Law firms are bracing themselves for a surge in client demand now Britain has voted to leave the European Union.
It is a decision that will not sit well with many lawyers, with a number of law firm leaders showing their support for the Remain contingent back in March.
Law firms have been contingency planning for Brexit for many months. One senior legal source even went so far as to call it “disaster planning”.
Simmons & Simmons, Clifford Chance and Dechert all set up their 24-hour hotline services for clients last night. Meanwhile, other firms are sending out pre-prepared Brexit materials to clients, with events due to be held next week to debate the consequences of this unprecedented decision.
One partner told The Lawyer he has already arranged an emergency breakfast meeting with a heavyweight investment banking client, set up as the results of the vote became clear overnight.
“We were quick to start engaging with businesses when the referendum was announced,” says Simmons & Simmons partner Mark Curtis. “We had a microsite to help clients and held roundtables and client meetings, which then meant we could go back and tailor content that was already on the microsite.”
Pinsent Masons partner Guy Lougher adds that “the most important thing we’ve been trying to address is clients’ needs. We’ve been trying to think about what happens next.”
The Law Society said this morning it is clear the amount of work to do in the coming months “will be enormous”. President Jonathan Smithers said: “It’s clear that there is an enormous about of work to do in the coming months and years to establish the terms of withdrawal from the EU and scope necessary changes to domestic law.
“The UK will also need to resolve issues relating to its trading relationship with other parts of the world, specifically in terms of international trade agreements. Amid all the uncertainty it’s important to emphasise there is no immediate change to anyone’s legal rights or obligations.”
Preparing to leave
Predicting what will happen next has been a challenge for politicians and law firms alike, with sources describing Article 50 of the Lisbon Treaty as “extraordinarily vague”.
“It’s not clear how the Government is going to serve its notice to leave and under what timescale,” one lawyer says. “It’s a real problem for businesses.”
Many firms have sent out “first stage of defence” checklists to clients in the last few weeks to help them adapt their businesses as Britain prepares to leave the EU. Pinsent Masons has been perfecting its checks after several trials with selected clients.
“We wanted to see what would be most useful to clients in the event of a Leave vote,” Lougher explains. “It goes through what you need to think about, such as contracts, employee arrangements and passporting. Clients like it and it can be used by any sector.”
Financial services groups have been most heavily hit in the run-up to the referendum, with the number of transactions decreasing amid market uncertainty. There has been a real dampener on capital markets and high yield work, giving City firms less opportunity to win some of the larger mandates.
“The financial services companies have obviously been focusing on preparing for Brexit but a lot of other clients in different sectors are still turning over it all in their minds,” notes White & Case partner David Crook. “They will need to devote a lot more time to it.”
“The referendum has hit some areas harder than others,” echoes Ashurst partner James Coiley. “In-bound investment has certainly slowed.”
Now that Britain has voted to leave the EU, the question for City firms will be whether London can continue to be seen as a place of investment. Work depends on the amount of foreign direct investment coming into the country and the attractiveness of the country to Chinese and US investors.
“Will this affect us if we’re not a member of the EU?” asks one lawyer. “We do not know.”
The future of London
Brexit has far-reaching implications for both UK and non-UK clients, who will need to think carefully about where they want to do with their businesses.
“It was largely seen as a domestic issue,” explains Simmons partner Curtis. “But as the polls narrowed and Brexit became more realistic, the volume of calls from clients outside the UK increased.”
As a result, some partners said that relationships between their UK and European offices have improved throughout Brexit planning. “Discussions about the nitty gritty has brought us closer together,” says Baker & McKenzie partner Ross Denton.
“Our relationship with the EU offices has firmed up,” he adds. “Lively debates have brought us closer together.”
White & Case partner Oliver Brettle echoes these sentiments, explaining: “We’ve found the Brexit events we have organised and the preparation of client advice on its implications have encouraged further international co-operation between our EU offices.”
“Clients in Europe are interested in Brexit as a topic,” he says. “There’s been a real scratching of heads as to why we’d want to leave. Colleagues see Britain as a positive influence to influence the EU towards more free trade.”
Transactional work is the obvious area that will be most affected by Brexit, with no-one really knowing whether deal activity will now pick up post-vote. However, White & Case partner David Crook believes “the willingness of parties to choose English law will continue,” despite Britain severing its ties with the EU.
Competition law taking the hit
City competition practices will be some of the worst affected in the legal market, with lawyers seeking admission on the Irish roll and Bar in recent week due to issues of privilege in the EU courts.
This week the Law Society of Ireland confirmed it has admitted a record number of UK solicitors since the start of 2016. The figure is more than three times the total at this point last year and the majority have cited Brexit as their primary reason for seeking admission.
Lawyers explain that admission is not the only thing law firms are seeking in the Republic of Ireland, commenting that firms would be at “a big advantage if they had an office in Dublin.”
“Having a presence there would enable firms to do things they want to,” say one partner. “There’s an availability of low costs flights and places likes Dublin and Cork are easily accessible.”
These are just some of the decisions that law firms will have to take in the next few months, as they attempt to assess the most viable solutions for the firm and their clients. But the element of the unknown remains ride as businesses wait to see how the Government will negotiate the terms.
What is certain is that Brexit has tested firms’ ability to prepare for the future, with both the EU and Scottish Referendum proving to be steep learning curves in contingency planning.