Law firms whose bottom line may be affected by Brexit must have a ‘plan B’ to reassure regulators they are preparing for the fallout.
That was one of the Law Society’s key messages at its sold-out annual Risk & Compliance conference, which took place in London's Victoria.
Christina Blacklaws, deputy vice-president, stressed that the SRA’s current guidance on leaving the EU can be summarised as ‘keep calm and carry on’. But she warned that the regulator’s ‘risk-based’ regime means it expects solicitors and firms to ‘be dynamic and react to external influences’.
She added: ‘The most immediate impact must be in terms of the economy and the implications that currency fluctuations, interest rates and similar considerations will have on business. Is this a financial viability concern? If it is, the SRA expects you to have factored this into your business planning and forecasting, and be considering a Plan B to survive any fallout.’
Consequences for law firms could also include a property bust – or even boom – affecting conveyancing; and a ‘dramatic change’ in client numbers for firms dependent on overseas business, she said. Some 1,349 PC holders have their main practising office in another EU country.
Blacklaws went to stress that ‘nothing has changed’ on forthcoming regulatory changes emanating from the EU, such as data protection and anti-money laundering directives. ‘All firms need to understand what these forthcoming requirements are and how they need to adapt their compliance processes to accommodate them,’ she said.
On practice rights, Blacklaws warned that anything less than full access to the single market will not provide the same level of access for legal firms. In the event of a hard Brexit with no transitional deal, the UK is likely to fall back on World Trade Organisation arrangements which entail over 30 different regimes depending on the EU or EFTA country involved.
Many of these impose ’a great number of restrictions and limit practice rights for third-country lawyers and law firms’, Blacklaws said.
Mutual access for lawyers to practise cross-border is among the Brexit priorities identified by Chancery Lane. Blacklaws stressed that following lobbying by Chancery Lane, the Brexit White Paper, which will soon be incorporated in the Great Repeal Bill, includes measures to maintain mutual recognition and enforcement of civil judgments, and collaboration on policing and criminal justice.