13 octobre 2016
Presentation by Gide Banking & Finance partner Margaret Boswell at the Lex Mundi Cross-Border Transactions Meeting - Panel on the Impact of Brexit on the Financial Services Industry.
This presentation looks at the likely impact of Brexit on the use of English law in international transactions generally, and on the provisions of finance documents governed by English law in particular.
It's not known exactly what proportion of cross-border transactions are governed by English law, but it's widely agreed to be more than any other legal system. A recent survey carried out by the Singapore Academy of Law revealed that 48% of in-house lawyers across the globe specified English law as their preferred choice of law in cross-border transactions. English law is used far more outside the UK than it is in domestic transactions; 80% of cases before the Commercial Court in London involve a foreign party.
As a result, legal services are a substantial and lucrative part of the UK economy; the total value of the legal services industry is GBP25.7 billion. To put that in context, the entire motor vehicle industry is only worth GBP 18 billion. There are around 370,000 people employed in legal services and the sector consistently outperforms the rest of the UK economy, growing on average 3.3% per annum over the last ten years, compared with 1.2% in the rest of the economy.
The strength of the UK legal services industry is due in part to the way English lawyers have used the access to the single market provided by EU membership to leverage off the widespread use of English law outside the UK. English law firms have taken advantage of successive EU Directives first to offer legal services across national borders, then to establish offices in nearly every Member State of the EU and most recently to re-qualify easily and practise local law. Whilst these rights are available to lawyers in all Member States, I think it's fair to say that English law firms have benefitted from them far more than lawyers in any other jurisdiction.
If the UK leaves the EU but remains in the single market, English law firms will continue to enjoy these benefits. However, at the Conservative Party Conference last week the Prime Minister, Theresa May, stated that her priority in proceeding with Brexit is to regain control over immigration, while EU leaders have indicated that access to the single market is conditional on continued free movement of people. These antithetical positions suggest that it is more likely than not that the UK will cease to be a member of the single market, and that some, if not all, of these advantages will be lost.
One unexpected consequence of Brexit is the possible resurrection of the Common European Sales Law (CESL), which was a proposal to introduce a coherent set of rules for the marketing of digital products and services across the EU. The proposals were approved by a substantial majority in the European Parliament in February 2014, and abandoned by the European Commission the next year, in the face of strong opposition from the Law Society of England and Wales and the UK Government, largely on the basis, I suspect, that the EU already has a coherent set of rules for the marketing of digital products and services across the EU, namely English law.
English practitioners are taking matters into their own hands; according to the Financial Times, the Law Society of Ireland has been receiving 30 applications a day from English solicitors wishing to re-qualify in Ireland. That report appeared in August, and the recent developments regarding the UK's stance on the single market will only have served to increase interest in requalification.
On the brighter side for the English legal profession, a recent article in the Wall Street Journal ("Post Brexit, London's Financial Center has English law on its side") ran the argument that the extent of the use of English law and the English courts in international finance "provides London's financial district with a gravitational pull for finance companies", and makes it more likely than not that London will retain its position as the leading financial centre post-Brexit.
Click on the PDF below to read the full article.