Brexit clock is ticking.
A recent survey by Thomson Reuters suggests uncertainty over the Brexit process and its outcome is having a profound effect on our clients.
The survey suggests clients are turning away from English and Welsh law and from this jurisdiction as a jurisdiction of choice.
This is clearly concerning, since one of the hallmarks of the Law Society’s work on Brexit is to maintain England and Wales as a global legal centre. Not a moment to push the panic button – but perhaps indicative of the need to conclude swiftly on the final picture for the transition period and the scenario thereafter.
The problems of uncertainty are recognised by the government. Justice minister Lucy Frazer MP acknowledged them in recent evidence to the Justice Sub-Committee of the Lords’ EU Select Committee, countering ‘… but we are working towards getting that resolved as soon as possible’.
To that end, on 12 July the government published a long-awaited white paper setting out its broad prescription for post-Brexit Britain. Like many others, lawyers are seeking a smooth transition. But the reality is that for many in the profession, the law and its practice will be significantly different.
Some of these changes can be perceived by examining the European Union (Withdrawal) Act 2018, which received royal assent at the end of June. James Segan of Blackstone Chambers has examined 10 of the significant changes rendered by the new statute. His piece can be found at tinyurl.com/yb9fd57f and it is a sobering read.
On civil judicial cooperation, paragraphs 145-147 of the white paper confirm the long-stated aim to join the Lugano Convention, but suggest a bilateral agreement which might be a form of ‘Lugano plus plus’. This proposal has some endorsement in the European Council Guidelines. Subject to the political uncertainty that surrounds the white paper itself, this all sounds positive and is an aspiration that the profession widely applauds. Moreover, it is rooted in a wider desire to achieve general civil and judicial cooperation between the UK and the EU (subject, of course, to the red line through the continuing binding influence of the Court of Justice of the European Union).
This aspiration is one of the foundation stones of the UK’s status as a global legal centre – the ability to enforce judgments of the UK courts freely.
There is less good news for the profession in relation to the export of legal services and continuing rights of establishment in the EU. The white paper starts off on the right foot, seeking mutual recognition of qualifications and suggesting this will provide the freedom to deliver services across the UK and EU. Unfortunately, this needs much more support in the white paper and yet this is absent. The problem lies in the general proposals for services, which fall well short of what professional services providers and many of their clients need in order to maintain (as far as possible) the status quo.
Free trade with a ‘common rulebook’ in manufactured goods is ‘at the core of the UK’s proposals’. This is, of course, to be welcomed – but the same concept is not transposed into services. The white paper makes it clear that in services ‘the UK and the EU will not have current levels of access to each other’s markets’.
For professional services providers, including the legal profession, this is disappointing and surprising. The white paper freely admits that the UK is a service economy, with legal services exports accounting for some £4bn of UK exports. Freedom in trade in services is one of the four core freedoms promoted by the EU and, moreover, it is often difficult to divide the export of goods from the export of accompanying services.
On mutual recognition of qualifications, the government foresees that joint practice between UK and EU lawyers will continue, but this is only part of the picture. The profession has advocated for itself and its clients throughout the Brexit process that the arrangement in services should reflect that of the arrangement for goods – that is, an extensive free trade agreement (reflecting closely a customs union) specifically aimed at services with a continuing right to establish within the EU. The white paper falls short of this.
One practical effect will be that UK lawyers will have to come to individual arrangements throughout the EU to be able to practise in an EU country. Moreover, UK lawyers will not have the right to plead in the European Court of Justice, despite its substantial continuing influence in UK law.
For City law firms, which are at the heart of the export trade, there is a potential double-whammy, because their financial services clients are also disappointed with the white paper proposals. The City has pressed for an equivalent to the current system of mutual recognition that underlies the passporting of financial services throughout the EU. They have railed against an ‘equivalence’ standard, because this allows the EU to set the rules from time to time and thereby lacks certainty.
The white paper has proceeded down the ‘equivalence’ route – albeit an enhanced one – which has been criticised by TheCityUK and the City of London Corporation. The EU’s chief negotiator, Michel Barnier, has already suggested the EU will not agree to enhancements.
The white paper provides an aspirational route for Brexit but unfortunately the political reaction to it has already undermined the certainty it sought to provide. As litigators, we are familiar with the negotiating process and last-minute shifts in position to do a deal. The oft-repeated catchphrase ‘the clock is ticking’ does not necessarily disturb the experienced litigator and negotiator.
It would be wrong, however, to liken these momentous events to our day-to-day work. The sooner we can secure the certainty of knowing what the world might look like after Brexit, the better.
David Greene is senior partner, and head of litigation and group action litigation at Edwin Coe. He is a committee member of the London Solicitors Litigation Association and deputy vice-president of the Law Society