Brexit And The Legal Sector

Will the UK retain its status as having an efficient and stable

judicial system post Brexit is the million-dollar question...

Law Society's priorities following Brexit

With Prime Minister Theresa May triggering Article 50

on March 29, 2017, preparations are underway for the

UK to leave the European Union (EU) in a year's time.

England and Wales is recognized as a global legal center

for providing world-class legal services, particularly for

international, commercial transactions, dispute resolution,

and arbitration. The Law Society outlined that in 2015,

more than 22,000 commercial and civil disputes were

resolved through arbitration, mediation, and adjudication

in the UK. With the UK's exit from the EU looming, the Law

Society has identified the following key priorities which it

is currently working on:

• Continued mutual access for solicitors to practice law

  and base themselves in the UK and EU Member States.

• Ensure that UK-based lawyers have access to EU courts,

  institutions, and the Unified Patent Court (for when it opens) and for their clients to have legal professional

  privilege.

• Continued mutual recognition and enforcement of

  judgments and respect for choice of jurisdiction clauses

  in the UK and EU.

• Maintain collaboration in policing, security, and

  criminal justice.

• Ensure that legal certainty is maintained throughout

  the process of withdrawal, including the transitional

  period.

• Ensure that the government works effectively with the

  legal services sector to continue to promote England and

  Wales as the governing law of contracts, jurisdiction of

  choice, and London as the preferred seat of arbitration.

What will happen to English arbitration?

While the long-term impact of Brexit on international

arbitration is unknown at present, the general consensus is

that there will not be much impact at least in the short term.

This consensus is justified as currently, London's unrivaled

status as the leading arbitration seat is due to English law

and the confidence that the parties have in the English legal

system. Parties decide to resolve international disputes

through arbitration in London as English arbitration is

known for its effectiveness, efficiency, and impartiality.

UK-based law firm Beale & Company highlights a number

of reasons which shed light on why English arbitration is

preferred by many. For instance:

• Unlike many arbitration jurisdictions, English law

  upholds confidentiality, which is one of the reasons

  parties may choose to enter into arbitration in the first

  place.

• English courts also have a reputation to be arbitration

  friendly and uphold the

  independence of the arbitration

  process.

• The Arbitration Act, 1996, main

  legislation governing English

  arbitration, gives arbitration

  tribunals discretion on a wide

  range of matters subject to the

  parties' right to agree on this,

  which encourages English courts

  to support arbitration.

• The English legal system places

  specific importance on the

  parties' freedom of contract

  whilst discouraging speculative

  or punitive damages.

• London has a high rate of

  qualified professionals acting

  as arbitrators, barristers, legal

  counsel, expert witnesses, and

  institutions such as London Court

  of International Arbitration,

  which assures parties that

  their matters will be dealt by

  competent professionals.

Thus, due to the stability and

clarity offered by London-seated

arbitration, the UK's position as leader in international

arbitration is likely to remain largely unaltered post

Brexit. Moreover, the EU has severely curtailed the English

courts' ability to support arbitration and its own jurisdiction

by issuing anti-suit injunctions. The Court of Justice

of the European Union (CJEU) ruled in the West Tankers

case that it was incompatible with the Brussels I

Regulation 'for a court of a Member State to make an

order to restrain a person from commencing or continuing

proceedings before the courts of another Member State on

the ground that such proceedings would be contrary to an

arbitration agreement.' Once the UK exits the EU, the UK

courts may once again be able to issue anti-suit injunctions

which restrain proceedings started in EU Member State

courts, in breach of an arbitration agreement. In this regard,

London's position as an arbitration center may strengthen

and it may even gain an advantage against rival European

counterparts.

Businesses, law firms, and technology

With Brexit bringing in uncertainty, many UK-based

public companies are already acting on contingency plans

around Brexit. As legal advisors, law firms have to help

companies obtain a comprehensive understanding of their

risk environment and outline any risks which may come

into place following the outcome of Brexit negotiations.

This provides an opportunity for external lawyers to work

closely with general counsel to flag any major risks and

work on how to overcome them.

International law firm Pinsent

Masons has identified some

key areas in which boards

would want their legal team's

advice in relation to risks

which may be potentially

associated with Brexit:

• Restrictions on

  transfers of customer data

  between the UK and EU
  

  The UK's exit from the EU

  will transform the way

  personal data is shared

  between the two parties. At

  the moment, the two parties

  share a relationship which is

  based on a deeply integrated

  single legal framework. As

  a Member of the EU, the

  UK is part of the same data

  protection regime as all other

  EEA Member States. Personal

  data can be moved effortlessly

  between all EEA Member

  States securely and under a

  high level of data protection.

  Data flows between the

  UK and the other members

  of the EEA are highly lucrative to economies and societies

  on both sides of the Channel. Personal data can flow

  throughout the EEA under current and incoming EU data

  protection rules. Furthermore, for millions of EU and UK

  citizens and businesses and for billions of individual

  exchanges of personal data currently relying on a

  borderless environment, Brexit may bring a significant and

  potentially disruptive change. It will require a new

  relationship between two legal frameworks based on the

  mutual goal of ensuring a high standard of protection for

  citizens' personal data.

• The impact of customer duties and tariffs applied to EUsupplied

  goods imported into the UK or exported to the

  EU
  

  Iain Jacobs, Managing Partner of The Contract Centre,

  Zurich, outlines that "the biggest practical challenge for

  foreign companies doing business with UK companies will

  be how to protect themselves against the unknown. For

  example, who bears the risk of changes in law such as the

  reintroduction of customs duties and tariffs?" Businesses

  will no doubt be seeking clarity from their lawyers in this

  area.

• Risks related to supply chain disruption
  

  If business suppliers are over-exposed to currency risk or

  price increases as a result of Brexit, it could have a profound

  impact on business. Suppliers may seek to pass increased

  costs, to re-negotiate terms, or may be unable to fulfill their

  obligations. Law firms need to be prepared to offer guidance

  as necessary. For instance, Pinsent Masons offers its clients

  the opportunity to design and deliver an online survey to

  assess risk within their supply chain and to identify where

  intervention is necessary.

• Contractual risk exposure
  

  Pinsent Masons outlines that one of the most daunting

  Brexit challenges is the requirement for businesses to

  review existing contract portfolios and understand their

  risk exposure. In particular, businesses should look into

  issues such as:
  
  

  - Does the contract cite the EU as the governing territory

  and therefore require review?
  
  

  - What do the contracts say about tariffs?
  
  

  - Is there any exposure to currency risk in the existing

  portfolio of contracts?

In other words, are there any elements in the contract which

could make the contract difficult to perform post Brexit?

When advising, lawyers should be able to identify the

specific risks to report to their clients. For instance,

lawyers should be able to advise on realistic timescales

for implementing changes that will protect businesses

against those risks. Dr Lynette Nusbacher, former Head of

the Strategic Horizons Unit in the UK Cabinet Office and

former Lecturer in War Studies at Sandhurst, suggests

that engaging with scenario planning allows businesses

to take control of their future. According to Dr Nusbacher,

structured scenario work will prepare businesses for the

future they are going to have to deal with, not just the

one they would like to deal with. This is an important

statement to consider. Brexit may bring forward

changes which businesses may not be used to. It is important

for lawyers to work closely with businesses and outline

how changes may affect them and what steps businesses

can take to minimize risks. Businesses and law firms

should make use of technologies such as Artificial Intelligence to help achieve this. Some law firms are

already embracing such innovation. For instance, lawyers

at Pinsent Masons are making use of a tool called 'Brexit

Contracting Solution' which helps clients identify risk in

existing contract portfolios, address Brexit risk in future

contracts, and make better informed strategic decisions.

This type of innovation will no doubt be on the rise in the

near future.

Attempts to retain UK's position as the

legal hub

The UK government, in its bid to ensure that the UK's legal

sector is not compromised post Brexit, released a paper in

August 2017 which noted the following points:

• The government will seek to maintain close cross-border

  civil judicial cooperation on a reciprocal basis.

• The government has a clear intention for the UK to

  remain in the Hague Convention.

• The government will enact Rome I and Rome II

  instruments on choice of law and applicable law.

Conservative MP Bob Neill outlined during a parliamentary

debate that there should be no barrier to European lawyers

practicing in the UK and vice-versa. Mr Neill told the

Westminster Hall that "automatic mutual recognition

of legal qualifications gained before and after should

continue." Mr Neill's statements make it clear that the

government, just like the Law Society, is keen to ensure that

the UK appears to remain open to international lawyers

post Brexit, which in turn will help preserve its position as

a global legal hub.

The Law Society is also eager to make the case for continued

practice for host state law (including EU law) under

home state title (including the right to appear in host

state courts), the ease of requalification as a lawyer in

another member state, and of current border crossing

and recognition procedures to UK Government and EU

stakeholders. In its bid to ensure that the UK remains at the

centre of the legal hub, the Law Society has been setting

out priorities to EU stakeholders in the EU Parliament and

Commission and has been holding meetings with European

bars and law societies to emphasize the need for working

together.

It is clear that both the UK government and the governing

legal body appreciate the need for the UK to remain at the

forefront post Brexit. This is not surprising as the UK's

unrivaled status as having an efficient and stable judicial

system gives its legal system an edge. It will be interesting

to see how events unfold once the negotiations come to an

end. Will the UK remain a legal hub post Brexit? That is the

million-dollar question.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.