The two sides of Brexit for European lawyers

For the legal sector, the EU referendum result could be considered either a disaster or an opportunity, writes Massimiliano Danusso

The occurrence of such an extraordinary (and unprecedented) event as Brexit could offer, in the short (and depending on the length of the negotiation process, perhaps also in the medium) term, new business opportunities.

Clients need to get at least an indicative suggestion on how their activities, as well as their pending and future contractual relationships, might be affected by the UK no longer being part of the EU. Moreover, given the wide scope of EU legislation, Brexit should basically impact any business sector.

However, at the same time, the uncertainty does not help business and this is not good news for law firms. The IMF has already estimated that Brexit could seriously affect the weak European economy and, in this respect, firms could again face the difficult challenges that followed the collapse of Lehman Brothers in 2008.

Firms could also face 'structural' issues. Today, other than being the main financial centre in Europe, London is the undisputed headquarters of legal practice. Almost all the greatest non-UK European firms have offices in the capital. This is not only because many of the main international banks and multinational companies are based there; it is also strictly connected to English law being the most popular choice as the governing law of international contracts and to the English courts being the preferred venue for disputes arising from such contracts.

This, however, may substantially change in the post-Brexit world. If the passport regime no longer applies to regulated industries carried out from the UK, banks and multinationals may move their headquarters, or at least a significant part of their business, to a country that is still in the EU.

Moreover, Brexit could easily affect the choice of contractual parties on governing law and jurisdiction: English law and English courts could become unattractive post Brexit, especially if decisions taken by English courts no longer rely on the automatic recognition regime in other EU countries pursuant to the Brussels Recast Regulation.

Even the permanence of European lawyers on UK soil, and the performance of their practice therein, might become a future issue. By leaving the EU, the UK will be no longer be required to allow the free circulation of people from other EU countries: in this respect, the process of moving lawyers from a continental office to London will become more complex. But more relevantly, European lawyers might no longer be able to rely on the freedom of establishment, which is the basis of the mutual recognition of professional qualifications among European countries.

However, it should also be said that, not being as 'London centric' as their UK-only counterparts, European firms could be less affected by the negative outcome of Brexit. If businesses move to other EU countries, a European firm might think it a good strategic move to strengthen its presence across the continent.

Massimiliano Danusso is managing partner of BonelliErede's London office