How Brexit could affect suppliers

When Prime Minister David Cameron announced his commitment to holding a referendum on Britain’s membership of the European Union, many thought it was simply a bone thrown in the direction of a small but boisterous section of his party, and that the result would never be in doubt.

Fast forward to the present day and opinion polls put the result of June’s vote on a knife-edge. Though often discarded as unreliable, online polls have returned pro-Brexit results consistently over the past few months. Even the much vaunted phone polls have started to show what was once a 15-point lead for Remain narrowing to single digits.

With just days to go until the British electorate delivers its verdict on the EU, it’s important that British suppliers in the betting and gaming industry are prepared for the uncertainty a vote to leave the EU could bring in a few key areas.

Broadcasting

EU law liberalised the broadcasting sector by allowing any broadcaster that was properly licensed in one member state to distribute its broadcasts freely throughout the EU. This liberalisation was essentially the application of the treaty freedom to provide services applied to the broadcasting sector. SIS’s Ofcom licences effectively amount to an EU broadcasting passport.

The effect of a Brexit would be that after a transitional period, UK broadcasters would lose this right. Put another way, UK broadcasters would have no legal means of challenge if a member state were to prohibit or impose conditions upon the reception of the UK broadcast.

Any statement about the effect of a Brexit is subject to the caveat that access to the EU could be maintained if the British government is able to negotiate suitable successor arrangements, but it is not clear what the terms of such arrangements would be or how long it would take before they come into effect.

The EU treaty allows a period of two years for exit terms to be negotiated, but since these provisions have never been applied no-one really knows how they will work or indeed whether two years will be sufficient. Until successor arrangements are negotiated, however, there will be a new degree of uncertainty about any contracts for the supply of broadcast content into the EU.

Existing contracts for the supply of content to customers in the EU could be terminated for force majeure if the recipient member state blocks or imposes conditions on access. New contracts would need to include break clauses to allow the contract to be terminated or renegotiated if the underlying right to provide the service is terminated or modified. Similar considerations would apply to contracts with rights holders where the media rights being acquired are for distribution in the EU.

Betting-related services

Betting is currently not governed at EU level, and its regulation is a matter for each member state. At present the broadcasting ‘passport’ prevents member states from blocking reception of services of the kind SIS provide, however keen they might be to regulate betting activities in their own territories.

Currently, UK betting operators enjoy the treaty freedom to provide services in other member states. The Remote Gambling Association in particular has been remarkably successful in using EU law and the EU institutions to challenge attempts by certain member states to close their markets to UK operators. A Brexit would reverse those gains unless and until successor arrangements were negotiated.

Since betting is not seen as a strategic industry for the UK (unlike, say, financial services, life sciences, automotive and aero engineering, or the creative industries) it is an open question as to what kind of priority a post-Brexit government would give to securing the betting industry’s access to EU markets.

Intellectual Property

The third area of uncertainty is in relation to IP rights. Currently IP protection for databases and content distributed online originates from EU directives which have been transposed into English law. These laws underpin the digital economy and protect digital and streaming operations.

No-one yet seems to know what the effect of Brexit would be on these rights. If we assume that the digital economy IP rights are preserved or re-enacted for the UK, there still remains the question of how those IP rights would be protected in the EU. That in turn, is likely either to involve a trade deal or an amendment to the international treaties that cover the cross-border protection of IP rights.

Labour

Finally, a Brexit might pose a challenge in terms of the supply of skills. If British companies are no longer able to employ EU nationals, unless British labour markets are opened up to nationals of other territories, suppliers may find that they are having to recruit from a smaller talent pool with higher salaries a potential result.

Conclusion

There is no hint from the Leave campaign on how access rights to the EU would be negotiated, whether on a sectoral basis (e.g. broadcasting, motor vehicles, energy) or as a complete market access package along the lines of international market access agreements.

Typically, such agreements take years to negotiate. An aggravating factor is that since all external trade arrangements have been coordinated through the EU for the last 40 years or so, there is currently no expertise in the British government as to how these things are done. All these factors suggest that there could be many years of uncertainty.

In summary, there is little to no clarity about what happens on the day after a potential British vote to leave the EU. Undoubtedly, British suppliers to the betting and gaming industry will have already felt the business impact this uncertainty about the future has brought upon their businesses. Negotiations with continental-based entities will have surely been put on hold until the result of the vote on 23 June is known.

At SIS we have put significant effort into planning for a possible Brexit to ensure that no matter how disruptive a vote to leave could be on the industry, we’re well positioned as a business. Though a vote to remain a member of the EU appears most likely at this stage, it’s essential for British-based suppliers to the betting and gaming industry to plan for all eventualities.

NB: The views expressed in this article are personal to the writer