Leaving the EU: Legal Services

– in Westminster Hall at 4:26 pm on 21 November 2018.

Alert me about debates like this

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 4:26, 21 November 2018

I beg to move,

That this House
has considered the provision of legal services after the UK leaves the EU.

I am pleased to have secured this timely Brexit debate on the provision of legal services. This is a key moment for our country’s wellbeing and direction, and the implication for the provision of legal services is significant. I introduce myself as a non-practising solicitor and as chair of the all-party parliamentary group on legal and constitutional affairs, which produced a report in October that noted serious issues that merit further debate. I take this opportunity to thank the APPG’s secretariat from the Law Society for its assistance with the report.

Before I launch into Brexit issues, let me explain why the legal services sector is so important to our economy. The legal services sector is a great UK success story. The UK has the second largest legal services market in the world and the largest legal services sector in the EU. In 2017, it contributed more than £26 billion to the economy—equivalent to 1.5% of GDP—and was responsible for net trade of some £4 billion. It employs and trains over 380,000 people.

The jurisdiction of England and Wales is recognised as a global centre for legal services, particularly for international, commercial and corporate transactions, and dispute resolution and arbitration. In 2015, more than 22,000 commercial and civil disputes were resolved through arbitration, mediation and adjudication in the UK. In the commercial court, which is housed in its new, modern building, nearly 1,100 claims were issued, of which two thirds involved at least one party whose address was outside England and Wales.

Our legal services sector is a great international success story, but we have no natural right to retain that business. Indeed, over the past 10 years several jurisdictions have sought to compete with England and Wales. We keep the work because of the excellence of our professional lawyers and judges and because of foreign parties’ trust in our rule of law and our reputation for judicial efficiency and fairness.

Photo of John Howell John Howell Conservative, Henley

My hon. Friend makes a very valid point. Surely one of the biggest threats to the UK comes from Singapore, which is developing a good range of courts to tackle commercial issues. I have raised the subject on several occasions, but there does not appear to be a united Government front to see off the threat from Singapore.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

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.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee

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.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

My hon. Friend makes another very important point.

English law is the most widely used legal system in the world—27% of the world’s 320 legal jurisdictions use it. There are more than 200 foreign law firms with offices in the UK, from more than 40 jurisdictions. The UK legal services sector is forecast to produce turnover of £30.82 billion and net exports of £4.25 billion by 2025.

Brexit will be the largest ever change to the UK’s legal framework and it represents both opportunities and risks for the legal sector. The impact of Brexit on lawyers, law firms and legal practices will be significant. Negotiations around the UK’s withdrawal from the European Union and the transition period have been agreed, but questions remain, especially about the future relationship of the UK and the EU.

Photo of Ellie Reeves Ellie Reeves Labour, Lewisham West and Penge

Legal services amount to the equivalent of 1.5% of GDP. Both the Bar Council and the Law Society have issued warnings that any form of Brexit will have a significant impact on the sector. Does the hon. Gentleman not agree that it would be better for the legal services sector if we remained in a single market?

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

Yes, and the hon. Lady is going to hear me explain how the post-Brexit situation that I want to see is as close to that as possible.

Photo of Jonathan Lord Jonathan Lord Conservative, Woking

I congratulate my hon. Friend on highlighting in this place the importance of the legal services sector to our economy and our justice system. Will he indicate what he believes the direction of travel for the legal services sector is in the proposed deal? We would all be interested in his initial reaction.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

That is exactly what I shall be doing.

The legal sector has broadly welcomed the Government’s negotiating stance so far. However, concerns remain that withdrawal from the EU and our future relationship will not deliver in a number of key areas for legal services. There are concerns over whether the Government’s current approach will deliver sustainable market access for legal services and flexibility for services. Unlike financial services, there is no in-depth common rulebook or Europe-wide regulator in legal services. Instead, legal services remain regulated autonomously by each EU member state, while functioning on the principle that an EU law firm should be treated as equal to domestic lawyers and firms. There is therefore no great benefit for the legal sector in maintaining regulatory flexibility when pursuing trade agreements with third countries.

I would point out, from my time on the Exiting the European Union Committee, that that is the view of most service industries. They have every intention of following EU rules whether they are mandated to or not, because that is what their business dictates. Certainly, from a legal services perspective, the preservation of the present system should be prioritised, so that lawyers from EU member states, European economic area states and Switzerland can practise freely across the continent.

The APPG inquiry focused on mutual market access and on how legal services will be able to operate following the UK’s withdrawal from the European Union. We accepted written evidence and held sessions in Parliament to hear oral evidence from interested parties, including law firms and chambers, individual practitioners and other stakeholders. We sought evidence on the impact of Brexit on legal practices, the workforce, business structures and client bases. We explored how lawyers currently practise across borders, looking at everything from rules on immigration and practice rights to the recognition of professional qualifications, and how that is anticipated to be affected by Brexit. We sought to understand where contingency planning was taking place and what steps firms were already taking to mitigate any effect of Brexit on the sector. We sought to understand the key concerns of the sector about the effect of Brexit, and we published the final report in October—if anyone wants a copy, I have some. It explored the concerns and comments raised in the oral and written evidence.

We made 10 recommendations. First, the Government should ensure that mutual market access is retained, as currently envisaged, in any transitional arrangements. Secondly, we urge the Government to seek to retain mutual market access as far as possible in any future relationship with the European Union. Thirdly, the Government should ensure that UK lawyers are able to continue to serve their clients post Brexit on what is called a fly-in, fly-out basis. Fourthly, the Government should ensure that any future relationship with the EU includes a mechanism for UK lawyers to practise EU law via the mutual recognition of professional qualifications and law firm structures. Fifthly, the Government should seek to secure the rights of audience in EU courts, such as the Court of Justice of the European Union.

Sixthly, it is vital that, following Brexit, the Government provides for the ability of the legal sector to easily recruit skilled individuals from outside the UK. Seventhly, the Government should ensure that our immigration system does not block lawyers from continuing to provide services in the EU. Eighthly, the Government and the EU should agree on the draft withdrawal agreement as soon as possible to ensure a transition period that provides legal certainty—that one, hopefully, gets a tick. Ninthly, any transitional agreement should replicate the current legal framework as far as possible to ensure legal certainty and prevent businesses and individuals from having to adapt to changes in their rights and obligations twice—once during a transitional phase and once upon implementation of a new UK-EU agreement. Tenthly, a no-deal scenario should be avoided at all costs.

Let me address a few of those points, taking first the ability to practise, mutual recognition of professional qualifications and rights of audience. Of key concern to the legal sector was the ability to practise in Europe. The current framework, which allows for the mutual recognition of professional qualifications, rights of audience and the ability to practise and establish firms in EU member states, has hugely benefited the UK legal services sector, providing a large net contribution to the UK economy, as was mentioned by my hon. Friend Robert Neill. As far as possible, mutual market access should be retained.

Photo of Ellie Reeves Ellie Reeves Labour, Lewisham West and Penge

The withdrawal agreement does of course refer to mutual recognition, but only for the transition period. Does the hon. Gentleman agree that that creates further uncertainty for the legal profession, which, as has been pointed out, already contributes such a lot to our economy?

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

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.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee

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?

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

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.

Photo of John Howell John Howell Conservative, Henley

My hon. Friend is being very generous with his time. I am not sure that I heard him mention the family courts in his list of things that we need to establish good relationships over. The family courts are very important, because sadly the amount of work that they undertake—on both sides of the channel—is growing. There is enormous mutual responsibility for them.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

I agree with my hon. Friend, who makes an important point. The Brussels II regulation is a single legal instrument that helps families resolve disputes about divorce and the custody of children where they involve parties in more than one EU state. Under the regulation, EU courts automatically recognise judgments on matrimonial and parental responsibility that are delivered in other states. That will no longer apply to the UK when we have left the EU. Similarly, the maintenance regulation, which helps to ensure the payment of maintenance in cross-border situations, will no longer apply.

In a no-deal scenario, the UK and EU27’s trading relationships in legal services would be governed by the general agreement on trade in services, or GATS, which falls far short of replicating the current EU framework. UK lawyers would be subject to myriad rules and regulations in each of the 31 European Free Trade Association states rather than to a single legal framework. UK judgments are automatically recognised and enforced across the EU27, but they will not be in a no-deal scenario, unless the UK unilaterally signs The Hague convention.

At the moment, clients can receive UK law advice from UK lawyers however and wherever they want in the EU; in a no-deal scenario, clients in some jurisdictions might be limited in how they can received UK legal advice from UK lawyers. Currently UK lawyers have the automatic right to set up practices in an EU host state with minimal bureaucracy; in a no-deal scenario, UK lawyers’ ability to set up practices in an EU27 jurisdiction will depend on local laws and regulations. If establishment is possible, permitted activities still might be limited.

Currently UK lawyers have the right to advise clients who are based in the EU27 on EU law, because their legal professional qualifications are automatically recognised. In a no-deal scenario, clients based in EU27 jurisdictions might no longer be able to receive EU law advice from UK lawyers, as UK legal professional qualifications might not be recognised. Now, law firms can set up in one EU member state and export their services across the EU by establishing branches of the same structure in other member states. In a no-deal scenario, legal entities would lose the automatic right to use their preferred business structures in certain EU27 countries, and the UK corporate form of limited liability partnerships might no longer be accepted in some jurisdictions. As can be seen, we must avoid a no-deal scenario.

Growing concern that the UK could exit the EU without a deal has led the Law Society to publish a series of papers that give solicitors guidance on how to take steps to mitigate some of the risks. Law cuts across every area of life, and often UK and EU lawyers work across borders and enforce and litigate on family, data or business disputes. The first tranche of Law Society papers gives advice on some of the potential rule changes where a deal between a business here and in the EU goes wrong, what happens in family law if a couple splits up, and how we should approach data sharing should we quit the EU without an agreement. There is another paper on providing legal services in the EU, and I understand that further papers are in production. Perhaps the Minister could take this opportunity to explain how her Department is preparing itself and the legal services sector for a no-deal scenario.

It is fair to say that services, including legal services, have not been given the same attention in the Brexit process as manufactured goods have. The sector wants a bespoke agreement that comprehensively covers legal services and is based on mutual market access, mutual recognition of regulatory frameworks, regulatory co-operation and continued mutual access to talent. I have high regard for the Minister, her understanding of this sector and her ability. I hope that she takes the opportunity provided by this debate to set out how she will champion the English legal services sector in negotiations on the future relationship with the EU, with the intention that legal services are not left behind and will be given the tools to maintain their world-leading reputation for excellence after Brexit.

Photo of John Howell John Howell Conservative, Henley 4:48, 21 November 2018

It is a great pleasure to serve under your chairmanship, Sir Christopher. I will not speak for very long, but I want to raise an important point about international arbitration while wearing my hat as the chair of the all-party parliamentary group on alternative dispute resolution, which looks at arbitration, mediation and other forms of dispute resolution.

I was pleased to see that the withdrawal agreement commits us to international arbitration to resolve any disputes between us and the European Union as we exit it. That is a very positive step forward and a good compromise to have received from the European Union. I pay tribute to the authors of the withdrawal agreement for getting the EU to agree to that. I put so much emphasis on international arbitration because it is arguably a cheaper and much quicker way of resolving disputes. As we have heard, we are a leading centre for arbitration, as the number of people who come to us from around the world indicates. They do that because of our distinguished judges and arbitrators, and because English law is admired around the world.

I raised that issue with the Lord Chief Justice this week, and I asked him how secure he is in believing that we will be able to continue with this regime after Brexit. He said, first, that it is difficult to see it continuing unless we do something about the fact that the number of judges is so diminished at the moment. That is a very important point. Arbitration is not solely based on judges, but we need judges with a great deal of experience.

The second thing he said—I made this point in an intervention—is that we need to be more aware of the alternative centres that are emerging around the world to deal with arbitration. I mentioned Singapore, which has put tremendous effort into developing a commercial solution. I hope that in the summer recess—assuming we still have one—I will be able to go out to Singapore to see for myself how its arbitration courts work and what sort of cases they deal with. We should be concentrating on those important things.

My hon. Friend Mr Djanogly said that legal services make an enormous contribution to the UK’s economic activity. I will not repeat what he said about them, other than to underline their phenomenal contribution.

I want much more emphasis to be put on tying up the elements that I have mentioned. We should not take for granted our legal position as the pre-eminent jurisdiction for arbitration. Our officials need some fight to ensure that we keep our jurisdiction and our reputation so that we can continue with that.

I stress the importance of ensuring that we have some sort of reciprocal arrangement for the family courts. My hon. Friend mentioned Brussels II and the maintenance regulations that apply to it. It is not the ideal form of governance of the situation with the European Union, but it is undoubtedly better than what preceded it, and we should be very careful about throwing it out.

I was disappointed not to see more in the withdrawal agreement about the protection of legal services. There is a gap there. It would have been nice to see more about how they will operate in the new environment and about how qualifications will continue to be recognised beyond the transition period. Those points have already been made, but I am happy to make them again because they are important and we need an answer.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee 4:54, 21 November 2018

It is a pleasure to serve under your chairmanship, Sir Christopher. I warmly congratulate my hon. Friend 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 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.

Photo of John Howell John Howell Conservative, Henley

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.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee

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 resigning 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?

Photo of Alex Chalk Alex Chalk Conservative, Cheltenham

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?

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee

I agree that there is a danger of us becoming a legal version of groundhog 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.

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Sport), Shadow SNP Spokesperson (Northern Ireland), Shadow SNP Spokesperson (Wales) 5:02, 21 November 2018

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate 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, 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, 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.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee

Does the hon. Gentleman want single or double?

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Sport), Shadow SNP Spokesperson (Northern Ireland), Shadow SNP Spokesperson (Wales)

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 practice 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.

Photo of Yasmin Qureshi Yasmin Qureshi Shadow Minister (Justice) 5:08, 21 November 2018

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate Mr Djanogly on securing the debate, and thank him for his comprehensive speech, which dealt with the issues and challenges we will face once the Brexit negotiations have been carried out. I commend him on the work that he has done as chair of the all-party parliamentary group on legal and constitutional affairs in the inquiry on the effects of Brexit on legal services.

This has been a thoughtful and considered debate. In particular, I thank John Howell, who does a superb job as the chair of the all-party parliamentary group on alternative dispute resolution. He discussed the need for arbitration and how it, too, is important to UK legal services. I hope we have further debates, for example on family law protection or the European arrest warrant post Brexit. Serious concerns have been expressed in all parts of the Chamber.

As we have heard, Brexit will be the largest ever change to the UK’s legal framework, which presents many concerns and risks for the legal sector. Regardless of the outcome of the negotiations, we need to ensure that citizens and businesses in the UK continue to have certainty about access to justice in civil, commercial, consumer and family law matters. That requires clarity on the responsibilities of the courts in the United Kingdom and in the European Union, and certainty that judgments can be enforced with a minimum of delay and cost.

The UK legal services market, as the hon. Member for Huntingdon said, is worth anything between £25 billion and £30 billion in total, employs 370,000 people and in 2015 generated an estimated £3.3 billion of net export revenue. Central to that market is the ability of barristers, solicitors and other legal professionals to provide legal services in the European Union. Equally importantly, our exporters’ confidence in doing business abroad depends greatly on the ability of their lawyers to establish and provide services in the countries in which they seek to trade and invest. Numerous aspects of the work of barristers and solicitors will no longer be possible when we leave the European Union, unless existing cross-border rights are preserved.

The Government must therefore have regard to the nature of the legal work that comes to the UK as a result of the UK legal profession’s expertise, not least in European Union law. Will the Minister tell us what measures the Government are taking to maintain cross-border legal practice rights and opportunities for the UK legal sector, given efforts by European Union law firms to use Brexit to win clients from UK competitors?

The draft withdrawal agreement, like the White Paper before it, continues to emphasise regulatory flexibility in the context of services, which would not assist the legal sector. Legal services do not need further regulatory flexibility: the regime in the European Union is already considered to be among the most liberal in the world, and provides lawyers with the freedom to advise and represent their clients anywhere in the EU and in any dispute resolution forum.

The Government have also made mention of adopting the approach of a free trade agreement to services. That is disappointing. Will the Minister explain how a binding EU-wide regulatory framework for legal services could be agreed in the context of a free trade agreement? Is there a danger that the legal profession in the UK would be left to negotiate different bilateral agreements covering the provision of legal services with many of the EU member states? Will that leave a patchwork of rights and obligations, varying from country to country?

I am also concerned that lawyers from England and Wales might lose their right to advise on European law when in the EU. UK businesses, which will still need to operate under EU law, will be unable to have their trusted UK legal professionals by their side and will instead be forced to hire EU lawyers with whom they are not familiar, and vice versa—despite language and other barriers—to protect and defend their rights within the European Union. Indeed, lawyers from England and Wales will even lose the right to defend the UK Government, as well as UK businesses and UK citizens, before the Court of Justice of the European Union, despite a former president of the Court recognising the UK profession for providing some of the best advocates. That would be a huge loss to both the UK and the European Union. Will the Minister in her response confirm that the Government will ensure that any future relationship with the European Union includes a mechanism for UK lawyers to practise EU law via the mutual recognition of professional qualifications and law firm structures?

The deal lacks the detail that the professional services sector needs to know in other respects, in particular with regards to temporary mobility for business travel. Do the Minister and the Government appreciate that that is essential for the quick delivery of legal services? For example, a lawyer might need to see a client at short notice in one of the EU members states, or to represent that client in an arbitration or mediation meeting. Will she ensure that, post Brexit, UK lawyers are able to continue to serve their clients on a fly-in, fly-out basis? Does the Minister recognise that the UK risks not only the loss of the tax revenue from legal services, but an erosion of the enormous influence and soft power generated by our legal services sector in Europe and internationally?

Finally, I remind the Minister that the UK is the largest market for legal services in Europe, and globally is second only to the US. The Government must do all that they can to protect Britain’s legal services sector after Brexit if the country is to remain the world’s jurisdiction of choice. Equally, it is vital to ensure that international parties understand the ongoing benefits of using English law and legal services once the United Kingdom has left the European Union. An efficient and cost-effective resolution of disputes is critical to that goal and to the ongoing development of English law. After all, that is at the core of the international attractiveness of the United Kingdom.

I hope the Minister and the Ministry of Justice will consider properly some of the representations made by the Law Society and the Bar Council. We all want the best for legal services, and I hope the Minister will respond on such an urgent issue and perhaps tell us what concrete steps the Department and the Government have taken to deal with it, and with the concerns. I am sure the concerns are not new and that the Government are not unaware of them, so I look forward to hearing from her.

Photo of Lucy Frazer Lucy Frazer The Parliamentary Under-Secretary of State for Justice 5:17, 21 November 2018

It is a pleasure to serve under your chairmanship, Sir Christopher.

I congratulate my hon. Friend Mr Djanogly on securing this debate. I am grateful for the opportunity to take part in it, as the future of UK legal services and their promotion after we leave the EU is important. I am particularly delighted to respond to a debate of my hon. Friend, who not only has extremely ably occupied my role as a former Justice Minister, but is knowledgeable on this issue as a non-practising solicitor, the co-chair of the APPG on legal and constitutional affairs and a member of the Exiting the European Union Committee. I am also grateful to him and to his APPG for their thorough and helpful report.

In that report, the APPG and my hon. Friend recognise the significance of our legal sector. As he rightly said, it is a great success story. The sector is worth at least—it varies—£24 billion a year. The UK’s trade surplus in legal services has nearly doubled over the past 10 years and now accounts for about 10% of global legal services fee revenue. Importantly, the sector provides jobs—it drives employment by employing well over 300,000 people. Those jobs are found throughout the UK, although we also have a huge hub of specialist lawyers, many of whom support our vital financial services sector.

English law, as many people have said today, is the most widely used in the world, with 27% of the world’s jurisdictions using it. International firms want to operate in this country, which is why more than 200 foreign law firms have offices in the UK. UK-based firms also operate around the world, and nearly 7,000 practising solicitors from the UK work abroad. My hon. Friend is right to identify that people come here for their legal disputes because of the integrity of our judges, the professionalism of our lawyers and our respect for the rule of law.

My hon. Friend highlighted that the report recognises that

“Brexit will be the largest ever change to the UK’s legal framework and it presents both opportunities and risks for the legal sector.”

It also recognises that the ability of solicitors, barristers and chartered legal executives to practice as lawyers in the EU is important to lawyers and, as my hon. Friend Member for Bromley and Chislehurst (Robert Neill) mentioned, the people whom those lawyers serve.

As far as the transitional period is concerned, market access will remain the same. The draft withdrawal agreement provides that, during the implementation period, EU and UK professionals working in the UK or EU will continue to have their professional qualifications recognised. We set out in the future economic partnership White Paper our proposal for new arrangements for services and investment after we leave the single market. We must recognise that we will no longer be in the single market and that there will be implications for market access.

The outline political declaration made last week identifies:

“Ambitious, comprehensive and balanced arrangements on trade in services”.

Those go well beyond World Trade Organisation commitments. The political declaration also identifies the need for provisions on market access and the importance of non-discrimination, and records the need for arrangements on professional qualifications. Alongside that, the mobility framework will support businesses to provide services—that includes travelling freely without a visa for temporary business activity, for example.

The outline political declaration will be built on and finalised with the aim of producing a full political declaration, which we hope can happen before the end of the month. In a no-deal scenario, there will be no basis for reciprocity—registered European lawyer status, which allows European economic area lawyers to practice permanently in the UK under their home title, will be phased out after exit. New entrants will be able to seek recognition of their qualifications and be admitted to the UK profession in the same way as third-country lawyers. There will be a transitional framework until 31 December 2020 for EEA lawyers and business owners to transfer their qualifications or adapt their business model.

My hon. Friend the Member for Huntingdon and Gavin Newlands asked me what preparations my Department was making for no deal. As a competent Government, we are making preparations for no deal. We have issued two technical notices, we are preparing our no-deal statutory instruments and we received £17.3 million in the spring statement, which was allocated to our Department to make suitable arrangements. My hon. Friend the Member for Bromley and Chislehurst made important points about laws that we can take advantage of in the event of no deal. We will incorporate Rome I and Rome II into our laws and we will sign up to The Hague convention in our own right.

Beyond negotiations with the EU27, we are working with the sector to promote the benefits of market liberalisation. We want to ensure the continued pre-eminence of UK legal services and English law. The Government are committed to championing the legal services sector. We are building our international and domestic and relationships and leveraging them to promote the sector overseas. We are working to improve legal services market access. We will seek opportunities in future trade agreements to include ambitious provisions for services.

My hon. Friend John Howell was right to identify the importance of international arbitration. Companies often choose the UK as the seat of international arbitration, which is an important part of the sector. The Ministry of Justice is working across the board to prepare for the UK’s exit from the EU, as well as continuing to promote legal services on the international stage.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 5:23, 21 November 2018

It is not often that I get the chance to respond to the Minister, because normally so many people want to speak. I am pleased to do so. I thank my hon. Friends the Members for Henley (John Howell) and for Bromley and Chislehurst (Robert Neill), and the hon. Members for Paisley and Renfrewshire North (Gavin Newlands) and for Bolton South East (Yasmin Qureshi), for their contributions, and the Minister for her response.

I did not hear a lot of difference in the approach across the piece. We know the issues and what we want to get to. Interestingly, my hon. Friend the Member for Bromley and Chislehurst spoke about a Committee report from two years ago that dealt with the same issues. Two years later, we have come to the same conclusions in this report—it is not even as though this is a new finding. We all want mutual market access, we want the importance of a labour mobility framework and we see the need for legal certainty.

Several hon. Members said that if those things are not achieved and, as a result, English law clauses are included to a lesser degree in contracts, there is potential for very lasting damage to our legal services. That must be of great concern to everyone in this room. Various treaties were mentioned—Lugano and so forth—but relying on those would be second best. We want the best for our legal services sector. I hope the message has been received and that, as we go into further negotiations, the Minister will bang the drum for legal services as I am sure she will.

Question put and agreed to.


That this House
has considered the provision of legal services after the UK leaves the EU.

Sitting adjourned.