Brexit: Negotiating another partnership dispute

After 44 years in partnership with the EU, we have done what is regarded by it and the people of Europe as unthinkable and unacceptable – we have, in effect, told our partners that we do not share their culture and that we no longer want to be in business with them.

Anyone experienced in partnership exits will be unsurprised at the anger that this has engendered. A number of EU members have made it clear they want the UK to suffer for what it has done. None of the continuing members will want to see the UK doing better than them post departure.

Partnership exits can be particularly problematic where the departing partner is a longstanding, full equity partner. It doesn’t help if they are setting up in competition – and with the UK looking to develop other markets, that is exactly what is happening.

The UK is a long-serving member of the union and has been one of its key figures for over four decades. So its departure will be unwelcome and may have the potential to weaken the remaining EU countries. The UK has often been regarded as less than fully committed to its partners. Its failure to participate in the European Economic and Monetary Union is a case in point and has created significant tension. By voting to leave, we have now exposed the full extent of our adverse attitude to the EU.

All of this has resulted in a wave of hostility. Worse still, Theresa May has now suggested that if the EU tries to treat us harshly, we are in a position to make life difficult for it, too. We can all see what the prime minister is getting at – those in business together often have the power to hurt one another when they separate – but in any partnership dispute, including difficult partnership exits, the priority is to work out as soon as possible what is in the best financial interests of the parties.

Expressing anger, while a natural reaction, usually has little or nothing to do with what is best for the parties in the long term. From the perspective of running a business (and on an economic basis, the EU and the UK can both be regarded as ‘businesses’), the right question to ask is: ‘How can I manage the separation so that the negative impact on my business is minimised?’Advice that might be given to the EU and the UK (and indeed any partners dealing with an exit) includes the following:

• Show respect, even if you don’t want to, and even (dare it be said) if it’s insincere. Don’t ramp up the pressure by making it personal. Take the moral high ground;

• Stand by your pre-existing commitments;

• Make sure that those involved in the negotiations have the necessary mandate (pay attention, UK) and experience to make the judgments and decisions required of them;

• Consider involving an experienced but neutral third party, who can remind the parties, if necessary, that they need to concentrate on the substantive, rather than emotional, issues;

• Try to identify areas where you can continue to be of assistance to each other, even if you are no longer bound together in the same way. Self-interest is a powerful tool in achieving compromise;

• Be prepared to give ground where you can and the cost is acceptable. A soft answer can turn away wrath. There will be issues where you will have to put your foot down, but think about what you can concede that doesn’t cost the world and may facilitate cooperation in the negotiating process. If you are not prepared to act reasonably, be prepared to look as though you are trying to act reasonably; and finally

• Don’t be cowed. The prime minister was right when she said that ‘no deal is better than a bad deal’. It may not be wise to repeat too often the argument that we can hurt the EU if it tries to hurt us, but the point has been made and will be obvious to anyone who understands economics. So, if all that is on offer is a bad deal, don’t be scared to walk away from the negotiating table – never be hostage to a negotiating process. You may find that you are soon invited back and that the intractable position of the other party has softened. If not, you will be better off than if you had accepted a one-sided proposal.

Andrew Cromby is a partner at Bracher Rawlins and specialises in partnership and LLP disputes