Several European economies are developing individually and wholly, creating new opportunities. Companies doing business in Europe need to stay on top of the continuously changing political, economic, and regulatory landscape.
Whether you are just selling into or are building out operations on the ground, here are the top issues to keep in mind when planning or doing business in Europe.
Commercial agreements when you do business in Europe
Keep in mind that some commercial agreements are regulated at an European Union level and that some Member States’ legislation contains defensive rules for such distributors. As EU antitrust laws are unique, you should also consider whether your European agreement is compliant as the criteria to evaluate a breach in competition law may vary from other countries’ approaches to antitrust issues.
Negative Interest Rate Environment
Negative interest rates are common across the Eurozone and do not appear to be moving temporarily. Therefore, most banks are now passing fees on to clients that hold balances in these currencies. Clients are being inquired to move non-operational funds out of the bank or are being given a certain threshold that they must stick to. In response, clients are finding uses for their excess cash.
It’s become increasingly crucial to understand where you have excess cash and integrate those balances into your information reporting dashboards. You should also examine your hedging strategies as there’s been a substantial amount of fluctuation across European currencies in the past year.
Disputes- choice of law and forum
Choice of law is a significant aspect of the agreement you are negotiating. English law, for instance, tends to give a more literal interpretation of the exact words used, while specific other jurisdictions give more weight to contractual common sense. Other notions that differ across jurisdictions include the extent to which parties will be subject to duties of good faith, and whether certain contractual remedies will be deemed to be ‘penalties’ and thus unenforceable.
Depending on the jurisdiction, other clauses will be imposed on the contract by statute, for instance in relation to consumer protection or personal injury.
You may thus want to apply a specific jurisdiction’s law depending on various factors such as the location of the other parties, the supply of services or delivery of goods, or laws that are more applicable to your business.
For cross-border contracts, you might also want to consider whether international arbitration might be desirable to litigation as a forum for conflict resolution.
Banking Structure
European banks are more dependent on short-term borrowing to fund their capital needs than other banks.
Deposits and borrowing are the two primary sources of funds for banks, where there is competition for deposits then banks need to depend on borrowing. Thus, many European banks have high loan-to-deposit ratios.
Several of the regulatory actions may result in stifling growth in some European countries and reduce lending by some banks. This is a matter to monitor in terms of determining where to operate and focus your resources in Europe.
Regulatory changes
Comprehending the regulatory environment applicable to your business is a critical consideration.
There are numerous regulatory changes to be aware of when doing business in Europe, including the following.
- Ringfencing in the U.K.
This infers the structural divergence of the retail and commercial deposit-taking side of the banks from the unpredictable activities that may be undertaken by that institution.
In order to adapt to the ringfencing rules, some banks and other depository institutions may have to reorganize their structure and possibly some of their banking functions.
- General Data Protection Regulation (GDPR).
All banks and businesses operating in the EU will have to comply with new rules surrounding data security.
Article 3 of the GDPR asserts that if you collect private data or behavioral information from someone in an EU country, your company is subject to the requirements of the GDPR.
The financial transaction doesn’t have to take place for the extensive scope of the law to kick in. If the organization only collects personal data as part of marketing analysis, then the data would have to be protected by GDPR requirements.
Enforcement of the new GDPR rules is important to ensure that you and your banking partners are in compliance.
Employment
Generally, employment law in the EU is less employer-friendly in the EU than in some countries, with termination-at-will clauses not usually permitted and collective bargaining agreements common in some countries.
Figure out the regulations set by EU law on the terms of employment for staff, changes to work contracts, and on notifying and consulting staff.
Immigration
Business immigration is a vital topic in the EU as numerous companies are accepting employees from other EU or third-party countries. You should consider what the choices are for the workers you would like to send to the EU and clarify the strategy and kind of backing you want to provide to your staff and their families.
IP registrations
Make certain that you register your IP in overseas jurisdictions and review your IP portfolio to guarantee it is up-to-date with registrations and expiration dates.
While trademarks, designs, and patents are safeguarded through registration at the local and EU level, remember that the duration of each right is unique and that their use or licensing may be prohibited by specific Member State legislation. Furthermore, review your current license agreements.
Financial Services and Passporting
As a financial services company doing business in the EU, the passporting system facilitates utilizing a regulatory license from one EU country across the entire EU. When you obtained your financial services licenses with one of the national regulators, no more license is needed to offer the same services in other EU countries, eradicating the burden and costs of extra regulatory approvals in other EU countries.
Despite the positive outlook of the E.U region, careful strategic planning is still an inevitable process that must be completed just like for any other market entry
Contact your Damalion expert now to register your company in Europe and to start doing business in Europe. Doing business in Luxembourg should be great start.
