Conversely, critics warn the risk of free ports being used to avoid tax and launder money.

Does the EU prevent the creation of free ports?

No, free ports are permitted in the EU. In the majority of the countries, these free ports existed before becoming members of the EU. In fact, seven free ports located in UK operated from 1984 to 2012. Currently, there are not free ports in UK, but there is one on the Isle Man.

Why UK Government consider that Brexit is an opportunity to create free ports?

The UK Government argued that European free ports are more restricted and limited when compared internationally. The UK Government would like to take the opportunity Brexit brings to create new free ports following the American model of Free Trade Zones.

The UK Government has argued that free ports could attract investment and generate new jobs but critics say it could induce money laundering operations.

UK Government launches free ports consultation

On 10 February 2020, the government has launched a consultation on creating up to 10 free ports with special tariff and duty status with the objective of opening it for business in 2021.

The consultation was intended to close on 20 April but the government considers that key sectors with a special interest in this policy such as: local government, ports and businesses, are facing challenges due to Covid-19. Therefore, the Free ports consultation will be extended to close on 13 July. Responses can be submitted through the existing gov.uk portal until this date.

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Having subsequently looked at a number of these unsuccessful applications, we believe this is down to two principal factors:

1. the applicant’s inability to produce the relevant information in the clear and concise manner that lenders expect so that they can rapidly analyse and decide whether to approve the application and provide the funding and/or;
2. not knowing how to discern which lenders are more likely to approve their application.

At Scornik Gerstein LLP, we have had numerous exchanges with the government approved lenders and have developed the expertise required to help our clients with their applications so as to successfully obtain funding through the CBILS & BBLS loan programmes.

We hope we can help you to swiftly and successfully apply for this unique borrowing opportunity.

Please feel free to contact your relationship Partner either Antonio Arenas (on 07540667073 or antonio.arenas@scornik.com) or Xabier de Beristain Humphrey (on xabier.deberistainhumphrey@scornik.com)

(Keep reading below for further information about the CBILS & BBLS loan programmes extracted from the UK government’s dedicated website)

Bounce Back Loan Scheme (BBLS)

(Finance of up to £50,000)

About the scheme

The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.

How it works

A lender can provide a six-year term loan from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.

The scheme gives the lender a full (100%) government-backed guarantee against the outstanding balance of the facility (both capital and interest).

The borrower always remains fully liable for the debt.

Key features of the scheme

Coronavirus Business Interruption Loan Scheme (CBILS)

(Finance of up to £5 million)

About the scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

How it works

British Business Bank operates CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance. They include:

• high-street banks
• challenger banks
• asset-based lenders
• smaller specialist local lenders

A lender can provide up to £5 million in the form of:

• term loans
• overdrafts
• invoice finance
• asset finance

CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending.

The borrower remains fully liable for the debt.

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

• recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
• a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility

Key features of the scheme

Coronavirus Business Interruption Loan Scheme (CBILS)

(Finance of up to £50 million)

Specifically, it facilitates access to finance for businesses with a turnover above £45 million, the upper limit for the existing smaller-business focused Coronavirus Business Interruption Loan Scheme (CBILS).

How it works

A lender can provide:

• up to £25 million to businesses with turnover from £45 million up to £250 million
• up to £50 million to businesses for those with a turnover of over £250 million

Finance is available in the form of:

• term loans
• revolving credit facilities (including overdrafts)
• invoice finance
• asset finance

CLBILS gives the lender a government-backed partial guarantee (80%) against the outstanding balance of the facility.

The borrower remains fully liable for the debt.

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, but claims cannot exceed 20% of losses after all other recoveries have been applied.

Key features of the scheme

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Where did the negotiations stop?

On 5th of March 2020 both sides met in Brussels for the ´first round´ of negotiations. When they were planning about to meet for the second round they decided put on pause the Brexit negotiations to focus on combat the spread of coronavirus.

However, on 18th March, British and European negotiating teams exchanged draft legal texts and officials had been discussing and reviewing those texts during one week by videoconference.

Where are we now?

On 15th of April 2020, David Frost, the UK´s chief negotiator, and Michel Barnier, the EU´s chief negotiator, had a meeting by video conference. Both sides reviewed the achievements and technical dialogue carried out during the first round of negotiations.

The next round is rescheduling for the weeks of 20 April, 11 May and 1 June.

The two parties continue to show high divergence of opinion on the following matters:

• TRADE DEAL AND THE LEVEL PLAYING FIELD: the level playing field is a trade-policy term that refers to common standards and regulation which seeks to avoid business in one country undercutting their competitors in other countries in areas such as taxation, environmental protection or workers' rights. It is therefore necessary to establish whether the UK will continue adhere to such standards or if in the contrary will be free to stablish its own.

 

• FISHERIES: The two key issues are:
1. Agreement on the access of European Fishermen to UK waters and vice versa. British fishing organisations consider that due to the EU’s Common Fisheries Policy they have not received their fair and reasonable share of quotas.
2. Determination of the shares of the Total Allowable Catch (TAC) for each stock which should be allocated to UK and EU fishers.
• THE EUROPEAN COURT OF JUSTICE’S (ECJ) ROLE IN DISPUTE SETTLEMENT: UK Government wants the ECJ not to have jurisdiction in the UK.

 

• SECURITY: EU says that a crime fighting agreement would not be possible if the UK withdraws from the European Convention on human rights. Although UK is not requesting entering into the EU policy agency Europol, nor the EU law enforcement agency Eurojust wants to work with both of them. Moreover, UK is seeking to sign an extradition agreement to substitute the European arrest warrant.

 

• TRANSPORT: lorry and goods vehicle drivers. The EU insists that British lorry drivers cannot expect to have the same rights as their European counterparts.

Will the Brexit transition period be extended due to Coronavirus?

The UK Government can ask for an extension of the transition period of one or two years. The deadline to do so expires on 1 July 2020.

A high-level meeting is scheduled to take place in June to analyse the progress made so far with a view to determining the framework for relations between the EU and the United Kingdom, at the end of the transition phase, which currently remains set for 31 December 2020.

Global Institutions such as The International Monetary Fund (IMF), has asked the United Kingdom via her director Kristalina Georgieva, to ask the European Union (EU) for an extension of its post-Brexit transition period amid uncertainty induced by the outbreak of coronavirus in all the world. The UK government is however not inclined to attend such request since any transition extension period could be perceived as an extension of the uncertainty.

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What type of activity can be carried out?

The Ministry of Economy regulates Foreign Investment in Mexico. There are reserved and restricted activities for foreigners; the reserved activities are those that are of exclusive exploitation to the Mexican State and the restricted ones are those in which a maximum percentage of participation of foreign investment is permitted or, if exceeding, an authorization from the State is required. Although these limitations exist for foreigners, the activities to which they apply are limited and are of specific commercial sectors such as firearms, transportation, education, nuclear energy, exploration or exploitation of oil, among others. ₁ Outside of these areas, foreigners have the freedom to participate in trade without any problem.

Mexican Company Formation

First, it is necessary to request authorization and availability of the desired name and purpose of the company before the Ministry of Economy. This allows maintaining the certainty that no other corporation will exist within Mexico with the same name and purpose. ₂ With this process, a unique code is issued that will be included in the Deed of Incorporation, a document that will be explained later. This task is sometimes carried out by the Notary Public who carries out the protocolization process.

Which brings us to the second step, the drafting and elaboration of the Deed of Incorporation of the company. This document is the most important one in any corporation since it establishes all the guidelines and identification details of the company, i.e. the name, company’s purpose, address, duration and nationality of its shareholders, and the rules of how the company will be governed, i.e. its administration, ordinary and extraordinary shareholders' meetings. It is necessary that the Deed of Incorporation include all the relevant points for the corporation since, in the event of any conflict, problem or even the distribution of dividends, the guidelines established in it must be followed. To be sure that this document is correctly written, we recommend consulting with a lawyer. The Deed of Incorporation must be accepted and signed before a Notary Public. This process is known as the protocolization of the Constitutive Act.

Finally, the registration of the company must be done before the different government agencies, which are the Public Registry of Commerce, which varies depending on the state in which the incorporation of the company was made, the Ministry of Finance and Public Credit, more specifically in the Tax Administration System and, finally, if it has foreign partners, in the National Registry of Foreign Investments. This affects the company as duly incorporated before third parties and can start operations.

It is important to understand that the process of hiring foreigners is completely different from the one explained here.

In Scornik Gerstein we are prepared to support you with the necessary process for the incorporation of companies in Mexico, as well as with any doubts and management that may arise during the process.

Written by Melina Ramírez.

₁ For a complete list of activities review the Foreign Investment Law in its articles 5, 6, 7 and 8.

₂ It is important to emphasize that the name is not equivalent to the brand, trade name or trademark registration.

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To set up a Spanish SL it is required:

1. A certification from Spanish Companies House (known as Registro Mercantil) to save the name of your company.

 

2. A bank account in order to deposit the company’s share capital.

 

3. To grant a Deed of Incorporation before a Notary Public. This Deed should express:
1. Shareholders’s identity
2. Contributions and share capital
3. Articles of association which should express the following details:
• Name of the company.
• Nature of business.
• Domicile.
• Share capital.
• How the company is going to be managed.
• How the company will make decisions.
4. Directors identity.
4. Shareholder’s NIF (Número de Identificación Fiscal or tax identification number). If the said shareholders are not Spanish, they will need to obtain a NIE number (Número de Identificación Extranjeros).

Once all the formalities are met and the Deed of Incorporation granted, the Notary will communicate this to the Registro Mercantil. Once this communication has been processed, the company will be officially incorporated and ready to trade.

Setting up a Spanish LTD raises a tax known as Actos Jurídicos Documentados. The amount to be paid by the shareholders depends on the Autonomous Community in which the company has been incorporated which ranges from 0.5% to 1.5% of the Share Capital value.

If you wish to obtain further information, please do not hesitate contacting us.

Written by Adria Moral and Beatriz Leiva. 

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We can define it following the article 17 of the Unfair Competition act as any sale of goods or services carried out by an economic agent at a price that must necessarily be below the cost of acquisition or production, therefore it seems clear that what the act punish a certain behavior by which a competitor is capable of losing benefit in order to annul its closest competitor.

What requirements must be met for a commercial strategy to be considered a sale at a loss?

Spanish case law is unanimous when confirming that it’s a "loss to the direct competitor" so that a sale at a loss can occur. Following again article 17 of the Unfair Competition act it also requires the concurrence of three requirements:

1. a) It is liable to mislead consumers.
2. b) It must necessarily have the spirit of discrediting potential competitors.
3. c) In determined cases, also when it is part of an eradication strategy of a competitor or group of determined competitors.

The first requirement is established for all cases and seems to operate as an objective budget and there must necessarily be a loss in the sale in the same market as the competitor, and therefore mislead the final consumer.

Our personal opinion focuses on how illogical it is to think that an entrepreneur can systematically sell their products or services at a loss, if we take into account the constitutional right to freedom of enterprise, it would not be very logical to deprive the entrepreneur of his right to benefit consumers with such low prices.

Written by Lucio Morcillo.

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