On 23 June, the people of Britain will vote on whether the UK should leave the European Union. The UK has been a member of the EU (then the EC) since 1973 and in the 43 years since we joined our laws have become increasingly dependent upon EU law.
A vote in favour of leaving, or 'Brexit', will have implications both for corporate and commercial lawyers and for their clients.
Legislative Uncertainties
Directly effective EU law would cease to apply in the UK, leaving many legislative gaps. Drafting new provisions to fill these gaps would be time consuming but replicating EU provisions wouldn't be as simple as it seems, as many ongoing roles previously assigned to EU bodies would need to be reassigned to UK bodies or ministers, or new bodies and roles would need to be created in the UK.
UK laws which implement or supplement EU law would remain in place, however there would be similarly functional difficulties concerning their interaction with relevant EU law and EU systems and also difficulties concerning their interpretation. It is unclear whether UK courts would continue to rely on the purposive interpretations previously given by the EU or would now take a UK approach to their interpretation. UK courts would no longer be in a position to refer questions of interpretation to the Court of Justice of the EU (CJEU), and it is also unclear whether they would continue to rely on decisions of the CJEU which previously were authoritative. As time goes on, there is the possibility of an unusual situation where UK laws share derivation and wording with laws of other EU countries but have very different interpretations.
Practical legal issues
Depending on both wording and business context, it is possible that certain contracts could be terminated as a result of Britain leaving the EU. For example, contracts which rely on aspects of Britain's membership of the EU, such as the passporting regime, could be frustrated. Where performance of a contract continues to be possible there still may be difficult questions of interpretation where contracts refer to or are dependent on EU legislation. When drafting new contracts, solicitors will need to provide for the many different possible models that Britain may choose to adopt in forging a new relationship with the EU.
Currently, parties to a contract are generally able to select which EU member state's courts will have jurisdiction to settle any disputes, although in certain situations the court will be determined by specified factors. However other courts within the EU are bound to recognise the judgement of the court chosen. A key advantage of this is the reduced likelihood of parallel proceedings, which are time consuming and costly for the parties involved. Following Brexit, Britain could prohibit parallel proceedings by acceding to the 2007 Lugano Convention, but contracting parties would nevertheless lose the ability to choose a jurisdiction. The various possibilities here also need to be provided for when drafting new contracts.
Implications for businesses
On 9 May the Institute of Directors published the findings of a survey of 1,224 of their members, showing business leaders to be 2-1 in favour of remaining in the EU. Their Director General pointed to trade in the single market and access to skills and labour as reasons for the majority opinion.
Loss of access to or restricted access to the EU single market is one of the biggest concerns for businesses in the UK. The single market removes barriers to trade and its harmonised rules make it easier for businesses across the EU to trade and work with one another. The UK financial services sector in particular is reliant on the single market passporting system, which allows UK authorised firms access to the rest of the EU. The free movement of labour, despite being a contentious issue for individuals in the UK, is also recognised by businesses as being a key asset of EU membership, offering access to a greater pool of skilled workers.
Following Brexit the UK would have to come to a trade agreement with the EU, but it's not yet certain what this would involve. In order to secure access to the EU market and EU workers, the UK would likely be forced to accept measures such as free movement of other EU citizens and obligations to contribute to the EU budget. Once this trade agreement is in place burdensome cross border issues may nevertheless be enough to drive some businesses out of the UK, with Deutsche Bank and HSBC having already threatened to leave.
Currently, and in any interim period between a vote in favour of Brexit and Britain leaving the EU, uncertainty itself has an impact. There are recent reports that investment in Britain has already slowed, and that the fall in the value of sterling against the dollar since the vote was announced in February have left it at a seven year low. Following the vote, there may be certainty as to whether or not Britain will remain in the EU, albeit we cannot rule out the possibility of a further referendum. If, however, Britain votes to leave there will still be uncertainty as to the nature of Britain's new relationship with the EU. Such uncertainty may continue for several years and the Bank of England has warned that sterling could further 'fall sharply'.
Conclusion
Lawyers can expect a larger workload generated by the uncertainties and complications of the legislative changes associated with Brexit. However there is a risk that, due to short term and long term reductions in investment and business activity in the UK, corporate and commercial lawyers would likely face a significant decline in business overall.
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