What has just happened?

The coronavirus pandemic has knocked the Brexit negotiations. However, Michael Gove (Cabinet Office minister), told MPs that the business turmoil caused by coronavirus would not cause the government to seek an extension to Britain’s post-Brexit transition period.[1]

What does it mean?

The UK government has ruled out any extension to the transition period and legislated for a commitment not to agree to any extension in the Withdrawal Agreement Act.[2] If the UK government fails to conform to extend the transition period and the future relationship framework is not ready for implementation, then the UK will exit the EU with a ‘no deal,’ which is going to affect not only the EU but also the UK.[3]

Labour Party and David Guake have warned that no-deal Brexit would be disastrous as the current UK-EU trade relationship would cease to apply, and the trade between the two would fall back to World Trade Organisation rules.[4] The petition asking for the extension of the transition and delay of the negotiations until after the coronavirus outbreak has so far received 57,125 requests on the date of writing this article.[5] Despite Boris Johnson making clear that he has no intention of extending the transition period, the government will have to consider the petition for debate in the Parliament after the petition has received 100,000 signatures. Therefore, it is likely that the transition period will be extended even if the government is currently against the extension.

How does this affect the legal industry?

‘No-Deal’ Brexit will have a significant impact on the legal industry. It would take a £3.5bn chunk out of the legal sector and put 10,000 jobs at risk.[6] The changes in legislation will have a direct impact on the law and an indirect effect on commercial law, particularly the cross-border trade.

If there is no UK/EU harmonised system agreed, then enforcing an English Court judgment in the EU will become more difficult.[7] With the change in the law, the commercial parties will have to spot various legal issues and help the clients to make practical decisions. The problems range from tackling the economic unviability of the contract, determining which law or court would regulate the contract to the need to consider the interpretation of the force majeure clause and whether the parties would be allowed to vary or adjust the price under the contract in response to currency or inflationary pressures.[8] This will increase business for law firms.

The legal talent pool across the UK will be impacted if adequate immigration policy is not introduced.[9] Without a deal, the UK, EU lawyers, and law firms will have a limited right to practice as there will be restrictions in regards to free movement across Europe.[10] It would result in new tariffs being introduced, which will increase the cost and administrative burden for lawyers and their clients as it will also be hard to provide legal advice in other EU countries.[11] A large number of international commercial firms’ clients are based in EU countries. Therefore, if there is ‘no-deal’ Brexit, it will be hard for firms to serve the clients on a fly-in-fly-out basis under the Lawyers’ Services Directive.[12]

Written by Samriti Rudhra

Assessing Firms:

#DLAPiper #IrwinMitchell #BurgesSalmonLLP #White&CaseLLP #AkinGump #Bird&Bird #Dentons

References:

[1] George Parker and Jim Brunsden, ‘Boris Johnson tells EU to shift Brexit Stance’ (The Financial Times, 27th April 2020)

[2] Haydon Etherington, ‘Brexit Transition Period’ (Institute for Government, 19th February 2020)

[3] Stefano Fella, ‘Brexit: What happens next?’ (House of Commons Library, 3rd January 2020).

[4] Stefano Fella, ‘Brexit: What happens next?’ (House of Commons Library, 3rd January 2020)

[5] UK Government and Parliament, ‘Extend the transition; delay negotiations until after the coronavirus outbreak’ (Petition)

[6] Kate Beioley, ‘Legal sector faces £3.5bn hit from no-deal Brexit, says Law society’ (The Financial Times, 1st August 2019)

[7] Mark Dewar, ‘No-deal Brexit: Impact on long-term commercial contracts’ (DLA Piper, 1st September 2019)

[8] Mark Dewar, ‘No-deal Brexit: Impact on long-term commercial contracts’ (DLA Piper, 1st September 2019)