European Affairs — House of Commons, 2018-03-15
Topic: Domestic Commerce
Robert James MacGillivray Neill (Conservative, Centre-right): My right hon. Friend makes an entirely fair point. We should do that, because there is going to be an administrative cost that will ultimately be borne by consumers and taxpayers The industry itself has done analysis of the costs in some areas of financial services. For example, the wholesale banking industry estimates that if there is regulatory fragmentation, it is likely that $30 billion to $40 billion of extra capital will need to be raised. The London Stock Exchange Group calculates that changing the location of clearing houses—we must try to retain euro clearing, which is critical for the sector—will have a potential cost of some $25 billion, not just to us but to the EU27. It is in our mutual interest, on both sides, to get an agreement. No analysis of costs has been done: we should be honest about that and do so. We have to get these agreements We must ensure, too, that there is the ability to hire talent across the board and to move it seamlessly. It has to be possible that people can move staff from an office in Brussels, Paris or Frankfurt to London without any hold-up or delay—not even the need for the slightest bit of paperwork. That has to be achieved sensibly. Again, it is in our interest because otherwise we damage the ecosystem of the global financial hub that London is. As the Chancellor rightly acknowledged in his speech last week, the depth of the London capital markets frees not only businesses but sovereign debt for the EU27 nations. Too much rigidity from either side makes that difficult and puts it at risk The other thing that underpins this is the legal structure that goes with the professional services. Our legal services are second to none. We are the venue of choice for international litigation and dispute arbitration. That itself is a great gainer of income for this country. The legal services sector was worth £26 billion to the economy in 2015-16—1.5% of GDP—and is responsible for about £4 billion of exports, about 55% of which goes to the EU. Fly-in fly-out arrangements are critical to that. We need an arrangement whereby, post the establishment directive, lawyers can have their qualifications mutually recognised in the EU27 states, can move seamlessly from one office to another, have the professional standing to advise their clients in EU27 countries and—this is very important but not often mentioned—have their client legal privilege recognised and protected, which can happen only where a lawyer’s qualification is recognised. Without a deal on that, British lawyers will not be able to advise clients or firms in EU27 countries—because professional privilege will not apply—appear in their courts or have the right to arrive in those countries and be present for negotiations with clients in important commercial contracts. It is critical, therefore, that we do not forget the need to get the legal services sector absolutely squared off in our future arrangements We must ensure the recognition and enforcement of judgments. A derivative contract—something we lead the world in—is worth while only so long as it can be enforced. We must ensure that they and all other commercial contracts have certainty of enforcement, not only over the transition period, but going forward, as they are typically written for three to five years. At the moment, we do that with one simple EU directive. It would be most unfortunate if we had to replicate that with each country plus those with which the EU has reciprocal arrangements. We can mitigate that by immediate action to join the Hague convention, but that is a back-up, not an ideal situation; we have to go further. I ask the Minister to detail what meetings he and his departmental officials have had with the Bar Council, the Law Society and, where appropriate, the senior judiciary to discuss the practical steps we need to take to safeguard the position of Britain’s legal services sector going forward and how it underpins the broader financial and professional services sector.