Will they, won’t they? Will the Biden victory ensure a deal or are we too far apart on fisheries?
We are now around 7 weeks from the UK’s departure from the transitional period during which EU law continues to apply here. If you take into account that an extended Christmas break swallows up the last 10 days or so, we are 6 weeks away. If you count in lockdown and the difficulties of getting things done as efficiently as usual, the urgency grows.
The kind of actions which all solicitors should consider post-transition fall into two distinct categories: practice management and substantive law. I will not deal with substantive law, because that depends so much on area of practice. But the practice management issues affect many more law firms, and will require systems to be prepared in advance.
Of course, there is no deal yet, meaning definitive advice still cannot be given, because the eventual deal may contain something affecting a particular field. Your view on whether the delay is sensible will depend on your view of Brexit and the EU. Nevertheless, the government has issued advice to businesses, urging them to prepare. ‘Check, Change, Go’ are the three words governing our behaviour for this particular emergency.
The Law Society has issued excellent advice on the end of the transition, added to and refined as the days pass and more is known.
Within practice management, the main changes flow from the fact that the UK will definitively become a third country for the purpose of EU law.
Data protection is the first concern, since it is likely that many law firms will either send data to, or receive data from, the EU.
Much will depend on whether the European Commission makes an adequacy decision in favour of the UK. If it does, there will be no problem about data flows. If it does not – or, more likely, does not do so to take effect from 1 January 2021 – then solicitors will need to ensure that they institute one of the GDPR’s safeguards as from the beginning of next year, namely binding corporate rules, standard contractual clauses, or certification and codes of conduct. The guidance takes you through each of these options. Be prepared: it is likely to be complicated.
The second practice management area to affect law firm systems is VAT. Again, the Law Society has advice.
If there is nothing about VAT in the deal, the VAT treatment of business to consumer supplies by UK lawyers to EU clients – or indeed EEA clients - will change (not including land transactions). These will move outside of the scope of VAT rather than being subject to full VAT. Obviously, law firms should adjust their client billing systems when invoicing individual clients, subject to the detail of the final agreement.
There should be no change to business to business (non-land related) supplies by UK lawyers to EEA clients, which will remain outside the scope of UK VAT.
The third area of practice management relates to law firms’ policies and procedures under anti money laundering legislation. Here the changes should be mostly technical, without affecting substantive issues.
The fight against money laundering is one of the areas which crept into last year’s political declaration, in which the EU and UK agreed to continue to cooperate:
‘The Parties agree to support international efforts to prevent and fight against money laundering and terrorist financing, particularly through compliance with Financial Action Task Force (FATF) standards and associated cooperation. The Parties agree to go beyond the FATF standards with regard to beneficial ownership transparency and ending the anonymity associated with the use of virtual currencies’.
The main problem again is that the UK will definitively become a third country from an EU perspective, and the EU member states will become third countries from the UK’s. In substance, that should not mean much, because third countries which have similar regimes are treated in a similar way by both the UK and EU regimes. But firms should still review their written procedures to keep them up to date.
The Law Society has a string of guides on other practice issues:
Much of the guidance is aimed at solicitors operating in England and Wales. For those in an EU member state whose issues are not covered above, the Law Society’s international department has excellent advice available.
So, the Law Society has tried to warn us. Now we must ‘Check, Change, Go’.
Jonathan Goldsmith is Law Society Council member for EU matters and a former secretary general of the Council of Bars and Law Societies of Europe. All views expressed are personal and are not made in his capacity as a Law Society Council member nor on behalf of the Law Society