The Brexit decision will mean a bonanza for many law firms, according to early reports of the UK decision to exit the EU, but longer-term the prospects could be tough for London’s law firm role in international law.
Many law firms in London had set up hotlines to advise concerned clients about the implications of the decision, including Clifford Chance, Simmons & Simmons, Freshfields and Dechert. The implications, of course, are many and varied and include tax, regulatory, immigration, IP and commercial law issues.
Some law firms have said that the decision could seriously affect London’s position as a major center for the law profession and the law marketing efforts made by firms in the wake of Brexit are themselves contradictory – some seeing a long-term bonanza and others a short-term one, followed by a lessening in business for the lawyers in London.
London has long been a major center of legal work with most of the world’s biggest law firms with presence in the City beyond just the Magic Circle firms, with many US law firms and Asian practices establishing a presence in the City.
Reuters report New York partner of Herbert Smith Freehills saying Brexit will create an initial flurry of activity, but that there were few, clear answers.
“We’re in a black hole,” he told Reuters, noting the U.K. had adopted EU law in a host of areas, including public health, transport, competition, intellectual property and human rights. With Brexit, those laws will become “blank sheets of paper,” and Parliament now faces the monumental task of passing new laws before Britain leaves the EU.
Leathley said he thinks that will take years, possibly far longer than the two years envisioned for withdrawal under the EU treaty.
Short Term Effect
In the short term, lawyers have warned that clients may pull out of some existing contracts or property transactions which have built-in Brexit clauses.
Guy Lougher, a London-based partner and head of the Brexit advisory team at law firm Pinsent Masons, said: “This is a huge change. Clients need to systematically look at every aspect of their commercial operations and the legal and financial risks they face after Brexit.
“Some corporate and commercial property deals have Brexit clauses in place and people have delayed signing them until today. Some of those deals are now not likely to happen. Other areas of law such as cross border acquisitions may see a reduction in work. ” he said.
The main certainty is uncertainty. Although there might be some contract cancellations or termination on the basis of the Brexit decision, it is difficult to know exactly what the extent of any decision will be.
Some clients may seek to terminate on the basis that the European concept no longer applies, but whatever the results, the legal implications of the decision is fundamentally and significantly altered.
Unpicking UK law and establishing new conditions and contract clauses is something that will fundamentally alter the way in which commercial decisions are made.
Many trading laws under the EU have been included in UK law by way of the 1972 European Communities Act, which may now need to be repealed. A great deal of EU domestic law will need to now become UK law.
Constitutional “Mayhem” Ahead?
The FT reports that there could be “constitutional mayhem” as the UK law that incorporates the EU laws is incorporated into the devolution statutes in Scotland, Wales and Northern Ireland.
To complicate matters further, some areas of law such as environmental law now fall within the powers of the devolved governments in Scotland and Wales so the UK could potentially end up with four possible replacements of one EU law.
Some areas of UK law are more harmonized with the EU — such as intellectual property law where the majority of registered trade marks and designs that take effect in the UK are in fact EU registrations.
LegalWeek reiterated the fact that there may be short term benefits, but longer term trouble.
Short term, law firms will need to adjust, recalibrate and respond to fast-moving events that affect their clients. Medium term, those with a network of European offices will need to carefully evaluate their viability according to changing circumstances as Britain’s relationship with Europe is completely redefined. Long term, more UK firms may seek US suitors or vice versa for defensive mergers.
The increasing competition between US law firms and major UK practices could see an end to the US expansion to the City as the short term advisory work leads ultimately to less commercial, M&A and other work coming from London.
It may well be that the longer-term problem leads to redundancies and layoffs in the London law market. Time will tell.
Source: LawFuel / Reuters / Financial Times