MPs warn of “devastating impact” on law firms of no-deal Brexit

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ECJ: Threat to UK firms’ work before court

A ‘no deal’ Brexit would be “devastating” to the legal services sector, “and should be avoided at all costs”, MPs have told the government.

They stressed the importance of UK lawyers being able to practise freely across the EU, and firms being able to recruit from the union too, as well as the need for legal certainty through the withdrawal process.

The comments came in a report published by the All-Party Parliamentary Group (APPG) on Legal and Constitutional Affairs, chaired by former justice minister Jonathan Djanogly MP and one-time cabinet minister Lord Hunt of Wirral – both Conservative solicitors. Labour’s Bambos Charalambous MP and Ellie Reeves MP are both officers of the group.

The report stressed how the UK legal services sector – and by extension the UK economy – has benefited from the mutual recognition of professional qualifications, rights of audience and the ability to practise and establish firms in EU member states, and from the ability to attract talent from across the globe, and the right to work in the European Union.

It was crucial that this access and labour mobility were maintained as much as possible after Brexit, the MPs said.

“If there is no alternative or transitional arrangements agreed as part of the Brexit negotiations, the UK is likely to fall back on WTO arrangements under trade in legal services,” the report explained.

“This would involve 31 different legal regimes, depending on each EU and EFTA member state, many of which impose a number of restrictions and limit practice rights for third country lawyers and law firms.” UK lawyers would also immediately lose the right to represent clients before EU courts and bodies, such as the EU Intellectual Property Office.

Further, clients would no longer automatically be covered by legal professional privilege or client-lawyer confidentiality in European Commission investigations and at the level of the European Court of Justice.

“This outcome would undermine legal certainty, increase legal costs and create confusion for clients who are in the process of taking cases through the national or EU courts, as they may not be able to rely on their legal teams to work on an ongoing case.

The report cited the evidence of commercial law firm Laytons, for which Brexit would have “a severely negative effect… leading to the termination of instructions, and the loss of numerous clients to firms within the EU27 jurisdictions.

“They will no longer be able to represent their clients at the EUIPO, in other EU states under the Lawyers Services Directive, before the Court of Justice of the European Union, on competition law where issues of EU legal professional privilege are relevant to effective practice, and in the EU using [its] membership of a European Economic Interest Grouping [it is part of the Libralex network of law firms].

“Businesses are more likely to select an alternative jurisdiction and governing law in contracts which in the medium term may lead to a downturn in the use of the civil and commercial courts in the UK, and thus a reduction in the dispute resolution work.”

The APPG noted that some 1,600 English and Welsh solicitors have qualified also in the Republic of Ireland in the last two years to get around Brexit, but was told by both the Bar Council and Clifford Chance that “it is not unanimously agreed that this will work as an effective bypass”.

The Chartered Institute of Trade Mark Attorneys told the APPG that a number of larger UK trade mark attorney firms have established offices in other EU countries since the referendum.

However, many smaller and independent firms did not have the resources to do the same, “and so are caught between being able to make arrangements to continue their clients work and potentially being forced to give up that work dependent on the outcome of Brexit negotiations”.

The APPG made 10 recommendations:

1. The government should ensure that mutual market access is retained, as currently envisaged, in any transitional arrangements
2. We urge the government to seek to retain mugtual market access as far as possible in any future relationship with the European Union.
3. The government should ensure that UK lawyers are able to continue to serve their clients post-Brexit on a fly-in fly-out basis.
4. The government should ensure that any future relationship with the EU includes a mechanism for UK lawyers to practise EU law via the mutual recognition of professional qualifications and law firm structures.
5. The government should seek to secure rights of audience in EU courts such as the CJEU and the EUIPO.
6. It is vital that following Brexit, the government provides for the ability of the legal sector to easily recruit skilled individuals from outside the UK.
7. The government should ensure that our immigration system does not block lawyers from continuing to provide services in the EU.
8. The government and the EU should agree on the draft withdrawal agreement as soon as possible to ensure a transition period which provides legal certainty.
9. Any transitional agreement should replicate the current legal framework as far as possible to ensure legal certainty and prevent businesses and individuals from having to adapt to changes in their rights and obligations twice – once during a transitional phase and once upon implementation of a new UK-EU agreement.
10. A ‘no deal’ scenario should be avoided at all costs.

A government technical note earlier this month spelt out some of the consequences of a no-deal Brexit on European lawyers in the UK.