Implications of Brexit on attorneys and legal services

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First, a disclaimer: there is a wealth of information on the possible effects of Brexit – too extensive to be comprehensively covered in this article.

So instead, we’ve outlined common concerns in several areas below to give some thought.

What is important to whom?

The UK’s withdrawal from the European Union will affect lawyers in two ways.

The first directly affects the law: changes in legislation that either remove areas of work from the lawyer’s domain, or (most likely) create work for lawyers to explain changes in business and other clients.

Another set of changes will indirectly affect commercial lawyers, as a result of the consequences of Brexit for British business – foreign investment, trade and the entire banking and financial industry. When thinking about the effects Brexit can have in practice or in a law firm, be sure to separate the two types of effect.

What are the main opportunities for the UK after the EU? Three models are tentatively considered that can be followed:

  • Establishing new relationships. Like Norway, which is not a member of the EU, the UK can join the European Economic Area (EEA). The EEA provides members with access to the EU’s single market, even if they are not EU members. Sounds good so far, but non-EU EEA members still have to follow EU rules and registries without being able to voice their opinion when rules are made.
  • Become an analogue of Switzerland. Britain could try to emulate the Swiss model and gain access to the European single market through bilateral treaties without being a member of the EU or EEA. But the Swiss are still building that relationship after seven decades, and it’s hardly an easy path – just think of all the controversy over money hidden in Swiss bank accounts.
  • Full withdrawal from the European Union. He would force Britain to control all of its legislation, but we will see that then it is necessary to establish separate trade agreements with the EU. We could establish a customs union with them (for example with Turkey), rely on the usual rules of the World Trade Organization, or negotiate our own Free Trade Agreement (FTA). The question is whether Britain has enough influence to negotiate lucrative deals with both the EU and the rest of the world.

Legal Changes: Pros and Cons

Much of the legislation governing the UK is related to EU law. And if parts of UK law are no longer limited by EU directives, then the UK parliament could drop EU law and impose its own version.

For example, labor law. Most of the UK labor law comes from European directives. “If the UK leaves Europe entirely, there is room for it to make adjustments to all EU laws, or to keep the parts it wants and get rid of the ones that get in the way,” says Charters Davis, Littleton Chambers.

“However, if it were to join the EEA, there would have been less room for change instead, and it would still have to pass most of the EU laws.”

But Davis doubts there will be a complete overhaul of the law for two reasons: “Many of the employment laws originated from Europe are now ingrained in British culture and business practice.

Therefore, the government would need to be aware of the political sensitivity to making any significant changes. ”

Therefore, areas such as discriminatory rights are likely to be safe, other less popular measures, such as government regulations, can be dangerous.

A second reason why big changes are unlikely to have practical implications, says Davis: “Businesses and people are used to organizing themselves according to existing laws.”

If these changes were to change dramatically and quickly, it could create tremendous uncertainty. However, there is a strong consensus among experts that some of the unpopular areas of EU labor law, such as the Working Hours Directive, can be changed. But there are not likely to be significant changes. ”

“Businesses and people are used to organizing themselves according to existing laws. If these people changed dramatically and quickly, it could create tremendous uncertainty. ”

Whether changes in labor law mean international companies will quickly flee to or from the UK depends on how the new legislation looks.

Davis explains: “Whether someone works in the UK, creating more or less burdens than the same in another country, can influence where businesses want to establish themselves.”

Competition gets a little tricky

UK competition law is closely related to EU law.

The UK has its own competition laws and national competition authority, the Competition and Markets Authority (CMA), but we also enforce the competition provisions of the Treaty on the Functioning of the European Union (TFEU) and the European Commission (EC) Enforce competition rules between states members.

Leaving the EU would give the UK more leeway to develop its own competition laws, which cannot be modeled as closely as it is with TFEU granting.

The EU will also lose its legal influence over the UK – for example, businesses involved in a cross-border cartel covering both EU countries and the UK will face separate investigations from the EU and the UK, not just the EU.

The current state of affairs also means that the national competition authority of the EU or a member state can grant permits for an EU merger.

Without access to the EU’s single window procedure, “one of two things can happen,” explains Paul Gilbert, competition specialist at Cleary Gottlieb.

“We could consider a separate agreement with the EU, whereby the UK allows the EU to make decisions on the acceptability of mergers – this is how Norway and other countries have done.

Alternatively, we could consider each merger separately under UK law.

Companies may require additional analysis of mergers by the UK authorities, for example, in Switzerland, as well as by Brussels, which will create additional costs, time and administration in the merger. ”

In addition, Brexit could lead to a reduction in competitive procedures – where companies are prosecuted for non-competitive behavior – through the UK courts.

A similar situation arises when considering changes in intellectual property

British and European patent law derives from the European Patent Convention, which is not tied to the EU and covers non-EU members such as Switzerland.

Currently, European patents are granted through the European Patent Office (EPO) in Munich and then become national patents. UK patents are available through the British Intellectual Property Office (UKIPO).

EU member states are in the process of trying to unify EU patent rights and infringement procedures with the launch of a Single Patent Court (UPC).

Brexit would leave EPO and UKIPO in place, but could leave the UK aside when it comes to UPC. “We could not participate in a scheme that allows businesses and individuals to obtain a single patent covering almost everywhere in Europe,” says Bristova’s partner and IP specialist Andrew Bowler.

“We will also adhere to the existing way of enforcing patents passing through each national court. The goal of the UPC is to simplify and harmonize patent law.

Leaving the EU would knock us out of this plan. This could complicate the work of international companies operating in the UK and they had to accommodate our different approach, which would increase costs. ”

Brexit also rules out the possibility of companies filing for registered trademarks and public brands in the EU as they are currently regulated by EU rules.

Andrew Bowler points to another possible situation that could lead to a rift: if UK intellectual property law is in significant conflict with EU law, “it could make it difficult for businesses to import and export goods and processes from the EU and into the EU without making some changes to these products / processes.

This is a question that applies to the law in general, and not just to intellectual property. ”

Impact of Brexit on Business

In all three areas of practice that deal with above: employment, competition and intellectual property, as well as changes in legislation, Brexit could lead to increased costs and administrative hassle for multinational companies.

The impact of Brexit on business will affect lawyers working in areas such as trade, foreign investment, and finance.

Customs duties, declarations of goods at the borders, tariffs … these are all that EU member states should not fight when they trade with each other.

As part of the EU, it allows member states to access the free trade agreements (FTAs) of the EU with other countries.

The big ones you may have heard of are the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada and the proposed Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US.

Leaving the EU will require the UK to rethink its trade deals and FTAs ​​across the board.

Brexit lawyers argue that this will put the UK in a strong position to negotiate profitable trade deals, but this argument rests on whether the UK is considered a desirable trading partner.

US Trade Representative Michael Frohman recently told the press: “I think it is absolutely clear that the UK has a higher voice on the EU trade table as part of a larger economic entity.”

Frohman said the US “Doesn’t particularly do market deals for FTAs ​​with individual countries.” Therefore, trying to negotiate our own deals with the United States may result in British companies facing tariffs on goods exported to the United States.

China currently pays 80% of tariffs on some of its products.

The UK can join the EEA or enter into bilateral treaties to trade with EU members. But UK companies trading with EU countries under these treaties will still have to comply with EU production standards and conditions.

The only companies that will benefit from the EU regulation will be UK companies selling to the domestic market.

Access to the EU free trade area will undoubtedly be one of the factors affecting how attractive the UK remains as a post-Brexit business location.

For example, the UK – and in particular London – currently attracts the highest level of commercial real estate investment in Europe.

A recent Global Cities report from real estate consultants Knight Frank made £ 31.7 billion in commercial real estate investments in London during the year to Q2 2015, a significant chunk of this coming from overseas investors.

A KPMG survey of real estate experts showed that 66% of respondents believe Brexit will negatively impact UK real estate investment.

If especially financial institutions find Britain’s post-Brexit too isolated from the EU, they may decide to say goodbye to their UK operations.

The UK is actually the EU’s financial, banking and insurance capital. A recent report from City of London Corporation predicts that the city’s economic growth could grow by a third over the next decade if the UK remains in the EU.

And if he leaves? There have already been hints from the likes of HSBC and Deutsche Bank that they might consider moving operations out of the UK after Brexit.

If multinational companies – especially financial institutions – find post-Brexit Britain too isolated from the EU, they may decide to say goodbye to their UK operations.

The EU currently operates a “passport system”, which means that if a financial services firm is authorized to operate in one member state, it can freely trade and start a business in another. If you are doing international business – EU based or otherwise – this is very convenient.

Foreign financial services institutions love to use the UK as a gateway to the EU’s single market.

Therefore, if Britain loses its ability to issue EU passports to companies, institutions may decide to establish their European headquarters in Frankfurt or Paris rather than London.

If the UK were to become a member of the EEA, it would retain the right to assign “passports” to companies, but that would leave the UK, in accordance with

EU law, without any statements in the decision-making process.

Another option would be to follow the Swiss model and negotiate contracts for each market we want to access; but the UK will still follow EU rules without affecting them.

Two Years Notice

The start of the EU referendum is likely to be rocky for both domestic and international business. The rating agency Standard & Poor’s even indicated that it could downgrade the UK’s credit rating if a departure from the UK looks likely.

And if the UK votes to leave, the markets won’t calm down right away. Uncertainty will remain, as leaving the EU cannot happen overnight: a two-year notice period must be given before withdrawal, and a renegotiation of relations between the UK and the EU could take up to a decade, according to some estimates. This uncertainty can hold back potential investments.

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