“Brexit: A threat or an opportunity for UK lawyers and legal London?”
By: David Small
Tags: London, Brexit, Law, UK Politics

In November 2018, I wrote a piece for a competition in the Times newspaper. The title for submission was “Brexit: A threat or an opportunity for UK lawyers and legal London?”. I did not win, but I enjoyed the process and thought that there would be no harm in uploading my perspective. Congratulations to the winner and to the runners-up. Their entries can be viewed here https://www.oeclaw.co.uk/times-law-awards/winners.

It should be noted that some arguments made are now out of date. In particular the reference to relocation plans of certain financial institutions is a fact that has changed and should be considered in context. Here is my submission.

“For lawyers, Brexit is an issue of profound importance. Law firms and chambers have invested substantially into Brexit research units to help advise clients, yet the answer to the question of whether Brexit is a threat or an opportunity for UK lawyers and legal London has never been answered conclusively and its results are difficult to predict. This paper will argue that Brexit represents an opportunity because it poses legal questions that need immediate answers meaning UK lawyers, in London especially, are needed now more than ever.

The business sector prospers when the marketplace delivers predictable results and the legal sector, comprising solicitors, barristers and judges and court systems, relies predominantly on businesses for work. Lawyers provide advice to encourage confident decision making. Therefore, market confidence helps both sectors. Brexit is looked upon as a cause of economic stagnation, at least, or downturn, at worst; so why doesn’t this correlate to a threat for UK lawyers and legal London? Brexit is a legal question as much as a political one. Leaving an organisation such as the European Union (EU), which regulates manifold areas of law, asks unprecedented legal questions. Legal businesses will thrive wherever there’s legal uncertainty. It is unsurprising that London’s largest law firms have recently posted record profits because of Brexit — clearly while businesses prosper from market confidence, legal businesses thrive on legal uncertainty. [1]

Disruption in the economy can be a positive indicator of increasing market efficiency. Brexit’s disruption could provide the opportunity to recalibrate Britain’s economy, and facilitate trade with other nations according to demand, which in the long term could “herald an economic rebirth” [2] - indeed, IMF reports signal that 90% of international growth will come from outside the EU in the next 15 years. [3] A disruption with diverse consequences so far has been the drop in value of the pound (GBP). This poses an unmentioned opportunity for the UK legal sector as law firms could secure more EU work, with a weaker pound making UK legal fees more competitive than their EU counterparts. [4] Furthermore, through this devaluation, British assets became an “attractive” investment opportunity to foreign buyers sparking a rise in M&A work for London law firms in 2017. [5]

Brexit’s effect on UK lawyers and legal London creates a tension between market confidence, which is lowered, and legal uncertainty, which is heightened making the result a difficult one to predict. As market confidence decreases, so does legal opportunity, and as the economy remains resilient or even grows in the long-term so Brexit’s threat is nullified.

It is claimed that Brexit could threaten London’s legal standing in the world. This could happen in two ways: 1) international businesses operating in London would restructure themselves to spread across other cities in Europe; and 2) London’s position as the court capital of the world is jostled by another city within Europe or beyond.

Since the referendum in June 2016, international companies such as HSBC, Goldman Sachs and JP Morgan have announced job relocations to other cities within the EU yet some have only relocated 10% of the jobs they claimed they would. [6] Continued business productivity would encourage foreign direct investment to increase it to, and perhaps beyond, its pre-Brexit level — conditional upon clear and certain negotiation resolutions. [7] The lack of legal, political and, therefore, market certainty inhibits business productivity, posing a threat to lawyers as legal work could leave the UK along with the businesses it advises. [8]

London’s status as the legal capital is largely due to its language, location, legal system and service sector context. The only existing comparable city to London is Dublin — yet even with Ireland’s low corporation tax, it has failed to attract a majority of professional talent emigrating from London. [9] To maintain the status quo, regulated sectors hope for a Reciprocal Enforcement Regime; where judgments made in London can have binding effect in the EU and vice versa. This is a question of political will, making it impossible to predict; however, we can evaluate where else the legal capital could go.

Alternative courts such as the Dubai International Financial Centre Courts or the Singapore International Commercial Court pose a threat to London’s dominance, but they aren’t located close enough to existing financial hubs within the EU jurisdiction such as Frankfurt and Paris. Additionally, they pale in comparison to London’s legal system which is regarded has having the best legal talent in the world and laws that promote “certainty and [a] commercial approach”. [10]

While it’s clear the legal sector is currently benefiting from Brexit, the threats and opportunities won’t be known for sure until the final arrangement is concluded. Opportunity lies in the ability to strike a deal with the EU, while the threat lies in failing to reach one. The balanced response to the question in mind, and the answer that everyone can agree on, is that it remains too early to tell.”