Berlin, Germany (Weltexpress). During gamescom in Cologne in August, the booming games industry attracted a record number of visitors and it was apparently business as usual. However, behind the scenes – at the parties and evening get-togethers that represent the essential networking driving this industry – there was much discussion around Brexit, most of it around as-yet unanswered questions.
I had the opportunity to talk to Jas Purewal of Purewal & Partners, a London-based British digital entertainment lawyer, about Brexit and the apparent absence of any concrete plans within or on behalf of the creative industries to deal with the consequences of not having a properly structured deal in place. What he had to say in our interview was unsettling.
SUSAN: Jas, could you explain some of the questions that remain unanswered for the digital industries in the event of a ‘hard’ or ‘no-deal’ Brexit?
JAS: Depending upon what flavour of Brexit it’s going to be – ‘soft’ Brexit, ‘hard’ Brexit or ‘no-deal’ Brexit but especially ‘hard’ and ‘no-deal’ Brexit – will we still have data adequacy recognition? Which means, on what legal basis can we actually share data with EU countries? It’s not sure at all what consumer rights are still going to apply. The EU is very clear that EU consumer protection law will still apply to EU citizens regardless of Brexit, but the inverse will not apply to British citizens going forward. So British citizens will most likely no longer over time have access to EU consumer rights. For example, that covers things like mobile roaming, so we can expect – on any kind of ‘hard’ or no-deal Brexit – that the old-school system of having to pay inordinate amounts of money in order to use your mobile phone in the European Union will suddenly reappear because we will no longer have access to the practical arrangements of how to do it, or the legal arrangement to do it.
SUSAN: What about VAT laws and the reverse charge system?
JAS: So, if we crash out of the customs and VAT system, then that means that for a start, digital products and physical products – electronics – all need to start having tariffs applied to them. Now, these tariffs aren’t huge, they can vary from 1 to 5% to 10% – but they do exist. And of equal concern is the VAT system. So, if we crash out of the reverse charge system, which in very simple terms means that the person that pays the VAT is the actual consumer – if that burden is now shifted to the business when it’s importing from the EU into the UK that means that those businesses will suffer a significant hit – and we don’t know how much – maybe as high as 5% to 20% over time. They will have to pass that on to the customer and it’s not clear what on earth that’s going to do. But it’s entirely possible in the short to medium term that prices will go up quite substantially across a whole variety of different products.
This is completely separate to the wider Brexit problems about can we actually bring [those products] in because of all the problems regarding transport and so on. But once they are in the UK, we have to assume that the combination of tariff charges, currency depreciation, crashing out of the VAT system will apply immense pressure over time to raise prices. We’ve seen this before – to give a simple example: there’s pricing parity on electronic and games products between the US and UK across a variety of different areas. But the publishers simply said 49 dollars is now 49 pounds. Even though it’s not.
SUSAN: So, what is the conversation around these topics at this point?
JAS: Well, it’s easy to dismiss all of these things by saying, “Oh, it’ll be fine, it’ll be fine!” – but it won’t necessarily be fine because we’re not thinking about this. And in my industry, the video games industry, from the informal soundings I’ve taken, few or none of the publishers, the distributors, the platforms have any contingency planning as to how this is going to work – at least none that has been communicated even if it exists. I honestly have no idea on what basis the Apple store is going to work after Brexit – but I hope that Apple do. So, it throws a great big, grey curtain over the whole of the digital and creative industries.
SUSAN: That’s a sweeping statement – do you include all the creative industries?
JAS: I’ve read every single one of the papers from Tech UK, from UKIE, from the industry associations in film, TV, publishing, theatre, art, fashion – so far and with the exception of UKIE in several areas, few or none of them have stated any kind of recent and clear position on all of these issues. The DCMS [Department for Digital, Culture, Media & Sport] has stated no clear position on any of these things.
SUSAN: What about accessibility to games and services? Will consumers in the UK still be able to play their favourite games?
JAS: We can give several admittedly provocative but clear examples. Will you still be able to play an online game like Minecraft or Fortnite – which is hosted outside of the UK – post-Brexit? How much will games cost? How long will it take to get a console in? Will you still have access to Netflix? And will it be the same Netflix in the UK as it is in Germany or Spain or France? Will you still have Amazon Prime? From a legal but also a practical perspective, if the warehouses are held outside of the UK and the warehouses that Amazon has in the UK are the “last mile” so to speak – or almost the last mile – will that still work?
All the airy fairy discussions about customs and services are not actually being applied to the real services the customers and businesses use. And it’s not about fearing that suddenly the world will fall over and we’ll be in the stone age the day after Brexit – the point is, there is real, considerable uncertainty and, in the event of a ‘hard’ or ‘no-deal’ Brexit, even the likelihood of massive disruption to all these services.
SUSAN: What about the Country of Origin principle? Can you explain what this is and how likely it is to be affected?
JAS: In the TV world right now, they’re freaking out about the country of origin principle. EU law says that if a TV or any kind of broadcasting company is based in one member state, when it broadcasts to the rest of the EU it only has to apply the rules from its state of origin – hence the ‘country of origin’ law. Now, what that means in very simple terms is that ITV and BBC don’t need to worry about e.g. German broadcasting rules as long as they follow all the niceties. And as a result, a huge majority of TV production companies and broadcasters use the UK as a regulatory base. But the one thing that TV law has been pretty consistent about is saying this does pose a problem, but there’s no solution. And it’s not even on the agenda! As far as I can tell, the Chequers Brexit paper said not a single word about the creative industries of any substance at all.
SUSAN: So, in your opinion, what should be done?
JAS: Well, for anyone who remotely cares, the time to wring your hands and argue the debate is past. There are three months to have any kind of tangible impact on Brexit and maybe even less. Within a given period of time, the Commission is going to say, “So that’s the deal – go for it.” There is a point beyond which there is not enough time to do a deal, because any deal has to be ratified by the member states, and in some countries, like in Belgium, that even has to go to below the Federal level. So, at some point the Commission will say, right, you’re out of time. At that point, Theresa May has got to put that Brexit deal to parliament. If Labour vote against it, which we assume that they will, and if she has enough rebels either on the Brexit side or the Remain side – and these are ifs – then that Brexit deal, as wonderful or as bad as it may be, doesn’t pass parliament. She then has three options: she can either ask the Commission for another deal – which isn’t going to happen; she can call a general Election and take the risk, the same as she took last time, and we’ll see how that works out; or she can try and get herself out of this hole by saying “people’s vote”. And there are huge problems with that as well. But if one is a hard-core Remainer – and I personally am – the first option, a new deal, even if the Commission offered it, we don’t want it. It’s either getting Labour to change its opinion in a General Election, which will quite effectively be a volte face of their established, stated policy – OR you outsource it to the people.
SUSAN: Well, we have to hope that there is behind-the-scenes discussion going on that will lead towards agreement on at least some of the points you have mentioned.
JAS: I will talk with anyone – at all – about this. And we have to be as direct and bluntly provocative as we can, because frankly, I don’t think our country’s got time to mess around.
SUSAN: Thank you, Jas. I look forward to getting back to you in November for an update!