What A BREXIT Means To The UK
“I went to bed reasonably confident and woke up shell shocked”. Many Britons can relate to the words of City Law Firm Partner, Colin Passmore, following the results of the EU Referendum. With a 51.9% majority, the UK has voted to leave the EU.
As voting closed at 10 pm on Thursday, opinion polls showed ‘remain’ in the lead with a 52% majority followed by ‘leave’ at 48%, causing even members of the Leave Campaign to believe that they had lost the referendum. With results flowing in through the course of the night, it was seen that Scotland and London had the highest votes to remain, with the majority of England choosing to leave.
As results were announced, the pound collapsed to a three-decade low and approximately $2 trillion was wiped off global stocks. The fear of Brexit resulting in a recession is now almost inevitable.
So what does this mean for the legal market?
The next step is for the government to trigger Article 50 of the Lisbon Treaty, an official notification to the EU of its intention to leave, providing a minimum 2 year period in which the UK will negotiate exit terms with the EU. In reality, this would be much longer, with 40 years of history and legislation to effectively re-negotiate. The UK will remain part of the EU during this period of negotiation with no immediate change to the law. However, this will be a period of great uncertainty in which clients will be mapping risk and considering alternatives for their business, with priorities being identified for the short, medium and long term.
Note, however, that under the Treaty of Lisbon, there are no timescales or even any requirement for a government to trigger Article 50 following a referendum. It is no surprise, therefore, that Boris Johnson declared in his statement succeeding the results that there is ‘no rush’ for the UK to begin negotiations, leading some to consider whether there will even be a Brexit. EU officials, on the other hand, have taken a strong stance claiming that this will not be an ‘amicable divorce’ and urging the UK to start negotiations immediately.
Law firms are providing close support for their clients and in the short-term, an upsurge in client concern could potentially lead to new work for firms, such as review of business-critical contracts where these agreements are governed by the EU courts as well as managing the upcoming challenge that political and economic negotiations will bring. The long term effects would depend significantly on the nature and terms of these negotiations. For financial service businesses, the key will be to secure continuing access to the free movement of goods and services through the EU single market.
Jean-Claude Piris, former head of the EU Council of Legal Services said, such claims that Britain would attain unfettered access to the single market without allowing free movement of people was equivalent to believing in Father Christmas – “Britain cannot get as good a deal as they have now, it’s impossible…they will have to negotiate from the position of a third country, not as a member state.” Any agreement by the UK to allow continued free movement of people in order to remain a part of the single market would be paradoxical given that immigration played a significant role in the Leave Campaign.
Britain’s financial industry thrives on the EU’s ‘passport’ rules under which banks, asset managers and other financial firms located in a member state may serve customers in any other member state without the need to set up local operations. An essential part of the negotiations will be for these passport rules to be renewed or replaced so that financial institutions can continue their usual business from London.
Amidst concerns that London will lose its “hub” status, the Mayor of London, Sadiq Khan, has called on citizens not to panic, assuring that London will remain a successful city post Brexit. There is no other financial centre in Europe that compares to London in terms of the number of financial institutions and the concentration of expertise, and that is not going to disappear overnight.
The Law Society of England & Wales released the following statement:
“The law of England and Wales retains its international commercial appeal and England and Wales remains an attractive and stable jurisdiction, with a high quality of legal profession, internationally respected courts and the best law firms in the world that have attracted clients from across the globe for many years. We will continue our work in upholding the rule of law and enabling access to justice; supporting law reform and the legislative process; and providing information to the solicitor profession and the public as the UK’s new relationship with the EU takes shape”.
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any other organization with which she might be associated.