36.The UK’s legal services sector contributes £25.7 billion to the UK economy, or 1.6% of gross value added. It generates £3.3 billion in annual export revenue and employs some 370,000 people (of whom roughly two-thirds work outside London). We have encountered concern from lawyers that potential implications of Brexit include some that would harm their business. Beyond the changes to the law on which they advise and litigate, as discussed in previous chapters, these encompass rules on lawyers’ own international mobility (and that of the services they provide). We also investigated how leaving the EU may affect wider international opportunities.
37.Cross-border practising rights within the EU were a key concern for witnesses. Three EU laws combine to create an effective ‘single market in legal services’:
Andrew Langdon QC, Chair of the Bar Council, claimed that “without the free movement of lawyers nothing else of much importance will be salvaged”, arguing that lawyers’ ability to represent local clients in cases with EU connections is important for the individuals and businesses they represent. He emphasised that this was not only of benefit to large firms and wealthy individuals, who “can afford to shop internationally for lawyers”, but also for small businesses and ordinary people, who cannot. Robert Bourns, President of the Law Society, warned of “traditional—some would say old-fashioned—fiefdoms of professional practice” re-emerging in Europe without the directives. We note that although these instruments are Directives, thus already incorporated into domestic statute, they rely on reciprocity (as with Brussels I and II in Chapter 3). WTO rules, on which the UK might fall back, are significantly weaker: they don’t guarantee legal professional privilege, without which “the right to practise is effectively useless”.
38.There are already concerted efforts by EU law firms to win clients from UK competitors by reference to Brexit. Nevertheless, witnesses expounded on the mutual benefits of preserving cross-border practising rights. Mr Bourns suggested that some Germans value the opportunity—not available in their home country—“to work through the City of London as limited liability partnerships”. He also noted, more widely, the internationalism of the English and Welsh legal professions, citing some 200 foreign law firms (of which 60 are from the EU) and 3,000 EU national lawyers based in England and Wales. This goes both ways: he estimated that UK and US firms train and employ 30% of the Paris Bar. Mr Bourns finally argued that the EU has an incentive not to self-destruct in the face of overseas competition: “the danger, of course, for the whole of Europe is that you diminish the whole and that the jurisdiction that really wins out is outside Europe altogether”. Mr Langdon and Alison Hook, of Hook Tangaza, warned that the threat of protectionism against the EU was not a credible bargaining ploy: the UK relies on a policy of openness in legal markets. The preceding also makes clear that the legal professions would be adversely affected by restrictions to their ability to hire EU national lawyers.
39.Registering as a lawyer in another EU jurisdiction is one attempted workaround. Ms Hook reported that the Law Society of Ireland had seen 806 English and Welsh solicitors requalifying since the referendum, against a normal rate of 400–700 annually. This is not a secure long-term solution: she pointed out that Ireland’s reciprocal duty to provide this route to qualification may expire upon Brexit.
40.The legal services sector underpins many areas of UK economic activity. Its ability to continue to facilitate these in the EU will diminish without protection of existing practising rights there for UK lawyers. There is also clear evidence of reciprocal benefit. We recommend the Government include achieving this protection in its Brexit negotiating strategy.
41.Looking beyond the EU, Hook Tangaza suggested that “the loss of the EU’s trade negotiating weight might be offset to some extent by more freedom for the UK to engage in and conclude deals”; Mr Gleeson was dismissive of any strong connection between free trade agreements and the growth of English law firms. The Solicitors Regulation Authority contended that “rights of legal practice painstakingly acquired through EU free trade deals will be jeapordised” by Brexit, highlighting that with South Korea. East Asia is a key (and competitive) growth market for the sector: Mr Gleeson described this as his firm’s “primary strategic objective … over the next five years” and stated “our hope in this regard is that nothing happens in the context of Brexit to damage that, but I think the two are unconnected”. Clifford Chance will need to restructure its business in Korea and called for “a fuller evaluation of all the trade agreements to which the EU is party to ensure that the exit of the UK from the EU does not result in the loss of other rights or privileges that derive from those agreements”.
42.The implications of Brexit for the legal services sector give cause for concern, but not hyperbole. Most of the sector’s strengths are unabated, and sensible discussions between the UK and EU ought to protect many of the advantages of their existing cooperation. However, we recommend that the Government should consider and promote the legal services sector in the context of its expected post-Brexit trade recalibration and the pursuit of new deals; it should outline steps it will take to protect and provide opportunities for the sector.
88 TheCityUK, , July 2016
92 The (WTO) regulates multilateral trade; its rules bind members in the absence of stronger or distinctive trade agreements between them.
93 [Simon Gleeson]
98 Hook Tangaza () para 13
100 Solicitors Regulation Authority () para 13
102 Clifford Chance LLP () paras 16–17
17 March 2017