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SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH ON BUSINESS

JULY 2021 THE BRAVE? AN OVERVIEW OF THE IMPACT OF ON BUSINESS

Scottish independence remains very much a live issue, as , , continues to push for a second , but the prospect of possible independence raises a host of legal issues. In this overview, we examine how Scotland might achieve independence; the effect of independence on Scotland's international status, laws, people and companies; what currency Scotland might use; the implications for tax, pensions and financial services; and the consequences if Scotland were to join the EU.

The between of pro-independence MSPs to 72; more, (which included ) and Scotland even, than in 2011. provided that the two Kingdoms "shall upon the first day of May [1707] and Independence, should it happen, will forever after be United into one Kingdom affect anyone who does business in or by the Name of Great ." Forever is with Scotland. Scotland can be part of a long time. Similar provisions in the Irish the or it can be an treaty of 1800 have only survived for six independent , but moving from out of the 32 Irish counties, and Scotland the former status to the latter is highly has already had one referendum on complex both for the whether to dissolve the union. In that concerned and for everyone else. The vote, in 2014, the electorate of Scotland rest of the United Kingdom (rUK) could decided by 55% to 45% to remain within not ignore Scotland's democratic will, but the union, but and the electoral nor could Scotland dictate the terms on success of the SNP mean that Scottish which it seceded from the union. The independence remains very firmly on negotiations between representatives of the agenda. rUK and of Scotland to establish the terms upon which Scotland should The 2014 referendum followed the SNP's become an independent country would winning 69 of the Scottish 's unquestionably affect the way business is 129 seats at the election in 2011. This carried on both north and south of the majority in favour of a party whose raison border, as would the choices made by d'être is independence persuaded the Scotland as an independent country. UK's Prime Minister that he could not deny Scotland the opportunity to decide Now might not be the time for full-scale whether or not it wished to remain within contingency planning for Scottish the UK. independence, but it is certainly the time to consider how a (second) Scottish The SNP might have lost the ensuing referendum, followed by independence, referendum, but it regards Brexit (which might affect the organisation and conduct 62% of the Scottish electorate opposed) of business. If independence were to as having changed everything, and it occur, the planning horizons could be continues to enjoy enviable electoral uncomfortably short, still more so the success. The SNP won 64 Scottish time to execute any plans. parliamentary seats in the elections of May 2021, but the Party, which This briefing explores some of the legal also supports independence, won a issues that will arise, including the further eight seats, bringing the number potential impact of separation on businesses.

2 CLIFFORD CHANCE ? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS Summary • Scotland is likely to require independent Scotland. A Commission legislation to hold a valid established by the SNP recommended referendum, which may come down to the continued use of sterling for an politics, rather than law. The SNP extended period, but an SNP wants a referendum in 2023 and, if conference rejected that in favour of successful, is then likely to want preparing immediately after any independence before the next Scottish independence vote for a currency of elections in 2026. its own. • An independent Scotland would be a • Contracts with Scottish parties will new player on the international stage. likely continue as before, but there A conundrum is how Scotland can may be, for example, currency risks if enter into agreements with other a contract requires payment states before it has legal status in in Scotland. public as an • For tax purposes, Scotland will need independent . to enter into double taxation treaties • Scotland will inherit a complete legal with other states, including rUK, to framework, but will need to amend its prevent multiple taxes. There is a laws in the same way that the UK did possibility of competition in tax rates (and continues to do) as a result of between Scotland and rUK and Brexit, as well as establishing other states. regulators and such like to take the • Pension schemes that use Scottish place of UK-wide ones. limited partnerships may need to • Scotland will need to establish restructure. Schemes with Scottish rules, and rUK will have to members may also need to ensure consider which of those who obtain, that assets and obligations are or can obtain, Scottish citizenship matched if Scotland adopts a should be able also to hold rUK new currency. citizenship. The SNP wants a common • At independence, Scotland may face travel area with the UK, but that might its own hard Brexit unless it is able to be difficult if and when Scotland joins assume the and obligations of the EU. the UK under the Trade and • Scottish companies will continue to be Cooperation Agreement between the recognised, but legislation may be UK and the EU. Longer term, the SNP needed to allow companies on one wants Scotland to join the EU, which side or other of the border to migrate, could lead to a hard border – for should they wish to do so, to the other goods, services and people – between side. rUK and Scotland in to protect the EU's single market. • The UK's assets and liabilities will need to be divided between Scotland • Scotland would need to establish its and rUK. rUK would likely retain the own financial services regulator, and whole of the UK's current national rUK and Scotland would need to debt, but receive an IOU from decide how to treat firms providing Scotland in respect its proportionate cross-border services, whether share of that debt. Scotland's largest through mutual recognition or creditor would, initially at least, be rUK. otherwise (though that might not assist non-rUK firms). • Currency is perhaps the most difficult issue that would face a newly

CLIFFORD CHANCE 3 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS Achieving independence 2026 election could offer opposing parties the opportunity to reverse the As mentioned above, the Scottish initial decision, particularly if the of 2014 preparations for independence, including followed the SNP's triumph in the 2011 negotiations with rUK, were not going Scottish elections. This persuaded the well. At the time of the first referendum, UK's then Prime Minister, , the SNP anticipated that it would take 18 that he could not, consistently with months of negotiations between Scotland democratic principles, resist an and rUK after a vote in favour of independence referendum in Scotland. As independence to put in place a result, the Agreement of 15 arrangements sufficient for independence October 2012 between the Governments (though many regarded that as a very of Scotland and the UK provided for the optimistic timetable). Given that a transfer to Scotland of the power to hold referendum and its campaign will also a referendum. This was done formally by take time, this indicates that the First an under section 30 of Minister does not have long before she the . The object of the must push the issue, though the timing is referendum was, according to the complicated by the COVID-19 pandemic. Edinburgh Agreement, to "deliver a fair and a decisive expression of views of Prime Minister has said people in Scotland and a result that that he will refuse any request for a everyone will respect". section 30 order, but he would need to consider the politics of refusal at the These steps put the legality – and the relevant time. If he were to refuse, the binding nature – of the 2014 referendum could contemplate beyond doubt. The outcome of the itself legislating for a new referendum, referendum was not the one the SNP had though First Minister Nicola Surgeon has hoped for. In 2017, following the Brexit generally been reluctant to take legally vote, Scotland's First Minister, Nicola doubtful steps towards independence. As Sturgeon, asked the UK Prime Minister, explained below, it is unlikely that the , for another section 30 Scottish Parliament currently has the order giving the Scottish Parliament necessary powers to call a referendum. power to call a second referendum. That request was refused on the basis that the UK's impending withdrawal from the EU The Scottish gave the UK and its more Parliament's powers than enough to occupy its time without The Scottish Parliament was established also contemplating another Scottish by the UK Parliament's Scotland Act independence referendum. 1998. It has limited legislative competence, and anything done outside The success of the SNP and the Green that competence is not law (section Party in the May 2021 Scottish elections 29(1)). A measure is outside the Scottish makes it inevitable that the First Minister Parliament's competence if it "relates to" will again demand a section 30 order to a reserved matter (section 29(2)()). enable a second referendum to take Reserved matters include "the Union of place. A White Paper from the Scottish the Kingdoms of England and Scotland" Government before the elections said that (paragraph 1(b) of Schedule 5). Measures a referendum should take place in the first can be taken under section 30 to enlarge half of the current Scottish Parliament's the powers of the Scottish Parliament. , which runs to May 2026, This was done in order to enable the suggesting a referendum before the end Scottish Parliament to call the 2014 of 2023. referendum, but that enlargement of the Scottish Parliament's powers was time- The SNP Government in Scotland will, in limited and has now expired. practice, want to ensure that independence formally occurs at the very Would a referendum on Scottish latest before the next Scottish independence called by the Scottish parliamentary election. If it did not, the Parliament, without a section 30 order,

4 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS "relate to" the union of England and must also get the timing right. Will its Scotland? The predominant view is that it electoral dominance continue? Even if it would, not least in the light of the draft did, to lose one referendum may be Scottish legislation published in regarded as a misfortune; to lose two in 2021 in which the relatively quick succession would surely proposed that a second referendum the issue for at least a generation. should pose exactly the same question as in the first referendum ("Should One compromise possibility that has been Scotland be an independent country?"). raised is that a section 30 order could be Some argue, however, that there is conditional on varying the electorate to nothing to stop the Scottish Parliament include not only all UK voters resident in legislating for an advisory, or consultative, Scotland but, in addition, Scots resident referendum which, unlike the 2014 in rUK. This would be controversial (if To lose one referendum may referendum, would not be accepted by Scots in rUK, why not Scots outside rUK be regarded as a misfortune; too?), novel and time-consuming. Who is the UK Government as binding. This is to lose two in quick not convincing. A referendum asking a Scot? Is it necessary to be born in whether Scotland should be an Scotland, to have one or both parents succession would surely bar independent country relates to the union born in Scotland, or perhaps a single the issue. of Scotland and England whatever the grandparent (enough to qualify to legal or political status of the outcome. represent the Scotland football team)? Or should the SNP's definition of Scottish If the Scottish Parliament were to seek to citizenship in the event of independence legislate for an independence referendum (see below) be adopted? Further, there is without securing a section 30 order, the no register of such "Scots." A register question of the Scottish Parliament's would therefore have to be created, competence to do so would have to be which would be time consuming and resolved by the UK Supreme Court. There expensive, as well as raising still more are various means by which a challenge issues. For example, what proof would be to Scottish legislation could reach the required, and what political or other Supreme Court, including a direct consequences would follow if these reference by a UK or Scottish law officer expatriate Scots were enough to or through the normal litigation process, the vote one way or the other? but there would need to be a definitive legal answer. Another suggestion is that a vote for independence should require a If the Scottish Government did not want majority (whether of those voting or of the to legislate unilaterally for a referendum, electorate) than 50%+1. In a referendum there could still be legal challenges, for in 1979, Scottish was example to the refusal by the UK supported by 51.6% of those voting but Government to a section 30 order, was not implemented because the but the key is likely to lie in politics, rather legislation required, in addition, that at than the law. The first referendum was least 40% of the electorate as a whole said by the SNP's leaders to be a "once should vote in favour. The 51.6% majority in a generation" opportunity for amongst those who voted represented independence, and that generation has only 32.9% of the electorate. This option yet to pass. But since the first of entrenching the union against a referendum, Brexit has taken place, temporary bare majority is, however, against the wishes of the Scottish unlikely to commend itself to a electorate, and the SNP continues to Government that was content for Brexit dominate Scottish politics. Can a UK to occur when supported by only a little Government refuse a second referendum over a bare majority of those voting. without significantly exacerbating resentment in Scotland towards rUK If Scotland were to vote for (generally referred to derogatorily as independence, what then? In the "" or "Westminster") and remainder of this briefing, we look at strengthening the SNP's hand? An some of the issues that would arise enhanced sense of bitterness towards following a successful (from the SNP's rUK might help the SNP, but the SNP point of view) second referendum.

CLIFFORD CHANCE 5 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS The timing of Scottish MPs who sit in the House of independence Commons (e.g. at the 2010 general election, the Conservatives would have If the SNP had won the first referendum, secured an absolute majority but for the it wanted Scotland to become Scottish MPs), though the large independent on 24 March 2016, the Conservative majority resulting from the anniversary of the of 2019 UK general election perhaps makes England and Scotland in 1603 (i.e. the this less likely than at the time of the date of the death of Queen of first referendum. England and on which King James VI of Scotland became also King James I of Although Scotland will remain part of the England). That timetable gave 18 months United Kingdom until independence, from the referendum for completion of the some have questioned the continuing negotiations with rUK, though many position of Scottish MPs in the House of expressed scepticism as to whether that Commons in the intervening period or, at was long enough to unpick over three the least, whether they should be able to hundred years of intimate union. It would vote on legislation only affecting England, not be necessary for all issues between Wales and Northern or relating to Scotland and rUK to be finalised by Scotland's independence (the House of independence day, but a sufficient Commons already has some procedures number of such issues would need to be providing for English votes for English resolved for Scotland to function as an laws – EVEL). If Scottish MPs do affect independent country. The UK and the identity of the UK Government in Scottish Governments may, for example, 2024, their departure on independence want to enter into a separation agreement day may not only reflect the creation of a (akin to the UK's Withdrawal Agreement new country, but it could also bring about with the EU) initially to provide for a change of Government in the old one. independence, perhaps with (time-limited) transitional provisions, to be followed by The old and new one or more agreements between Scotland and rUK dealing with more On Scotland's independence, rUK will be detailed issues. The Czech Republic and the "continuator" state as a matter of Slovakia were still negotiating almost a public international law, i.e. it will be the decade after their "velvet divorce" same legal entity as the UK, with all the took effect. UK's existing rights and obligations (such as membership of the UN and NATO) but The Scottish Government would, having lost a little over 8% of its presumably, conduct the negotiations for population, slightly under 8% of its Scotland, though it has been suggested economic output, as well as 32% of its that others could be invited to participate land mass. The rest of the United (the UK Parliament may also need to Kingdom continued in this way when the transfer powers to the Scottish was formed out of the Government to enable it to prepare fully (then) United Kingdom of for independence), but who should and Ireland in 1922 and, similarly, Russia negotiate for rUK? In practice, it would be was treated as the continuator on the the UK Government, but it could be a breakup of the Soviet Union. rUK may group representing all the political factions need to consider its name, since it will no in rUK. longer include all of Great Britain – the United , Northern The position of the UK Government is Ireland and Wales? complicated by the fact that there will be a general election in the United Kingdom In contrast, Scotland will be a wholly new on 2 May 2024 at the latest, which is state, probably not even the revival of the likely to be before Scotland could achieve state that existed before the union with independence even on an optimistic England in 1707. As such, Scotland timetable. The election could result in a must make its entrance on the change of UK Government and therefore international stage. of negotiating position. Indeed, the identity of the UK Government could even For many purposes, this debut will be be determined by the (currently) 59 straightforward. Numerous

6 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS uncontroversial international The need to change its laws would not arrangements (postal services, flights and be confined to Scotland. rUK would need so on) will require Scotland to do little to pass laws to modify UK statutes which more than to announce that it will treat apply throughout the UK to reflect their itself as bound in the same way as the reduced territorial scope (e.g. the UK by the previous arrangements or Constitutional Reform Act 2005 alone has simply to sign up in its own name. But in over 100 references to Scotland), and its some cases, to existing continuing regulators would need to treaties could prove more difficult. adapt their rules to reflect their reduced Scotland will have to apply to join some remit. rUK regulators may also need to multilateral organisations, such as the UN, reconsider the scope of ongoing NATO and the IMF. investigations that relate to Scottish businesses. Scotland could, however, face a logical conundrum. Until Scotland is Both Scotland and rUK would need to independent, it has no separate decide how to treat matters which are personality in public international law and, currently wholly internal domestic issues therefore, no standing to enter into and to address this through appropriate treaties or such like, even with rUK. legislation (e.g. enforcement of judgments Until Scotland is Scotland and rUK should be able to and recognition), which may independent, it has no overcome this issue internally, but to require additional agreements between separate personality and, avoid a gap in its induction into the rUK and Scotland. In some cases, turning international order, Scotland may, for internal domestic issues into cross-border therefore, no standing to example, have to rely on foreign states issues could have a significant financial enter into treaties agreeing to enter into agreements with impact, such as tax and pensions, the Scottish Government (which may discussed below. require a transfer of powers from the UK Parliament for this purpose) to take effect Businesses would need to track legal with Scotland on independence or changes, in Scotland and rUK, that could accepting the application to Scotland of affect them, particularly where they result existing arrangements immediately in additional compliance requirements. on independence. These may include obligations for a business to inform its customers and Laws counterparties of how the new legal regime affects its relationship with them Laws applicable in Scotland before (e.g. new deposit or investor protection independence would presumably arrangements for financial services firms). continue to apply after independence, but (as with EU law in the UK on Brexit) Scotland would need to decide what, if People any, adaptation to its new circumstances The Scottish Government set out wide was appropriate (e.g. companies and criteria for Scottish citizenship at the time insolvency legislation), including of the first referendum. So, for example, transitional provisions. The UK Parliament citizens habitually resident in would need to amend the Scotland Act Scotland on the day of independence 1998 to enable the Scottish Parliament to would automatically have become pass laws that will take effect on Scottish citizens, as would British citizens independence but that currently fall born in Scotland but living outside outside the Scottish Parliament's powers. Scotland on the day of independence and children born in Scotland to at least Scotland would also need to create one parent with Scottish citizenship. regulatory bodies to replace existing UK institutions that serve the whole UK (e.g. rUK would also have to decide upon the the Financial Conduct Authority, fate of Britons who acquired Competition and Markets Authority and Scottish citizenship (no one should be left the industry bodies), which may stateless). For example, should everyone themselves need to adopt new rules for habitually resident in Scotland cease to the entities that they regulate. be British (i.e. rUK) citizens on independence or should they be entitled to retain British citizenship if they so wish

CLIFFORD CHANCE 7 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS or if they meet certain criteria, such as business impact of independence on birth or parental birth in rUK? What about people issues. Employees who are those living in rUK (or, indeed, elsewhere) Scottish or rUK citizens would retain the but born in Scotland? right to reside in either Scotland or rUK and to travel freely between them, Dual British and Scottish citizenship – if although their employment rights may in allowed by rUK, as it currently is for other the future depend on the jurisdiction in nationalities – could have advantages for which they live and work. However, other British citizens. This would be particularly nationals, including members of so if Scotland were to become a member Scottish or rUK nationals, resident in of the EU because a Scottish passport Scotland or rUK would not necessarily would grant British citizens free have the same freedom of movement, movement within the EU. Many British and this could have adverse impacts on citizens with Irish connections obtained employees even if their existing rights of Irish passports after the UK's Brexit residence in either Scotland or rUK were referendum for that reason. preserved. For example, other nationals resident in Scotland may not be able to At a more practical level, many who move their residence or travel to rUK on would become Scottish citizens will business or for holidays without work already hold British (i.e. rUK) passports, permits or visas (or vice versa for non-UK which could have up to 10 years to run nationals resident in rUK). before expiry. It would probably be impracticable to replace all of these with These issues may also affect EU nationals Scottish passports before or at resident in Scotland or rUK and currently independence, even if that was what the benefiting from citizens' rights under the holders wanted. Will British passports EU-UK Withdrawal Agreement unless held by Scots still be valid, whether as Scotland and rUK agree to continue to British passports, Scottish passports, or apply the provisions of the Withdrawal at all? Agreement on citizens' rights as if Scotland remained part of the UK. The The SNP said at the first referendum that risk of disruption to employees is much it would look to agree a common travel greater if there is no area with rUK, like that between the as all employees may have to make and the UK and, as a irrevocable choices as to where they wish result, that Scotland would not participate to reside or work. in the Schengen borderless travel area if and when an independent Scotland Companies joined the EU (see below). All new UK companies can currently have their members of the EU since 1997 have registered offices in Scotland or in been required to commit to join the another part of the UK. On Schengen area, though Bulgaria, Croatia, independence, companies registered in Cyprus and Romania have yet, in fact, to Scotland would become, as far as rUK is join. Scotland's negotiating position with concerned, foreign companies. In the EU might also be perceived to be principle, that would not cause a weak, since the SNP has such a clear problem. Scottish companies would be desire – perhaps even need – to join the recognised and accorded legal EU, though Ireland retains a common personality in rUK on the same basis as travel area with the UK and is outside companies incorporated under the laws Schengen. Membership of Schengen of Germany, or Russia. It may would typically require checks on all be that Scottish companies that carry on individuals entering Scotland from rUK business within rUK would be required to and passport stamps, as well as register a branch in the same way that restrictions on the ability of rUK citizens to foreign companies must do so, but that is work in Scotland and even to go to not in itself a heavy burden. Scotland (the normal Schengen maximum is 90 out of any 180 days). A number of companies registered in Scotland indicated during the first A common travel area between rUK and referendum that a vote for independence Scotland would significantly mitigate the would lead them to move to rUK their

8 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS places of registration or the companies that fixed or immovable assets (such as through which they carry on some or all Government or military buildings) would of their business. This may have been for automatically become assets of the regulatory reasons, reasons of public state in which they were located. Other, confidence, the uncertainty over moveable assets (such as military Scotland's currency (see below) or just equipment) would become subject to convenience but, in the financial sector in apportionment through negotiations – particular, regulatory considerations are with the only applicable legal principle likely to have been, and to continue to be, being that the apportionment should be a key driver. Some companies registered equitable. Liabilities would be similarly in or subject to apportionment may also wish to move their seat of through negotiations." registration to Scotland, whether for tax or other reasons. The prevalent view was that apportionment should be on the basis of The most straightforward way to move population, rather than, say, spending or seat would be for the UK to pass tax revenue. The purpose of legislation immediately following an independence is not to perpetuate or independence vote allowing a move on, undo fiscal transfers that have already say, a company's shareholders passing a taken place between Scotland and rUK, resolution to that effect. If there is no but to separate the two populations for legislation to ease the process, the future. companies would need to consider how best to migrate, a matter that would need The Scottish Government identified to be the subject of contingency planning. certain of the United Kingdom's assets What is required will vary from company that it would like, such as military to company and with how each business hardware and foreign embassies. The wants to be structured in the future. assets that must be split between Scotland and rUK encompass property of What is done and how it is done will every kind, including gold and foreign determine the effect of any migration on currency reserves, intellectual property, contracts (e.g. whether it gives a right of staff, software and computer systems, termination) and on counterparties. A works of art, shareholdings, contracts, legislative change of registered office from and the seabed. Scotland to England may affect, for example, the insolvency regime that This last aspect (the seabed) could prove governs a company, but in practice the particularly contentious because of the oil immediate consequences for and gas below it. There are, however, counterparties of a move are likely to be reasonably well-established, if not easy to minimal, except in regulated industries apply, principles of public international where the place of incorporation may law upon which the seabed is divided affect whether an entity holds Scottish or between neighbouring states. If Scotland rUK licences and its ability to operate in and rUK cannot reach agreement, it may the other jurisdiction. be that this issue could be resolved through arbitration or other legal means. The UK's assets Indeed, many issues that might arise and liabilities between Scotland and rUK could ultimately be referred to a third party for Scottish independence would require the resolution. For example, the -Irish assets and liabilities of the United Treaty of 1921 establishing the Irish Free Kingdom to be split between rUK and State provided for the Irish Free State to Scotland. The Select assume part of the United Kingdom's on the explained, public debt, the amount to be determined prior to the first referendum, that: by arbitration in default of agreement.

"The key principle governing the The major, but not the only, liability of the apportionment of assets and liabilities is United Kingdom that must be divided that they should be shared equitably between Scotland and rUK is the UK's between the continuator and the national debt (other debt includes, for successor states. It is a legal principle

CLIFFORD CHANCE 9 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS example, long-term pension liabilities and The UK Government and most the UK's obligations to the EU under the commentators dismissed this argument, Withdrawal Agreement). The UK and all major UK national political parties Government said at the time of the first stated that they would not support rUK's referendum that there would be no formal entering into a with transfer to Scotland of any part of the Scotland. A currency is a medium of national debt; rUK would remain liable but exchange, a store of value and a unit of Scotland would indemnify rUK in respect account, not an asset that appears on a of a certain proportion of the debt. This balance sheet and that can be divided. would involve discussion of what amount The is one of the Scotland should take, what maturities institutions of the UK's Government should be allocated to Scotland, what which, by opting out of the UK, Scotland interest rates, what currencies and so on. would have foresworn. For example, rUK may even consider seeking security Scotland might be entitled to some of the for Scotland's obligations (e.g. gold UK's foreign embassies, but it would not reserves allocated to Scotland could be entitled to use in perpetuity the continue to be held by, and pledged to, services of the Foreign, Commonwealth the Bank of England, though these would and Development Office. only secure a fraction of Scotland's likely debt to rUK). As a result, the SNP's position appears to have changed. It set up a Sustainable How assets and liabilities are divided Growth Commission to look at economic affects business in different ways. The issues arising on independence, including UK's commitment to continue as the currency, which reported in May 2018. obligor on existing UK Government debt The SGC took a very cautious approach may reassure creditors, although as regards currency, determined not to independence could have some impact alarm investors, holders of accounts at on the credit standing of the rUK Scottish banks or others. Government and of rUK businesses whose credit is linked to their sovereign's The SGC recommended that Scotland credit. The split of assets and, more should continue unilaterally to use sterling importantly, liabilities and the impact on for "a possibly extended transition period" the credit standing of the Scottish after independence, only moving to a Government will be more critical for Scottish currency when six tests were current and future creditors of the met The SGC considered that it was Scottish Government – and at least some unlikely that its tests would be met until Scottish businesses – in international towards the end of the first decade capital markets. following an independence vote. The chair of the SGC was quoted as saying Currency that rushing into a new currency would be "short-term risky, politically difficult, "... by laying sole claim as the continuing and it would make the cost of state to the public asset of the Bank of Government borrowing much more England, it would see [rUK] take full expensive… The monetary policy responsibility for the £1.6 trillion national situation that we have should continue debt." So said , Scotland's until such a time that it's no longer in First Minister at the time of the 2014 our interests." referendum, linking Scotland's willingness to accept a share of the UK's debt to The SGC's six tests included: fiscal rUK's agreeing to enter into a formal sustainability, including credible budget currency union with Scotland (the debt is deficit and debt levels; a credible Scottish now well over £2 trillion). His argument and stability in the price of that rUK was obliged to enter into a Governmental debt issuances; sufficient currency union with Scotland rested on foreign exchange and financial reserves to the assertion that the Bank of England, allow currency ; and as the issuer of sterling, is an asset of the Scotland's economic cycle moving away United Kingdom, not of rUK alone. As from rUK's such that an independent such, Scotland would be entitled to the monetary policy was feasible continued use of this asset, and desirable. namely sterling.

10 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS The SGC recommended that any new take steps to ensure that sterling assets currency be pegged at 1:1 with sterling in remained as such and could not be the short and possibly medium term, that converted into the Scottish currency (e.g. the currency used in private contracts by mandatory conversion of all bank should not be changed retrospectively by balances) or trapped in Scotland (e.g. by Scottish legislation (i.e. contracts, such as capital controls). Deposits at banks in loans and bank deposits, in sterling Scotland might, for example, be moved should continue in sterling), and that to banks or branches in rUK or individuals and companies should be free elsewhere, potentially creating an to continue to use sterling in Scotland if immediate liquidity crisis at banks in they so wished. The SGC concluded that Scotland, as well as a shortage of foreign it would be impractical to impose capital currency reserves. The formal currency controls to protect a Scottish currency. union between the Czech Republic and Slovakia in 1993 survived only five weeks, Parties could face a risk of The SGC's approach would leave as monies flowed from Slovakia to the their assets and liabilities Scotland without any influence over rUK's Czech Republic, which was regarded as (and therefore Scotland's) monetary the economically stronger of the two. no longer matching in policy, without its own central bank and currency terms. without any for its financial In any event, the introduction of a new institutions to the Bank of England as currency is likely to give rise to issues for lender of last resort for a significant period some businesses or individuals, whether of time. A foreign currency is used or not Scotland mandates the domestically in this way by, for example, redenomination into the new Scottish Montenegro, which uses the euro, and currency of obligations under some or all Panama, which uses the US . Even existing contracts. Some will end up some larger countries, such as Ecuador, facing mismatches between the currency use the US dollar, issuing only local coins. of assets and liabilities or future income and outgoings that will be difficult or The SGC's proposal was rejected at the expensive (even, perhaps, impossible) to SNP's conference in April 2019. The . These impacts are likely to be conference passed a resolution to most significant for businesses that are "authorise the preparation of a Scottish highly leveraged (such as banks), operate currency as soon as practicable after a in both Scotland and rUK or have assets vote for independence." This, or liabilities that are governed by both presumably, contemplates replacing Scottish and English or other laws. These sterling with a new currency at, or shortly issues are reduced by a long transition after, independence. period with a 1:1 peg as shorter term contracts can be run-off and parties can The success, or otherwise, of the SNP's readjust their positions but are increased conference policy would depend upon if there is a more rapid transition. the perception of a new Scottish currency. If it was perceived that the new Currency is one of the hardest issues an currency would be strong (at least, independent Scotland would face. It is stronger than sterling), there would be understandable – indeed, it is to be fewer problems. Parties would, in general, expected – that a new country would be content to move sterling assets, want its own monetary policy, rather than including bank accounts, into the Scottish be beholden to the state it has rejected. currency, and creditors would be This requires a currency, but launching a positively keen for contracts to be new currency into the global financial redenominated. But even in this situation, markets involves considerable risks, as parties could face a risk that does not the SGC recognised, not least in the light now exist if their assets and liabilities no of the current deficit in Scotland's public longer matched in currency terms. finances and the (post COVID-19 pandemic) debt it would inherit from If, however, the perception was that a the UK. Scottish currency would devalue against sterling, individuals and enterprises may

CLIFFORD CHANCE 11 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS Contracts contract has a Scottish element, can Scotland take the benefit of the contract Scotland already has its own laws and or any part of it should it wish to do so? legal system. Contracts expressed to be Will renegotiation be required? Can rUK, governed by Scottish law would continue Scotland, or both, make use of software to be governed by Scottish law, and licences for systems each wishes to contracts expressed to be governed by continue to use? would continue to be governed by English law, even if the Other cross-border elements may also counterparty is Scottish. Subject to any create issues. For example, if the contract legislation that Scotland may introduce in provides for the delivery of goods or respect of contracts governed by Scottish provision of services between Scotland law and that rUK may introduce in and rUK, the contract may not anticipate respect of English law contracts, pre- the impact of new tariff or non-tariff independence contracts would remain as barriers to cross-border trade that come binding after independence as they into effect after independence. were before.

The uncertainty over Scotland's currency Tax may, however, introduce performance or Independence raises difficult questions of execution risks for contractual tax policy, as well as numerous practical counterparties. For example, if issues for individuals and companies with performance of a contract must take interests and business cross-border. place in Scotland, a Scottish overriding mandatory law could affect, say, the The Scottish Government proposed at ability to pay in sterling. Similarly, Scottish the time of the first referendum to cut laws could determine the exchange rate tax to 3% below rUK's rate at which a debt due in sterling was and to introduce a series of tax converted for enforcement or other incentives. This raises the spectre of tax purposes in Scotland. If sterling is the competition between the two countries. currency of account in a contract with The long-term consequences are strong to Scotland, a new Scottish unpredictable, but in the short term some currency could lead to an argument that may wish to take advantage of lower this new currency, rather than sterling, rates and migrate entities to Scotland becomes the unit of account. prior to independence. Others will be concerned about uncertainty (whether To consider these risks, parties would tax, legal or economic) and therefore need to look at the terms of their existing migrate in the other direction. In both contracts (e.g. Where is payment due? Is cases there would likely be questions as there a definition of sterling?). They may to whether the migration is tax-effective; also need to consider the drafting of however, in principle, migration before future contracts to ensure, for example, independence would be considerably that sterling is adequately defined and more straightforward than migration has that payments are to be made outside historically been (e.g. to Ireland), with no Scotland. Similarly, although the mere exit taxes and few other frictional costs. fact of the creation of an independent This prospect may alarm HM Treasury, Scotland is unlikely, of itself, to trigger a colour other aspects of negotiations, contractual default (absent any specifically and perhaps prompt new drafted provision), parties may want to anti-avoidance rules. review covenants, undertakings and events of default in commercial contracts, A tax treaty between rUK and Scotland bonds, loans and swaps. would need to be in effect by independence to prevent double taxation In addition, anyone with a contract with of Scottish and rUK businesses and to the UK Government or a public sector prevent payments to/from Scotland institution needs to consider how the becoming subject to withholding tax. contract will be affected by Scottish However, the terms of that treaty might independence. If the contract relates only be contentious (particularly given to services in England, the contract will Scotland's intention to capture business probably continue as before. But if the from rUK).

12 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS rUK would, as the continuator state, would be consistent with the UK's retain the benefit of the UK's historic WTO obligations. Similarly, that kind of network of around 120 tax treaties. special treatment for residents of one Scotland would not – and on the face of other country (and nowhere else) would it that would present considerable seem to be incompatible with a future difficulties to Scottish companies Scottish membership of the EU. These investing and operating in other countries two issues would likely prevent and to companies from other countries straightforward solutions to this or the investing/operating in Scotland. other complexities we identify. Negotiating a new treaty network would • Groups containing rUK and Scottish take time, likely many years. There is, entities would be broken for tax however, for Scotland simply purposes. This could have a number of to agree bilaterally with other countries complex effects. Going forward, cross- that they each consider themselves border groups would in practice lose subject to the relevant UK treaty – the ability to move assets tax-free and certainly not an instant process, but to surrender losses within the group. considerably faster than a full treaty negotiation. • Scottish companies would only be required to operate PAYE for employees In terms of domestic legislation, it seems in rUK if they have a taxable "presence" likely that Scotland would choose to in rUK. If they didn't, they would not inherit UK tax legislation as at have to operate PAYE, and rUK independence, save for the specific areas employees would have to pay any which have been the subject of political due to HMRC through self- focus (such as tax rates, incentives and assessment. Similarly, companies anti-avoidance rules). Any more based outside Scotland may no longer fundamental change would seem have to operate PAYE for employees impractical (as well as highly risky). Over in Scotland. time, the two systems could be expected • A large number of rUK residents could to diverge, as happened with, for claim in Scotland, and, as example, Ireland and . "non-doms", be taxable on foreign income/gains only when remitted to On a practical level, the most likely overall rUK. Presumably, rUK rules around outcome is that rUK would treat Scottish domicile would need to be changed to individuals and companies in the same avoid a material loss to the way as it treats any other country's (and Scotland would face similar individuals and companies (and vice concerns). Again, creating special rules versa). Given the history of being the targeting one country could raise same country, that would have a host of complex questions of compatibility with complex consequences, including: WTO trade rules and (for Scotland) EU law. • rUK companies' Scottish operations would be treated as permanent • Similarly, the ease by which many establishments, separately taxable in individuals could shift their residence Scotland, and vice versa. from rUK to Scotland, or vice versa, would likely concern both • Arrangements and transactions tax authorities. between rUK and Scottish entities/ permanent establishments would then • Various tax rules impose exit charges be subject to transfer pricing, creating a on companies that cease to be resident significant compliance burden (and the in the UK. So, for example, an rUK potential for arguments between the company holding real estate or another rUK and Scottish authorities as to who capital asset would, on ceasing to be has the taxing right). It has been an rUK resident, be subject to rUK CGT suggested that this could be avoided on its unrealised capital gain – and by creating a formulary apportionment similar rules would apply to intangible system between Scotland and rUK. property, loan relationships and However, as that would give Scotland derivatives. Any unrealised losses more favourable treatment than any would also crystallise for tax purposes, other country, it is unclear whether it but in many cases an emigrating

CLIFFORD CHANCE 13 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS company would have no use for the effective due to a quirk in the losses. Under current UK tax legislation, legislation. This quirk depends on the these exit charges may be triggered being located in the United upon independence – and unless new Kingdom. This may not survive reliefs and/or exemptions were created, independence, leading to a potential this could amount to a considerable need to restructure. In the majority of windfall for the UK Treasury and a cases, it may be possible to get considerable tax burden on affected comfortable that structures can be companies. It therefore seems likely continued, but detailed consideration that some form of deferral arrangement will be needed. would have to be put in place (and that • Regarding regulation, the UK pensions should be possible within the WTO and market is governed by a number of key EU frameworks). institutions, such as the Pensions Regulator and the Pension Protection Pensions Fund. Decisions will need to be taken Pension schemes would not be immune as to whether these bodies' functions from the effects of Scottish will be split between new regulators independence, although one of the key and, if so, on what basis. concerns raised by potential • The PPF's position in particular is likely independence following the 2014 vote to be a point for negotiation. The PPF has receded due to Brexit. acts as a statutory "lifeboat", providing a proportion of benefits of schemes That concern was that a scheme with a whose employers have become mix of Scottish and rUK employees could insolvent, and it is already responsible be classed as a "cross-border scheme" for a number of schemes previously following independence and would have operated north of the border. For to meet various conditions, including example, a Scottish PPF, split on the seeking authorisation from the Pensions basis of population, would be Regulator and, crucially, complying with significantly smaller than the existing much more onerous funding requirements UK-wide body – there are bound to be than usually apply. In the absence of questions as to how sustainable it exemptions or transitional provisions would be and whether levies would being agreed, this would likely have rise. Many employers have put in place resulted in schemes taking steps to arrangements designed to reduce the segregate Scottish pension liabilities from levy they pay to the PPF – would these rUK pension liabilities in order to avoid continue to be recognised? having to meet these onerous obligations. However, following Brexit, the legislation • Pension schemes are also particularly governing cross-border schemes ceased exposed to currency issues if to apply, with no detailed regime independence results in mismatches replacing it; the immediate authorisation between the currency of 's and funding requirements are no longer a assets and liabilities. Pensioners may concern (although such concern could be also be adversely affected where the revived if Scotland joins the EU and is currency in which pensions are paid required to apply the same rules to depreciates against the currency of existing schemes). their country of residence. There have been proposals in Scotland for the In terms of other pensions-related Scottish Government to protect implications: Scottish pensioners under UK schemes against this risk. • Over recent years, a number of employers have given their pension Other implications will come to light, schemes assets instead of cash as part particularly if different income tax levels of their funding. In many cases, these are introduced, as was suggested at the contributions have been structured time of the first referendum (given that using a Scottish Limited Partnership in contributions to registered pension order to overcome some technical schemes are normally tax deductible). It concerns under employer-related remains to be seen how all these issues investment legislation. SLPs have been will be resolved.

14 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS The each EU member state of the accession treaty with Scotland through each The EU will still be a day one issue on member state's national legal and political Scottish independence but for different procedures – but it would only take one reasons than it would have been following member state to refuse to do so or to the first referendum, when independence encounter problems in the process in would have left rUK within the EU and order to delay Scotland's accession. The Scotland outside it. quickest time in which the process of The day one issue will be whether an joining the EU has been completed is two independent Scotland will be allowed by years and nine months, for Finland. the EU to assume some or all of the UK's Whatever the merits of Scotland's rights and obligations under the Trade membership of the EU, its application and Cooperation Agreement between the risks becoming a pawn in unrelated UK and the EU. If not, then Scotland will national and international politics. The be faced with its own "hard Brexit", example of , with its Catalonian trading with the EU on WTO terms rather separatist movement, was much cited at than those in the TCA. The EU may also the time of the first referendum wish to bind Scotland to at least some of (subsequently, in 2017, there was an the obligations of the UK under the independence referendum that was EU-UK Withdrawal Agreement, such as unlawful under Spanish law and that led the UK's obligations with respect to EU to the gaoling of some pro-independence citizens' rights and the separation politicians), but other member states may provisions dealing with protections for EU also have an interest in discouraging any intellectual property and other rights. But popular towards division. For it may not be possible to continue the example, Cyprus, Greece, Romania and same treatment for goods traded Slovakia, along with Spain, have not between Northern Ireland and Scotland recognised the independence of Kosovo, as apply today under the Northern Ireland each for its own historical and cultural Protocol as this may be inconsistent with reasons. States with separatist Scotland's new status. These issues, like movements might not oppose Scottish Scotland's membership of the EU, could accession outright if done legally and with become a political pawn. the agreement of the UK, but they will In the longer term, securing Scotland's appreciate that the position of Scotland membership of the EU will not necessarily could set a precedent for subsequent be a quick process. Until it is formally . They will have every incentive independent, it is hard to see how to make the accession process visibly Scotland could apply for, negotiate, sign arduous and costly. Scotland is setting a or ratify an accession treaty. Similarly, all course across unknown, and quite the EU's members would have had to possibly treacherous, terrain. recognise Scotland's independence before a treaty could be signed. Whether Duties and VAT Scotland becomes a member by As an independent country, Scotland amendment to the EU's existing treaties would be free to reach such agreement under article 48 of the Treaty on European as it saw fit with rUK (within the bounds Union (the Scottish Government's of international rules) on import duties preferred route during the first and VAT, and to legislate as it wished. referendum) or by the more probable The goal of potential membership of the route of a separate treaty of accession EU could, however, restrict Scotland's under article 49, Scotland must negotiate freedom of action in this area. and reach agreement with all the current members of the EU, which agreement The EU would be unlikely to allow must then be brought into legal force. Scotland to inherit the opt-outs and These two stages could each easily take special provisions enjoyed by the UK at least 18 months. when it was a member of the EU, such as the opt-outs from the requirement to Some, perhaps most, EU member states join the euro and from the Schengen may be prepared to rush the first stage borderless travel area. In particular, the and the second stage – the ratification by border between rUK and a Scotland

CLIFFORD CHANCE 15 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS within the EU is likely to be a major 0% VAT rate. In addition, Scotland would aspect of negotiations. That border is lose the right to apply the 0% rate in currently completely open, to both people relation to 54 different areas, including and goods, and would likely remain at food, water and health care. Joining the least largely so under any independence EU may, therefore, lead to an increase in agreement between Scotland and rUK. prices for Scottish consumers, with the result that some consumers may head If and when Scotland joined the EU, the south to do their shopping. This would be position would be different. Northern exacerbated by any changes which Ireland offers an obvious parallel. Under Scotland or rUK chooses to make to its the TCA between the EU and the UK, VAT system, or simply by a natural Northern Ireland is effectively within the divergence in the two systems over time. EU's single market in order to keep its land border with the Republic open and Businesses with a presence in both thus to support the Agreement. Scottish and rUK entities will have to The result of this is that goods entering register for VAT and file VAT returns in Northern Ireland from Great Britain are both jurisdictions (rUK and Scotland). subject to various EU border controls. Businesses will lose the ability to form a Similarly, some sort of border VAT group between their Scottish and infrastructure between a Scotland in the rUK entities. This lack of VAT grouping will EU and rUK would be needed in order to give rise to particular difficulties in those allow for the checks, certificates, duties industries which rely heavily on VAT and passport stamps currently required groups to mitigate the impact of for goods and people to go from Dover to irrecoverable VAT and/or to streamline Calais (and vice versa) in order to uphold business operations or minimise cash the principles of the EU's single market. flow costs. Many financial groups, in This border "wall" – 154km long with 21 particular, may need to reorganise their and two railway lines crossing it – group structures and intra-group could have serious implications for arrangements significantly, even if they Scotland's trade with rUK. 60% of only involve the use of service centres Scottish exports go to rUK; less than in Scotland. 20% of Scotland's exports go to the EU. Exports from rUK to Scotland represent a Financial services significantly lower proportion of rUK Scotland will need to establish its own exports. By comparison, prior to Brexit, financial regulator and resolution authority the UK's trade with the EU represented and make arrangements for continuing about 50% of its exports. the licences and supervision of Scottish firms that are currently authorised and If it wished to join the EU, Scotland would supervised by the UK authorities. The rUK have to adopt a VAT system consistent regulators will continue to authorise and with EU VAT law. Whilst this may sound supervise rUK-incorporated firms. uncontroversial, given that Scotland was, until recently, part of the EU, the UK had Scotland and rUK would need to decide many exemptions from the standard EU how they wished to deal with the rules which are no longer available to regulation and supervision of firms from countries now joining the EU. Unanimous one jurisdiction that operate through amendment of the VAT Directive would be branches in the other and the cross- required to permit Scotland the use of border trade in financial services between similar derogations, and this the two jurisdictions. seems unlikely. One possibility might be a broad mutual For example, Scotland would likely be recognition arrangement which aims to required to implement VAT on children's replicate many of the features of the clothing at the main VAT rate and to passport regime within the EU – although a minimum VAT of 5% on books; this might not benefit non-UK firms in the UK, these items continue to have a

16 CLIFFORD CHANCE SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS currently operating through branches in The new Scottish regulators would also the UK which deal with clients throughout need to put in place new memoranda of the UK. However, Scotland's flexibility to understanding or cooperation operate a mutual recognition arrangement arrangements with EU and other non-UK of this kind with rUK may be constrained regulators as they would no longer be if Scotland joins the EU; Scotland and parties to those negotiated by the UK rUK may end up treating each other's regulators. Scottish firms would also need financial services firms in much the same to confirm that their new home state and way that the UK currently treats non-UK regulator do not adversely affect their firms. Whilst the immediate impact might ability to continue to operate be mitigated by transitional provisions and through branches or cross-border in equivalence decisions under inherited non-UK jurisdictions. legislation, this could create significant barriers to cross-border trade in financial Defending the borders services between Scotland and rUK, at In its preparations for the first referendum, least as regards retail customers. The the Scottish Government pointed out impact would be exacerbated to the that, in 2007, the UK Government valued extent that the regulatory regimes in its military assets at £93 billion. Splitting Scotland and rUK diverged this on a population basis would give after independence. Scotland a £7.8 billion share on independence. If Scotland joins the EU, any previous equivalence decisions in favour of the UK The Scottish Government then earmarked may not need to be replaced by certain assets it would like within its European Commission decisions under share, such as two , four mine EU legislation. In any event, the rUK and counter measures vessels, two offshore Scottish regulators would need to put in patrol vessels, two light artillery units, six place memoranda of understanding and helicopters, at least 12 typhoon jets and, other cooperation arrangements within a decade of independence, 15,000 governing the supervision of cross-border service personnel. activity. Financial services firms would need to prepare contingency plans for the What the Scottish Government did not possibility of new barriers to business want was the nuclear deterrent. It between Scotland and rUK. wanted an "early agreement on the speediest safe removal of nuclear Similar issues would arise for the rUK- weapons", and would make this a based trading venues, central "priority for negotiations" with rUK. To counterparties, central securities emphasise its determination, it identified depositories and payment systems that , the home of Trident, as the currently serve firms based in Scotland. headquarters of the new Scottish defence These would continue to be regulated forces. Given the lack of any obvious and supervised by rUK authorities, and other venue for rUK's nuclear weapons, the terms of access by Scottish firms this could, at an early stage, make the would likely be similar to those of other negotiations between Scotland and rUK non-UK firms. Absent any broader mutual highly contentious. recognition regime, Scotland may apply the inherited UK legislation to recognise the equivalence of UK regulation for the Conclusion purposes of central counterparty clearing, The practical issues that arise on central securities depositories and the separating Scotland from rUK cannot be securities and derivatives trading underestimated, despite the existence of obligations, but if it rejoins the EU, those a Scottish Government since devolution decisions would then be for the in 1999. Everything run on a UK-wide European Commission. basis must be split. Laws that are in force in Scotland and in rUK on independence

CLIFFORD CHANCE 17 SCOTLAND THE BRAVE? AN OVERVIEW OF THE IMPACT OF SCOTTISH INDEPENDENCE ON BUSINESS day will continue in force, but both or dealings with, Scotland needs to countries need to look at their statute consider how the changes required for, or books in order to ensure that they meet wrought by, independence affect the requirements of each country's new their position. or revised form. For example, the Scottish judges sitting in the (rUK) Supreme Court Much of the work to achieve separation will, presumably, be removed; the almost will require negotiation between Scotland innumerable UK statutory references to and rUK, which will be difficult, quite Scotland may need removal or possibly fractious, given the divergence of amendment; and the Royal Charter interests between the two. Extensive establishing the BBC provides for there to quantities of black coffee may be needed be a trust member for Scotland, who will, to see people through late nights of presumably, lose his post on negotiation, but, if anything is to be independence day. The list is endless. achieved, any stimulant must be supplemented by a huge amount of The practical issues go beyond the two goodwill on all sides. Governments. Anyone with operations in,

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Chris Bates Kate Gibbons Melissa Fogarty Consultant Partner Joint Head of Corporate, London T: +44 207006 1041 T: +44 207006 2544 T: +44 207006 4699 E: chris.bates@ E: kate.gibbons@ E: melissa.fogarty@ cliffordchance.com cliffordchance.com cliffordchance.com

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