The Winners of the ‘Brexit’ Debate Are... Lawyersby
Britain facing possible June vote on leaving European Union
Law firms preparing to update clients on `Brexit' scenarios
British attorneys say the country’s possible departure from the European Union would bring economic chaos -- even as they benefit from increased billing hours from briefing clients about the move.
The country is moving toward a referendum on its EU membership, a vote that Prime Minister David Cameron said Wednesday may come as early as June 23. The uncertainty is bringing short-term benefits to firms as clients seek advice, according to Richard Tromans, a U.K.-based law-firm consultant.
Lawyers say the higher billing hours won’t make up for the longer term negative shock to the economy should Britain leave. Attorneys in London -- the region’s business hub -- are seeing increased work advising U.K.companies on scenarios of a "Brexit" and redrawing regional contracts. Customers want guidance on trading agreements, tax and employment law while firms are still unclear on how a withdrawal will harm their own businesses.
"Paradoxically, the firms who’ll benefit from the preparatory work will be the most international, but they’ll also be the most exposed as they have the most lawyers across the EU,” Tromans said. “There will potentially be an enormous amount of preparatory work, but after, there will be an impact on investment, transactional work, migration of talent and employment law.”
Cameron is trying to appease his Conservative Party’s right wing, which opposes closer ties to the continent. While he says he’ll campaign against an exit, polls remain inconclusive, with some online surveys suggesting it’s too close to call. Leaving the EU -- dubbed Brexit by the British media -- is the biggest threat faced by U.K. businesses, economists have said.
On Tuesday, European Union President Donald Tusk, issued a draft proposal that offered a four-year brake on welfare for EU migrants, as well as safeguards to shield the U.K. financial system from interference by euro-area regulators and more powers for national parliaments. Still, Cameron -- who had to defend his negotiations in Parliament Wednesday -- had to give ground on key demands including welfare payments for children living outside the country.
International law firms with London roots, such as Allen & Overy, have significant interests in the EU and employ thousands across dozens of offices. The expansion beyond the capitol was initially aided by the EU harmonization process in the 1980s and the recognition of professional qualifications that let firms go into business with lawyers in Germany and France.
"It is the defining issue for the U.K. economy and our place in the world for a generation,” David Morley, Allen & Overy’s senior partner, said in an interview. “We should voice our concerns as a player in what feels like a high-stakes game. There are potentially serious consequences for firms like us.”
Allen & Overy, the third-largest U.K. firm last fiscal year with revenue of 1.28 billion pounds ($1.8 billion), generates about two-thirds of its income outside of Britain, with a third coming from Europe. That split is similar to those at the country’s other large firms.
A vote to leave Europe would mean “there is a very good chance we will be going from Great Britain to Little England as the Scots would most likely want to leave the U.K.," Morley said. “It’ll make us even less relevant to the rest of the world. Why would a country with less than 1% of the world’s population -- 3% of the world’s GDP output -- believe it is better off on its own rather than as part of a market of 500 million people?"
Membership of a group set up to give lawyers a platform to voice their concerns on a "Brexit" has risen to about 300 in 12 months. Lawyers Against Brexit, headed up by antitrust attorney John Davies, plans to publish a paper in this month examining both sides of the argument.
While politicians start to campaign, firms have begun preparing briefing documents. DLA Piper has a team of over 20 lawyers in Europe and the U.S. on hand to lay out potential scenarios to clients. Hogan Lovells set up a taskforce to walk clients through the potential risks, with specialist staff able to discuss implications on issues including bi-lateral treaties and trading agreements.
“Brexit would require new legal trading agreements with the EU and much of the rest of the world, for better or worse, and mechanisms to ensure continued compliance with EU law for products to be sold or business conducted there," Susan Bright, Hogan Lovells managing partner for the U.K. and Africa, said.
Should the U.K. vote to leave, lawyers will be leading the potential two-year long negotiations that will decide the look of the U.K.’s relationship with the EU. The time frame appears optimistic to some who say the breakup could be the "biggest legal divorce in history," Phillip Souta, Clifford Chance’s head of U.K. public policy, said.
The uncertainty will keep firms busy before the vote as each hypothetical situation arises -- even lawyers don’t have all the answers.
"We will be throwing away 43 years of established business, regulatory and political conventions,” Morley said. “Do you think they’ll be able to negotiate all that in just two years?”