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Will the UK retain its status as having an efficient and stablejudicial system post Brexit is the million-dollar question...Law Society's priorities following BrexitWith Prime Minister Theresa May triggering Article 50on March 29, 2017, preparations are underway for theUK to leave the European Union (EU) in a year's time.England and Wales is recognized as a global legal centerfor...
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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:
is highly regarded
globally. However,
with Brexit looming,
this may well change.
This article looks into
the potential impact
of Brexit on the UK
legal system and
whether in fact Brexit
will have a detrimental
effect on it
- 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.