Blog: Brexit expertise of the Bar assembles in force

1 December 2016

Whatever one may think about the consequences of Brexit at a political level, on which the Bar Council, as a professional body has decided to remain politically neutral, there can be little doubt that from a legal perspective it is about the greatest challenge which this country has ever had to deal with in its history.

The Bar for its part is rising to this challenge. Following the referendum the Chairman set up a Brexit Working Group, led by Hugh Mercer QC, which draws on the combined expertise which the profession has to offer to the public and to government on this huge project.

On 29 November the Working Group hosted a Briefing Meeting for senior civil servants from six government departments to help with the task of prioritising the legal issues arising and to make recommendations in the public interest, to ensure that a transition can occur which minimises the risk of legal uncertainty, loss of rights and economic damage as well as capitalising on potential opportunities.

The meeting at the Bar Council was received by the participants as a very timely opportunity to assess the risks inherent in Brexit and will undoubtedly help government in shaping the agenda for the forthcoming negotiations.

The Bar Council and Specialist Bar Association experts reviewed some of the most challenging areas of law and practice affected and here are some of the highlights of the presentations and recommendations that were put forward.

Recognition and Enforcement of Judgments

The meeting opened with a discussion of this key issue. The ability to enforce judgments of the courts in one state in another state is of the utmost importance for the functioning of society as well as in retaining the position of England and Wales as the leading dispute resolution centre in the world, with the important economic benefits that follow from this. With Brexit the UK will lose the ability to avail itself of Regulation (EU) No 1215/2012, the so-called 'Recast Brussels Regulation' which the Bar Council did much to bring about and works well for clients.  The meeting heard that the Bar Council's preferred solution to replace it would be to enter into an agreement based on the Denmark-EU Jurisdiction Agreement, albeit with a clause providing not for interpretative judgment of the CJEU but for 'due account' to be taken of the decisions of the courts of all 'Contracting Parties'. In addition the Lugano II Convention and the 2005 Hague Convention on the Choice of Court Agreements should be signed and ratified.

On Service, the Service Regulations would need to be replaced with an agreement based on the EU-Denmark Service Agreement.

As for choice of law, the Rome I and II Regulations can be adopted into domestic law by Act of Parliament, as is a widely held view by many experts including senior members of the judiciary.

Criminal Justice

In this important field the Bar Council is asking the government to pursue objective on both public security and human rights.

As regards the first, the government should negotiate a reciprocal measure to replace the European Arrest Warrant which has worked well in securing the speedy arrest of suspects combined with due process and respect for fundamental rights. It should provide for the use of Joint Investigation Teams, provide rapid access to identification databases and find and equivalent mechanism for the European Investigation Order which will come into force by mid-2017. The package should further include continuing cooperation through Europol, Eurojust and the European Public Prosecutor's Office, as well as provide for a measure to transfer prisoners to their home countries.

As far as procedural safeguards are concerned we urge the government to ensure that British citizens subject to investigation and prosecution in other Member States continue to benefit from the safeguards set out in the European Council Resolution of 30 November 2009, on aRoadmap for strengthening procedural rights of suspected or accused persons in criminal proceedings.

Family Law

It was pointed out by the representative of the Family Bar Association that a huge number of families in which the partners are from different Member States will be affected by Brexit in relation to divorce and children matters. UK citizens have benefitted in particular from two directly applicable EU Regulations:

(a)      Regulation 2201/2003, known to English family lawyers as 'Brussels IIa'. This Regulation establishes the  jurisdictional framework (a) for divorce and (b) for issues about children, both in the private law sphere (disputes between parents and other family members); and also in public law cases where local authorities are involved. This Regulation also has provisions which reinforce the 1980 Hague Convention on international abduction of children.

(b)      Regulation 4/2009, known as theMaintenance Regulation. This establishes the jurisdictional framework for all disputes about family maintenance obligations.

These instruments provide certainty about jurisdiction, allowing affected families to readily find out where issues concerning the welfare of children, divorce and maintenance are to be resolved. They also greatly assist with enforcement and provide for cooperation between Central Authorities in relation to the protection of children's welfare.

If they were to fall away the 1996 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Cooperation in respect of Parental Responsibility and Measures for the Protection of Children (which the UK has already ratified) would significantly (but not entirely) fill the gap left by the children aspects of Brussels IIa. The international protection of children would be weakened by the loss of Brussels IIa.

The 2007 Hague Convention on maintenance, to which the UK could accede, would to a much lesser extent fill the gap left by the Maintenance Regulation. This could to a certain degree be rectified by ratifying the Lugano II Convention post-Brexit. Nevertheless even if these steps are taken, there would be gaps, notably the "first in time" rule, according to which, if proceedings have commenced in one Member State, the courts of other Member States are required to stay any subsequently commenced equivalent proceedings until the jurisdiction of the first court has been established.

Hence the government is asked to replace the Brussels IIa and Maintenance Regulations on the same basis as the Recast Brussels Regulation. It should also ensure that the agreement in relation to the Brussels IIa Regulation will apply equally to the proposed Recast Brussels IIa Regulation when that comes into force. Finally it must ensure that the new agreements will come into force seamlessly on Brexit in order to protect the welfare of children and the stability of families. 

Intellectual Property

The meeting was told that in this field the consequences of Brexit could be particularly severe, given the large degree of EU harmonisation of laws in this field. Particular dangers exist, for example, where rights are directly granted under EU law which are effective in the UK (such as EU registered trademarks and designs), the impact of ceasing to be a member of the EU would be that the rights in question would cease to exist in the UK (unless otherwise provided for). To counteract this, UK Intellectual Property Office is considering whether to provide for equivalent rights under English law or, at least, a set of transitional measures to ensure that existing rights owners do not face a gap in protection. The IPBA submitted a paper which highlights this and many other challenges in this field.

The UK is a highly attractive place for R&D and the creative industries, but it may not remain so if it is not (or is not perceived to be) central to European activities. London and its periphery, in particular, provide a cluster of activities both in R&D and creative industries and their support services, of which intellectual property is a part.

Intellectual property services are currently a flourishing area in the UK. The intellectual property bar is very active and the excellence of the courts is widely appreciated, making a significant positive contribution. To ensure that this remains the case, the IPBA suggests among other things that HMG should explore ways to ensure that the UK retains its position as a forum of choice for intellectual property matters in Europe. This should include steps to ensure that the UK remains more efficient and quicker as a litigation forum than other EU countries and EU courts. It should also include attempts to ensure that, if the Unified Patent Court goes ahead, the UK is able fully to participate in it post-Brexit and that, if the UK is not able to do so, the UK is nonetheless well-placed to remain a first-choice forum for resolution of patent disputes in Europe. 

Competition Law

Discussions under this heading focused on the consequences of Brexit to both public and private enforcement of competition law.

The paper submitted to the Meeting on this item points out that whilst Brexit will not affect the ability of UK authorities to enforce UK competition law in the UK, those authorities in fact take very few competition enforcement decisions. Hence, if our current system of efficacious remedies and consumer protection is to remain in place it is critical that consumers in the UK are able to rely upon decisions of the European Commission.  Otherwise, competition enforcement (both public and private) will be severely weakened.

The Competition Act 1998 gives permits decisions of the European Commission to be relied upon in order to found follow on actions.  The formal position is that those provisions would not be affected by repeal of the European Communities Act 1972 as they are contained in primary legislation. 

It is likely that preserving those powers would therefore enable UK courts and consumers to continue to enforce the decisions of the European Commission.   The Commission will however continue to make decisions which impact upon UK business which trade in the EU.  At present, its investigations encompass distortions of competition within the whole EEA, including the UK.  Depending on the terms of Brexit, that may well come to an end, unless steps are taken to ensure that UK markets and consumers stay within its remit for competition law purposes. There is a powerful public interest in arrangements which enable it to continue to do so.

Another significant issue highlighted at the meeting and in the paper is that a key driver of competition enforcement in both the UK and EU is the use of leniency arrangements, under which participants in cartels may obtain immunity or reduction in fines in exchange for cooperation.  At present an application in the UK is sufficient to trigger leniency across the EU and in respect of the Commission.   Use and disclosure of that material is carefully controlled.  If that "one stop" approach were lost, there would diminished incentive to apply for leniency, and a need for multiple filings.  Thus, following Brexit, coordinating measures would be highly desirable.

The key recommendations to government in this field are to (i) preserve the powers contained in the Competition Act 1998 to render Commission infringement decisions binding and enable UK consumers and businesses to seek injunctive relief on that basis, (ii) to preserve the immunity protection for leniency applicants and ensure mutual recognition and protection for immunity statements from disclosure and (iii) to protect against double jeopardy of competition fines in respect of the same conduct.

Insolvency and Restructuring

Among the many challenges in this field, the meeting highlighted the need to deal with the principal pieces of EU legislation which govern insolvency and restructuring generally (both corporate and individual): the Council Regulation (EC) No 1346/2000 on Insolvency Proceedings ("the EUIR") and Regulation (EU) No 1215/2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters ("the Recast Brussels Regulation"), already referred to above.

In general terms, the EUIR seems to have worked reasonably well, and the amendments reflected in the Recast EUIR have been broadly welcomed by practitioners as sensible improvements. As in civil and commercial matters, and perhaps even more so in the context of insolvency and restructuring, it is generally accepted that it is essential to have a clear and consistent basis for the allocation of jurisdiction in insolvency proceedings, and the recognition and enforcement of orders made in those proceedings.

Hence the British government would be well advised to seek a successor regime which keeps these advantages the ChBA representative commented.

The paper submitted by the Chancery Bar Association for this meeting highlights many other areas requiring attention.

In relation to the Brexit consequences for the legal services provided in this field the paper points out that the UK is undoubtedly seen as a centre of excellence in this field and that this can be maintained with some effort, provided that there is sufficient clarity at a sufficiently early stage as to what the legal consequences of Brexit will be. However, there is increasing national competition in this field; Singapore is aggressively promoting its legal system in international restructuring and insolvency cases, and certain EU member states (for example, the Netherlands) have adopted, or are in the process of adopting, restructuring regimes analogous to schemes of arrangement which may be an attractive alternative for businesses with a significant presence within the EU.

Tax Law

The representative of the Revenue Bar highlighted a number of challenges. A particularly large one would be the need to introduce a comprehensive Customs Code, should the UK decide to leave the Customs Union. This would undoubtedly increase the costs of trading with the EU. In addition, UK currently benefits from free trade agreements entered into by the EU with third countries which give access to preferential duty rates. Unless and until the UK has its own agreements with such third countries, duty rates faced by UK exports are likely to increase.

In the area of VAT, post-Brexit, decisions of the European Court ("CJEU") interpreting the PVD will, de facto, remain 'binding' in the UK for so long as the UK's system mirrors that of the EU.  This is particularly so since the UK courts have to interpret the UK VAT legislation in accordance with the legislative intention of the UK Parliament and the intention of Parliament when enacting the majority of the current UK VAT legislation was to ensure a harmonised VAT system with the rest of the EU. The UK courts will however no longer be able to seek guidance from the CJEU nor will the UK have any influence over how EU law is developed by the CJEU.

Reference was also made to the area of direct taxation where a number of challenges were identified in the paper. The paper also covers issues in relation to stamp duties, tax evasion and state aid.

Access to the EU Legal Services Market

The UK legal services market is a significant earner of UKplc, generating c. £3.3bn of net export revenue in 2015. More importantly, our exporters' confidence in doing business abroad depends greatly on the ability of their lawyers to establish and provide services in the countries where they seek to trade and invest. The EU Legal Service regime which we may lose, permits UK lawyers with unfettered and unbureaucratic access to all legal services throughout the EU.

Therefore the Bar Council requests government to preserve in the negotiations the rights of UK lawyers under the Lawyers Services and Establishments Directives, ensure that they may represent clients before the European Court, maintain rights to legal professional privilege and freedom of movement for immigration purposes.

Equally in order to maintain the position of England and Wales as a leading arbitration centre it will be important to ensure that immigration hurdles are not imposed for parties, lawyers and arbitrators from EU jurisdictions. 

As can be seen from the above, the meeting covered a considerable number of legal challenges posed by Brexit. The Bar Council will continue to provide support to government departments in all of these areas and indeed others so as to ensure the UK will achieve the best possible outcome from the Brexit process. 

Christian Wisskirchen is Head of International Policy at the Bar Council