BREXIT IMPLICATIIONS FOR MULTINATIONALS 2016 Brexit what next

BREXIT – IMPLICATIIONS FOR MULTINATIONALS 2016

Brexit – what next? Clifford Chance

The EU referendum result Voting Leave – 51. 9% 17, 410, 742 VOTES Scotland Leave 38% vs Remain 62% Northern Ireland Leave 44. 2% vs Remain 55. 8% Remain 48. 1% 16, 141, 241 VOTES England Leave 53. 4% vs Remain 46. 6% 48. 1% 51. 9% Electorate 46, 501, 241 Turnout 72. 2% Brexit – what next? London Wales Leave 52. 5% vs Remain 47. 5% Leave 40. 1% vs Remain 59. 9% Clifford Chance

The UK exit from the EU: Steps Negotiate Art. 50 agreement UK gives Art 50 notice Prepare for UK exit Sign Art. 50 agreement* Transitional period? Art. 50 agreement enters in force (UK exits EU) Ratification (as needed) Negotiate long-term agreements between UK and EU Sign long-term agreements* Confirmation UK will not remain in Customs Union? ** Resetting UK & EU legislation Agreements with Third countries Future UK/EU Agreement Article 50 Withdrawal Agreement 2017 UK to establish ‘schedules of commitments’ at the WTO*** Transitional period? Agreements fully in effect Long-term agreements in force UK negotiates and concludes agreements and other arrangements with third countries EU negotiates and concludes agreements and other arrangements with third countries UK laws to prepare for UK exit UK laws to prepare for long-term agreements EU laws to prepare for UK exit EU laws to prepare for long-term agreements * Agreements subject to EU Parliament and Council approval and UK Parliamentary process under Constitutional Reform and Governance Act 2010. ** 27 members of the EU will need to agree to the UK opening informal talks. If an FTA will be negotiated with the EU, third countries may want to see what emerges from these talks before committing to negotiations. *** UK’s WTO schedule of commitments has to be adopted by consensus among the 164 members of the WTO. There may be domestic roadblocks to overcome. Brexit – what next? Clifford Chance

Illustrative timeline Q 4 2016 DC decision in Miller: Gov wins/loses Q 2 2017 Q 1 2017 SC decision on appeal in Miller: Gov wins Q 3 2017 Q 2 2018 Gov delivers art 50 notice under prerogative Q 1 2019 Q 2 2020 UK leaves EU Art 50 law passed; notice given Art 50 law rejected by H of C Govt introduces art 50 law Q 2 2019 UK leaves EU Second referendum or general election? ? SC decision on appeal in Miller: Gov loses Art 50 law passed by H of C, but rejected by H of L Art 50 law passed by H of C again; becomes law; notice given Art 50 law passed; notice given Gov introduces art 50 law Art 50 law rejected by H of C UK leaves EU Second referendum or general election? ? Art 50 law passed by H of C, but rejected by H of L Art 50 law passed by H of C again; becomes law; notice given UK leaves EU Assumptions: * the UK and the EU do not enter into a withdrawal agreement within the two year period that specifies a date of entry into force outside the two year period (the date of entry into force being the date of the UK exit from the EU); * the UK and the European Council do not extend the two year period Brexit – what next? Clifford Chance

Europe – Ties that bind Swiss Immigration Model Not Relevant for Brexit Talks, PIIE Says – Bloomberg, 4 October 2016 Brexit – what next? Clifford Chance

The “four freedoms” of the internal market Goods Persons Services Customs duties Free movement Freedom of establishment Internal taxation of citizens Free movement Freedom to provide, receive services of exports of workers Brexit – what next? Capital Free movement of capital Free movement of payments Clifford Chance

“Hard” or “soft” Brexit? Trade offs Soft Brexit EEA + EFTA membership Onerous and unlikely Bilateral agreements + EFTA Unique to Switzerland Customs Union Onerous and unlikely Deal consisting of single or multiple FTAs or other agreements WTO / GATS Greater market access in return for free movement of people, budget contributions, regulatory equivalence and institutional oversight Most likely* If negotiations fail Hard Brexit Less market access with reduced free movement of people, no budget contributions, possibly diverging regulation and little institutional coordination *Theresa May sets Brexit course away from EU single market – Financial Times, 2 October 2016 Brexit – what next? Clifford Chance

Impact for multinational corporations (outside financial services) Immediate market consequences Current volatility – affecting treasury operations (e. g. currency hedges) Impact of £ sterling decline – increased competitiveness for UK based export-led businesses; challenging environment for import-led businesses. Lack of certainty increases risk across all areas of business and future deals Action points Businesses need to be proactive to make sure their industry’s interests are represented and to make their views and concerns heard Companies should start drawing a picture of how much the current business, including the customer facing side, and the internal structure, is relying on the EU fundamental freedoms – may need to change the shape and structure of that business Businesses will need to undertake a detailed analysis of their trade flows and supply chains to assess the impact of tariffs and non-tariff barriers. Key to the initial assessment will be (i) what do you rely on the EU system for; and (ii) what do you rely on the EU's FTAs for? Brexit – what next? Clifford Chance

Other legal implications… It is unclear whether, and how, protection currently obtained via current EU unitary rights such as EU trademarks, EU registered designs, SPCs, PDOs or GIs will be maintained in the UK following Brexit. The long-awaited Unitary Patent and Unified Patent Litigation System will likely be delayed IP Rights Impact on data protection needs to be considered in the context of upcoming reform of EU law. The vote to 'leave' has created a number of short-term practical considerations for corporate treasurers, as well as potential longer term repercussions. Financing Data protection Trade Agreements Regulatory Commercial contracts Most EU rules are implemented through UK law and it is likely they will initially remain in place, but they may diverge in the longer term. Direct EU law will need to be replaced. Employment Brexit may impact the right of EU nationals to continue in their present jobs in the UK and the right of UK nationals to work in the EU. Imports and exports may be subject to tariffs and non-tariff barriers pushing up the price or effective cost of goods imported or exported to or from the UK. Consideration should be given to the impact on key contracts and, in particular, how you might want to vary the terms on renewal. Tax Potentially significant tax consequences; for example, dividends from EU subsidiaries to UK parents may attract withholding tax post-Brexit. . Brexit – what next? Clifford Chance

Clifford Chance's Brexit USPs CC is uniquely well placed to help the world's leading businesses manage the risks and opportunities arising from the UK's Brexit vote because: Public Policy Group European Network Trade Group Regulatory and Restructuring Public policy practice unique within Strongest network across EU as a Strong trade expertise across our network. Experience includes advising businesses and Pre-eminent financial regulatory a top tier global law firm, with a network in London, Brussels, Paris, Frankfurt and Washington D. C. Actively helping clients to understand national and international government institutions and to develop appropriate commercial strategies. Strong trade association links internationally reinforce our ability to advise on understanding and influencing debate. Key people: Michel Petite (PAR) – former head of the European Commission's legal service; adviser to three commission presidents; participated in the EU treaties of Maastricht, Amsterdam, Nice and Lisbon; Phillip Souta (LON), UK head of public policy and former director of Business for New Europe. Brexit – what next? whole of any elite firm 16 offices in 12 countries in Central Europe with over 1, 000 lawyers (200 partners). More Band 1 rankings (14) in the Europe-wide regional tables of Chambers Europe 2016 than any other firm, including Corporate/M&A; Dispute Resolution; Banking & Finance; Capital Markets (various); Regulatory: FS; and Regulatory: Government & Public Affairs. trade bodies on trade-law issues post Brexit – both inbound and outbound; currently advising a third country on an EU trade agreement; longstanding advice to clients on how trade agreements could best provide for their sector's needs; extensive experience of protecting investments in the face of political change or interference. Key people: Jessica Gladstone (LON) – international disputes lawyer with experience negotiating treaties and representing the UK at the UN, Council of Europe and other international institutions; Michel Petite (see above) Audley Sheppard (LON) - specialises in resolving major disputes arising out international investment and trade, including energy and infrastructure projects and bilateral investment treaty claims; Tony Reeves (BRU) - advises major companies from a wide range of industries on trade, competition and EU law; Janet Whittaker (WAS)- experienced in claims to protect assets under investment treaties and international trade agreements; Dr Federico Ortino (consultant to CC) - Reader in International Economic Law at King’s College London, specialising in international trade law. practice globally - tier one in Chambers, Legal 500 and IFLR. Long track record of advising governments, trade associations (e. g. AFME) and major financial institutions on implications of Brexit. Combining our regulatory and corporate strength across Europe as a whole (see point 2 above), uniquely well placed to advise from a pan European perspective on every stage from understanding the issues; to contingency planning; to implementing international restructuring and reorganisation across the European region. Key people: Chris Bates, Simon Gleeson, Caroline Meinertz, Ashley Prebble , Alex Erasmus (LON); Mark Benzler (FRA); Nick O'Neill (NY); Mark Shipman (HK) Clifford Chance

Sarah Jones, New York Sarah is a partner in the Corporate practice of Clifford Chance and is the Head of our global Consumer Goods group. She has extensive experience in advising multinational corporations on high profile, complex, cross-border M&A in particular in the consumer goods sector. Sarah regularly provides advice on the establishment and ongoing conduct of joint ventures in a wide variety of industries. Relevant experience includes advising: Sarah Jones Partner T: +1 212 878 3321 M: +1 212 878 8375 E: sarah. jones @cliffordchance. com Coca-Cola Co and Coca-Cola Femsa in their announced US$575 million agreement to acquire Ade. S, the soy-based beverage unit of Unilever. Mondelēz International Inc. in connection with the US$13. 9 billion announced acquisition of Keurig Green Mountain by JAB Holding Company. Minority investors, who are shareholders in Jacobs Douwe Egberts, including Mondelez and entities affiliated with BDT Capital Partners, have partnered with JAB on its current deal for Keurig. Jacobs Douwe Egberts on the sale of Carte Noire to Lavazza, as a result of the commitments taken by Jacobs Douwe Egberts following the merger of the coffee businesses of Mondelez Group and Douwe Egberts Master Blenders. Mondelēz International on the combination of its global coffee business with D. E. Master Blenders 1753 B. V to be named Jacobs Douwe Egberts (JDE) and, prior to closing, on its internal restructuring to separate coffee from Mondelēz's other operations across more than 40 jurisdictions GTECH S. p. A. on its change of corporate seat from Italy to the UK (by means of a European cross border merger) and its acquisition of IGT (by means of a US merger) for an aggregate consideration of US$4. 6 billion Kraft Foods on its £ 11. 6 billion takeover of Cadbury and subsequent reorganization Philip Morris International in its acquisition of a 20% equity interest in Megapolis Distribution BV in Russia for $750 million Bridgepoint in the sale of the Permaswage Group to Precision Castparts Corp. (PCC). Motorola Solutions, Inc. on its takeover of Psion plc TAM Airlines in its US$7 billion merger with Lan Chile to form LATAM Airlines Group S. A. Kraft Foods on its € 5. 3 billion acquisition of the global biscuits business of Danone Kraft Foods on its US$1. 067 billion acquisition of the Iberian biscuits operations of United Biscuits Phillip Morris International on its US$5. 2 billion acquisition of HM Sampoerna TBK Altria Group on the US$5. 622 billion merger of Miller Brewing with South African Breweries (to form SABMiller) Ms. Jones has been a partner with the firm since 2001 and has been based in its New York office since 2006. She is admitted as a solicitor in England &Wales and to the New York Bar. Brexit – what next? Clifford Chance

Clifford Chance, 10 Upper Bank Street, London, E 14 5 JJ © Clifford Chance 2016 Clifford Chance LLP is a limited liability partnership registered in England Wales under number OC 323571 Registered office: 10 Upper Bank Street, London, E 14 5 JJ We use the word 'partner' to refer to a member of Clifford Chance LLP, or an employee or consultant with equivalent standing and qualifications