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Hard Choices for Trade in Legal services post Brexit

Last year the UK earned £3.6 billion from legal services exports. Earning more for the economy than sectors like the dairy industry, coal, transport equipment or electrical machinery.    

So the government needs to pay attention to the interests of the UK legal sector, as it shapes its post Brexit trade policy.

Once we have ‘consciously uncoupled’ from the European Union, Liam Fox’s international trade team might be tempted to set their sights on emerging markets like India, Indonesia and Brazil, where the EU has yet to conclude bilateral trade deals, and foreign law firms face considerable obstacles to doing business. However, the UK will face an uphill struggle in winning better access to markets like these. In most of our target countries, the legal sectors are usually highly protected and politically sensitive, with little interest beyond their own borders. We, on the other hand, already allow foreign lawyers to do almost anything they want in the UK. Whisper it quietly, but it has actually been quite useful, in deals such as the EU-Korea Free Trade Agreement, to trade Korean access to the German car market in exchange for UK lawyers gaining access to the World’s tenth largest economy. 

If emerging markets are too difficult, the UK’s new International Trade department might look to secure the best possible bilateral arrangements with major developed markets, such as the USA, Canada and Australia. We already transact a great deal of legal business with these jurisdictions and there are ways in which this could be made even easier; reducing the barriers that UK law firms face in running global businesses and allowing lawyers to work more flexibly across borders. The EU-Canadian Comprehensive Economic and Trade Agreement (CETA) offers some indications of the sort of opportunities on offer, with its promises of more liberal work permit arrangements for lawyers and the creation of a framework for the mutual recognition of qualifications. There are, however, doubts emerging as to whether this deal will ever enter into force. An indication, should it be needed, that once the crudest barriers are removed, trade negotiations rapidly turn to politically sensitive areas on which it is hard to get public understanding and buy in. It appears inescapable that if we are to secure meaningful trade in services deals with countries like Canada in future, the UK will need to have flexibility on migration issues, with more sophistication than a points based system can offer, and a public discourse that accepts foreign workers.

But however we cut it, the overwhelming priority for the UK legal services sector is to reaffirm access to countries which are worth most to the sector overall. And this is the European Union, which bought 55% of the UK’s legal services exports in 2014 and plays host to UK law firms across the continent, from the longstanding shipping firms in Piraeus through to the boutique private client firms in Luxembourg, and the global players of the Magic Circle resident in Brussels, Paris and Berlin. Not to mention the US top 100 law firms using the UK to passport into the European legal market. 

If we leave the single market, our lucrative legal services trade will inevitably suffer. The Brexit hardball negotiating logic which maintains ‘they need us more than we need them’ might work for German car manufacturers but it won’t work for lawyers. European lawyers’ access to our market derives largely from our historical, common law regulatory approach, which imposes few restrictions on what anyone can do. We, on the other hand, depend on Europe’s four freedoms to gain access to the continental market, which will remain the World’s largest single economic area, even after we have left.

 

Alison Hook

Hook Tangaza and Vice Chair of the International Bar Association Trade in Legal Services Committee