Leaving the EU: Legal Services

Robert Neill Excerpts

Wednesday 21st November 2018 Westminster Hall

[Mr Djanogly]

My hon. Friend makes a very important point. Other jurisdictions are also mounting challenges. We must avoid doing anything that might impair the reputation of the sector.

[Robert Neill (Bromley and Chislehurst) (Con)]

My hon. Friend talks of the reputation of the sector. It is also about hard cash. At the end of the day, the legal services sector makes a contribution of about £25.7 billion per annum to the economy. It is really significant for our economic wellbeing.

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[Mr Djanogly]

I will be making the case that the hon. Lady has just put.

On labour mobility, the legal services sector has profited from the ability to attract talent from across the globe and the ability to work in the European Union. Frankly, many people going into the offices of a City law firm would be staggered by the number of nationalities and the depth of EU and world legal experience that we have in the UK. For instance, an American client would quite commonly run its European company acquisition strategy from London—because we speak English, yes, but also because they trust our jurisdiction and courts, and because we have European expertise here in London. We do not want to lose that. It is very important that a labour mobility framework that guarantees those abilities post-Brexit is put in place.

The legal services sector requires legal certainty throughout the UK’s withdrawal from the European Union. Law firms and their clients are already, sadly, beginning to implement contingency plans and move business elsewhere. We now have a draft of a detailed transition agreement, and the sector believes, as I do, that that agreement must be confirmed as soon as possible to ensure the sector has the legal certainty that it requires.

[Robert Neill]

Does my hon. Friend agree that having a swift and clear transition agreement is important not just, as he rightly says, to give law firms the certainty they need to continue their operations, but to ensure for their clients contractual continuity and, above all, the enforceability of contracts and judgments in commercial matters and a whole range of other matters?

[Mr Djanogly]

As ever, my hon. Friend makes a pertinent point. Avoiding a no-deal scenario and securing the right future relationship with the European Union is of the utmost importance. The APPG supports the view of the legal services sector that a no-deal scenario would be devastating to the sector and should be avoided at all costs. Of course, there have been significant recent developments. Last week, on 14 November, the Cabinet collectively agreed to the draft withdrawal agreement and the political statement on the future relationship. Following a special European Council meeting on 25 November, the Government intend to lay a final version of the agreement before Parliament for debate.

It needs to be recognised that the draft withdrawal agreement contains a number of positive elements for the legal services sector, including provisions on mutual recognition of professional qualifications and on lawyers continuing to obtain qualifications throughout the transition period, and clarity on continued recognition and enforcement of judgments and orders throughout that period. Lawyers will continue to have the right to represent a party in proceedings before the CJEU in all stages of proceedings where a case can be brought by or against the UK. The automatic transfer of an EU intellectual property right into an equivalent UK right before the end of the transition period is very welcome.

The non-legally binding declaration, however, is a work in progress. To be frank, it is worryingly brief and it is vague on services, especially legal services. The relevant part of the political declaration explains that the goal is to secure

“Ambitious, comprehensive and balanced arrangements on trade in services and investment, delivering a level of liberalisation in trade in services well beyond the Parties’ WTO commitments”.

It says that the Government will put in place

“Appropriate arrangements on professional qualifications.”

I have to say that this is pretty sketchy stuff, and so we continue to have concerns about the lack of detail contained within the political declaration between the UK and the EU.

First, it is pretty unambitious for the UK-EU agreement to say only that it will go “well beyond” the parties’ World Trade Organisation commitments, and it is likely to lead to significantly less market access for services. Secondly, like with the Government’s White Paper, there are concerns about the continued focus on regulatory flexibility, as I mentioned before. The preservation of the present system, whereby lawyers from EU member states, EEA states and Switzerland can practise freely across the continent, should be prioritised instead. Thirdly, it is good to see a reference to professional qualifications, but that only goes some way towards giving lawyers the ability to practise in the EU, and generally it is not their preferred route.

Fourthly, it is disappointing not to see a reference either to civil or commercial co-operation, unlike in the Government’s White Paper. The UK and the EU currently enjoy the gold standard in civil and judicial co-operation, which should continue. Fifthly, without an agreement on judicial co-operation, judgments made in UK courts might be unenforceable in EU countries in the cross-border settlement of trade disputes, which might result, for instance, in debts owed by EU entities to UK businesses not being recovered. It follows that uncertainty about whether judgments from UK courts would be enforced could make the UK less appealing as a jurisdiction of choice for contracts and dispute resolution, which would lead to the growth of competing jurisdictions.

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[Robert Neill (Bromley and Chislehurst) (Con)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I warmly congratulate my hon. Friend the Member for Huntingdon (Mr Djanogly) on securing the debate. I congratulate the all-party group on legal and constitutional affairs on its excellent report, which mirrors the Justice Committee’s conclusions in our report in the 2016-17 Session on the implications of Brexit for the justice system, especially in the areas that relate to co-operation in civil and commercial law. Our report, of course, went further and stressed the importance of continuing co-operation on criminal law and law enforcement, but our conclusions on the civil front are exactly in line with those of the all-party group. That is not surprising, because the evidence is entirely consistent.

My hon. Friend the Member for Henley (John Howell), who serves on the Committee with me, stressed the other issue that we want to raise: family law. This is not just about the clients of big commercial firms. The ability to enforce judgments makes a difference to parents who are seeking to get maintenance from a partner in another EU jurisdiction. At the moment they can enforce their maintenance agreement without any difficulty, but they would be at a grave disadvantage if they were not able to do so.

Many of us will remember the problems that arose in the past with the growth of what is called parallel litigation in family cases, in relation to divorce, financial arrangements and child custody arrangements. The last thing we want is a crash-out arrangement. In theory, that would mean that, as of 1 April next year, a parent in the UK and one in another EU jurisdiction would be capable of commencing parallel proceedings in family matters.

[John Howell]

My hon. Friend is stressing the role of the family courts, but he might also want to mention the ability to handle child abduction equally on both sides.

[Robert Neill]

That is entirely right. Some of the worst examples, before we developed the mutual enforceability of judgments, related to child abduction. In cases involving non-EU states, in which we are a third country, the parent here—frequently the mother—was at a significant legal disadvantage and did not have the protections that we have under the current arrangements, particularly the recast Brussels arrangements. I am glad that my hon. Friend has raised that issue.

I want to make two other points very briefly. First, I support my hon. Friend’s point about English law. Those of us who have practised know that, because of the reputation of our system, it is almost the norm to find English law clauses in international contracts. We want that to continue, but it is concerning that the Bar Council and the Law Society have been reporting evidence—so far anecdotal, but strong—that the uncertainty and the risk of a crash-out arrangement without contractual continuity is leading some firms to advise their clients to have clauses excluding English law from contracts. It would be extremely troubling if that were to persist. The longer the uncertainty, the greater the risk.

Simmons & Simmons, a leading law firm, conducted a survey of clients in Germany, France, Italy, Spain and the Netherlands to look at what the courts in those countries might adopt if we were a third country and could not rely on the current arrangements. It reported that 88% of clients—people abroad buying British services—thought that the Government needed to make an early public statement to remove uncertainty, and 50% said that, without that, they would be inclined to move away from choosing English law or jurisdiction clauses. The situation is urgent, so I will back the withdrawal agreement because it will get us into a transitional arrangement, which will give continuity for that period. More importantly, contracts will run beyond the date on which we leave, and significant commercial litigation will almost certainly take more than two years to work its way through. I hope that those issues will also be taken on board.

Will the Minister consider a couple of suggestions by the City of London Corporation and TheCityUK, to which I am grateful, about failsafe devices—I do not like to use the word “backstop”, because it has certain controversial associations—that we could have in parallel with seeking to get the withdrawal agreement through and get into the transition period? It has been suggested that it would be reasonable to look at a means of copying the text of the Rome I and Rome II regulations into our own private international law. Those regulations, of course, determine the applicable law for contractual obligations. As well as seeking the transition, many lawyers think it would be advisable to copy those texts—in parallel, I suggest, as a belt and braces operation—which are much superior to anything that went before, into our law. It is also important that we consider re-signing The Hague convention as an independent party. That would be a failsafe, not my preferred objective, but we need to have those eventualities in mind. That would assist with certainty.

In her Mansion House speech, the Prime Minister talked about the Lugano convention. I think that most people would concede that Lugano, in its original form, is nothing like as good or effective as Brussels I and II in their recast form. They are the gold standard that my hon. Friend the Member for Huntingdon referred to. Will the Minister take away the idea that, to get us anything like as good as we have under Brussels, any Lugano would have to be a Lugano plus plus plus?

[Alex Chalk (Cheltenham) (Con)]

I am grateful to my hon. Friend, the Chair of the Select Committee on Justice, for giving way. The comments made in this debate bear a striking similarity to those made in the debate that followed the production of the Committee’s report. That just goes to stress the urgency of the situation. Law firms cannot wait forever to get a degree of certainty; the time for action is fast running out. Does he share my concerns about that?

[Robert Neill]

I agree that there is a danger of us becoming a legal version of groundhog day in these debates. I know that the Minister is absolutely committed to achieving continuity, but there is a real sense of frustration among practitioners because, although there are warm words, promises and statements of intent, and a Brexit law committee in which practitioners are involved is being set up, none the less, despite those strong wishes, the detail on future arrangements remains extremely scarce. If the Prime Minister succeeds in moving us on to the next stage, as I hope she does, it is absolutely critical that that detail is fleshed out at the earliest stage. I hope that we will take the opportunity of strengthening the political declaration that comes as part of the package with the withdrawal agreement, as the Prime Minister said today, so that it makes more reference to legal services in particular.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate the hon. Member for Huntingdon (Mr Djanogly) on securing such an important debate, and I will touch on some of his remarks. He mentioned that the legal services sector contributed £26 billion to the economy. Like him, I look forward to hearing the Minister outline what her Department is doing to prepare for a hard Brexit, should that occur on 29 March.

My colleague on the Justice Committee, the hon. Member for Henley (John Howell), mentioned a point made by Lord Chief Justice on the paucity of judges in the English system, which has come up from time to time in the Committee’s deliberations. I have made it a habit not to disagree with the Chair of the Justice Committee, the hon. Member for Bromley and Chislehurst (Robert Neill), because he is wise and rarely wrong, and he was right again, particularly when he brought up the potential position of family courts post-Brexit. He also mentioned that the discussion is akin to groundhog day, which I am pleased to tell him is on my birthday, so I look forward to a nice bottle of malt from him.

[Robert Neill]

Does the hon. Gentleman want single or double?

[Gavin Newlands]

Whatever the hon. Gentleman can afford; I would be most grateful.

On a more substantive point, we have heard today that Brexit has the capacity to complicate and disrupt every aspect of our lives. Over the decades, European co-operation on justice issues has undoubtedly led to countless criminals and victims getting justice. Brexit seriously risks that successful current arrangement for very little gain. It is vital that the UK Government do everything in their power to ensure that cross-border legal service arrangements are as close as possible to the current arrangements.

At the moment, it is unlikely that the Prime Minister’s withdrawal agreement will pass the House of Commons. On top of countless other problems, a no-deal Brexit would discard the agreement to have reciprocal recognition of legal qualifications. With their technical notice, the Government have provided something, but it does not provide anywhere near enough clarity on justice arrangements after a no-deal Brexit. I welcome the fact that under the withdrawal agreement, mutual recognition of legal professionals would continue at least during the transition period.

That is just one example that highlights how European Union membership benefits our justice system and society more widely. The Scottish National party will continue to argue that the best course of action for Scotland and the UK’s other constituent nations is full membership of the European Union. Failing that, even single market access via the European economic area and customs union membership would also allow current arrangements to continue unhindered.

We are hurtling rapidly towards a blindfold Brexit, with no clarity on what future arrangements will look like. Despite some of the welcome guarantees, we are still none the wiser about what the arrangements for legal services will look like. We remain gravely concerned about the future of legal services in Scotland and across the UK after transition. I urge the Minister and the UK Government, in the strongest possible terms, to get their act together and address that urgently in the future partnership arrangements.

No one can know for certain what will happen in the next few months, but it is clear that the Prime Minister will struggle to gain approval for the agreement, and a damaging no-deal Brexit is still a real possibility. As we heard from the hon. Member for Huntingdon in his opening speech, the mutual recognition of professional qualifications directive, the lawyers’ services directive and the lawyers’ establishment directive all provide reciprocal arrangements between EEA states for the recognition of qualifications, creating arrangements for European lawyers to register to practise permanently in another EEA state as a registered European lawyer. As the Government’s technical notice clearly states, if no deal came to pass, those reciprocal arrangements would cease to apply, which would result in a sharp end to them on 29 March. As we have heard in great detail, that would be an unmitigated disaster for law firms and lawyers who operate in the EU.

The Law Society of England and Wales carried out research on Brexit. Some £3 billion could be stripped from the sector’s turnover by 2025 if the UK crashes out of the EU without a deal, and a hard Brexit could cut the legal sector’s rate of growth by half. The UK is a world-leading centre in legal expertise, as we have heard, and that standing could be irrevocably diminished because of Brexit—“global Britain” indeed. The Scottish National party has been consistently clear that freedom of movement and all the advantages that it brings should be allowed to continue in Scotland. Ending freedom of movement will jeopardise the continuing success of the legal sector in a country that voted overwhelmingly to remain in the European Union. That will be heavily damaging and deeply unfair. It is vital that the legal sector continues to receive the benefits of freedom of movement, and retaining freedom of movement is the simplest way to secure that.

Andrew Langdon, Chair of the Bar, told the Justice Committee 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.

Stakeholders and leading legal experts are desperately calling out for clarity and decisive action from the Government. A sector that is especially vital to the UK economy is under threat, and our lawyers need answers beyond the transition period. If the Prime Minister cannot get an agreement through the House, we seriously risk subjecting the sector to further irreparable damage. It is therefore better to reverse the whole shambolic process and remain in the European Union, so that we would retain the benefits, not only in the justice system but in countless other areas that have enjoyed benefits for decades. At the very least, we should come to an agreement on retaining membership of the single market and the customs union, but if, as I fear, we do not, I suspect many Scots will feel that they have no choice but to exercise their democratic right to regain all those benefits by choosing an independent path of their own within the European Union.