Oral evidence: Implications of Brexit for the Justice System, HC 750
Wednesday 1 February 2017
Ordered by the House of Commons to be published on 1 February 2017.
Members present: Robert Neill (Chair); Richard Arkless; Alex Chalk; Mr David Hanson; John Howell; Victoria Prentis; and Keith Vaz.
Questions 168 - 249
Witnesses
I: Andrew Langdon QC, Chair, Bar Council; Simon Gleeson, Partner, Clifford Chance; Alison Hook, Co-founder, Hook Tangaza; and Robert Bourns, President, Law Society.
Written evidence from witnesses:
Witnesses: Andrew Langdon QC, Simon Gleeson, Alison Hook and Robert Bourns.
Q168 Chair: Good morning, everyone. Thank you very much to our four witnesses for coming to give evidence to us. This is probably the last of our immediate hearings in relation to our inquiry into the impacts of Brexit on legal services in the UK.
We are particularly interested to see what priorities we need to establish, assuming there are no great surprises later today, both for the legal sector and the legal system as the Government go forward to the next stage of what we anticipate is the article 50 process. That is what we are going to try to concentrate our questions on, if that is okay, in a number of areas. Would the witnesses introduce themselves and their organisations for the record?
Robert Bourns: I am Robert Bourns, president for the time being of the Law Society of England and Wales.
Alison Hook: I am Alison Hook, the co-founder and director of an advisory firm called Hook Tangaza. As we are not yet a household name, I should perhaps explain that we are specialist advisers to the legal sector, both in the UK and abroad. We advise Governments, regulators and law firms.
Simon Gleeson: I am Simon Gleeson of Clifford Chance. I am co-chair of our public affairs practice and leading on Brexit.
Andrew Langdon: I am Andrew Langdon, chairman of the Bar.
Chair: In terms of our own interests, as per the register, I am a non-practising barrister and a consultant to a law firm.
Victoria Prentis: I am a non-practising barrister.
Keith Vaz: My wife is a member of the Law Society and a former Council member. I am a non-practising barrister.
Alex Chalk: I am a practising barrister.
Richard Arkless: I am a non-practising English and Wales Scottish solicitor.
Mr Hanson: I have lots of interests, but not those.
Q169 Chair: Let us move on straightaway to get on the record something that all of us in the room probably know, but for the evidence it is important to state: how important legal services are to the UK, both in economic and reputational terms. If you wanted to encapsulate it in a few words, how would you put it?
Robert Bourns: It is about the quality and the efficacy of common law underwriting business transactions across the world. The practitioners of English and Welsh law provide a network of provision that enables commerce, both within England and Wales and beyond. Its standing and reputation relies on the independence of practitioners and the independence of our judiciary. As I said, it is around quality and experience.
Andrew Langdon: UK legal services are a success story, and Governments have recognised it as such. We have a good story to tell. As Robert says, we have a deserved international reputation for impartiality, excellence and innovation, so now we have a significant share of the global market. If I may say so, the view we take is that the negotiators need to understand the value of what we have and what is at stake, and ensure that the process of exiting the European Union is conducted in a way that enables our strength and our world-class brand to continue to prosper. Obviously that will not be easy, and there are significant risks ahead.
Q170 Chair: Has somebody quantified the economic value and the worth? I do not think we have any evidence.
Robert Bourns: Yes. We calculate that it is accepted as being in the order of £26 billion-worth of turnover attributable to legal services, and exports of about £3.6 billion-worth of trade.
Alison Hook: In terms of contribution to the economy, it should be seen as around 1.6% of gross value added, which is extremely important because we do not know how much of that is integrated with the European Union. We do not know how many of the 300,000-plus jobs actually depend on our continuing relationship in terms of legal services with the European Union.
Q171 Chair: I understand that. In terms of employment, do we have any figures?
Robert Bourns: There is talk of 370,000.
Andrew Langdon: Perhaps the important thing to emphasise—it may catch some people by surprise—is that two thirds of that is outside London. It is a national position.
Q172 Chair: Mr Gleeson, what about the financial services aspect, which is an important part of our legal practice, and something where we are regarded as having a head start in many areas?
Simon Gleeson: As a starting point, I defy you to think of any other industry in which five of the top 10 players are based in London. Clifford Chance’s turnover last year was £1.4 billion. If we were an exporting company, we would be a very big exporting company. If you multiply that by our fellows, we are collectively a very big business. It is fair to say that the substantial majority of that is finance or finance driven.
Q173 Chair: I have seen some figures suggesting that the finance sector buys about 10% of all UK lawyers’ work, for want of a better word.
Robert Bourns: The figure I have is about 20% overall, across England and Wales.
Q174 Chair: It is a significant matter. Mr Bourns mentioned our importance as a world leader. What do we need to do to maintain that competitive advantage in the Brexit scenario?
Andrew Langdon: Obviously, a certain amount of clarity was brought to that question in relation to the Prime Minister’s setting out the position, and the fact that we are likely to be leaving the single market. If that is indeed to be the position, free movement of lawyers, the right to give advice across borders for the Bar, but not only for the Bar, and rights of audience are all pretty fundamental to our continued success.
Q175 Chair: Does anybody disagree or wish to add to that?
Alison Hook: That summarises it pretty well.
Q176 Victoria Prentis: This is a very wide-ranging inquiry, so I am sorry to ask a simplistic question to start with, but what do you think we ought to be concentrating on as the most important aspect of leaving?
Simon Gleeson: Let me give you a simplistic answer. From our point of view, from the perspective of the transactional end of legal practice, what we sell is a complicated mixture of legal services and transaction execution. That is embedded in the operation of the industries that we serve. They do not think, “Which law shall we use? I know, let’s use English law.” They think, “Who shall we use to execute this transaction? How does this work?” The effectiveness of English law is part, but only a part, of the business that we are doing, but it is integral to who we are.
There are two aspects. Brexit does not affect the validity of English law or the effectiveness of English law. In terms of private contract it is almost irrelevant. However, in terms of people’s decisions as to what they do, what they use, how they use it, where they can get judgments recognised and all the rest of it, it is very important.
We would take the view, from a rather selfish point of view, that the most important thing for the UK to do is to take every step possible to ensure that English judgments remain enforceable abroad, and overseas judgments remain enforceable in the UK, and that English lawyers are able to provide services to people outside the UK, or as far as possible are not prevented. I would be inclined to say that those are probably the three biggest points.
Q177 Victoria Prentis: Mr Langdon, would you agree but with more emphasis on movement, possibly?
Andrew Langdon: Yes. It seems to us collectively that without the free movement of lawyers nothing else of much importance will be salvaged. That is absolutely fundamental. It is important to underline—I am sure this Committee will be concerned about it—that it is not necessarily whether it is just important for lawyers. One of the benefits of the present arrangements for clients is for individuals and for small businesses. Big companies and those that can afford to shop internationally for lawyers will do so, if they have no option, but the present regime also affords accessibility to the little man, if I can put it that way. It is a liberal regime, so a small firm or a solicitor in rural Wales can advise, appear and where necessary instruct a Welsh or an English barrister to represent a client in disputes that have arisen abroad and for whatever reason end up in European courts.
Q178 Victoria Prentis: That is the point you made about two thirds of the activity taking place outside London.
Andrew Langdon: Yes, that is certainly an aspect of it, but it is really the accessibility of a liberal regime to the little man, as I have characterised it. That should not be forgotten when we are considering what the consequences will be if we are unable to instruct solicitors, barristers or legal services from our own jurisdiction.
Businesses of all sizes benefit from the availability of UK barristers at work in Europe, not only large private companies. Intel instructs English barristers, as does ICI. Several times a month Her Majesty’s Government are represented in proceedings by UK lawyers. Those are proceedings in which we have intervened for one reason or another—disputes about financial markets or whatever it may be. If nothing is done to preserve the position, everyone will suffer from the fact that those who want to be represented abroad—and we will continue to need to be represented abroad within Europe and within the EEA—will have to instruct lawyers not from the UK but from within the EU.
Q179 Victoria Prentis: What is your reaction to the Prime Minister’s speech last week? Do you think it helped?
Robert Bourns: We are all learning to deal with this situation. Anything that gives greater clarity in terms of the approach to be adopted is helpful. You will find that there is fierce agreement among us in relation to what is necessary. I would endorse, going to your earlier question, what I call the infrastructure—the recognition of the service of documents and the enforcement of judgments—which we hope would command some mutual recognition and reciprocity within the wider community, both in the EU and in England and Wales.
Practice rights are fundamentally important to the ability of practitioners based in England and Wales to continue to advise their clients across Europe. In that respect, that is something we are promoting as practitioners of law in England and Wales in circumstances where, beneath the establishment directives, the lawyers services directives, you will find in Europe what we would regard as traditional—some would say old-fashioned—fiefdoms of professional practice, where we will have to go and argue our cause on behalf of our members in terms of re-establishing or maintaining rights of practice in those jurisdictions. That is the task ahead of us, and that is why practice rights are important.
Q180 Victoria Prentis: Coming back to the Prime Minister, is there any reaction to leaving the jurisdiction of the European Court of Justice?
Alison Hook: What I am going to say is possibly unpopular and slightly unusual. I have rarely heard anybody say anything positive about the European Court of Justice, but I am afraid that, certainly from the perspective of many of the people I deal with, the European Court of Justice gives us certainty of national treatment. The European Court of Justice has been extremely important to lawyers—never mind the clients, for whom it is really important. It has enabled lawyers to ensure that we have had access to European markets, picking up on Robert’s point about the difficulty of persuading others to open up their jurisdictions. We surrender a lot by coming out of the jurisdiction of the European Court: the right, essentially, to have national treatment and have that enforced across the European Union.
Simon Gleeson: As regards private contracts, and for that matter dealings between firms and regulators, it is worth remembering that, no matter what the technical position is, the real position will not change. The vast majority of English law and financial law at the moment is derived from directives at one point or another. Of course, the English courts will continue to have regard to how the ECJ thinks that legislation should be interpreted; it would be very strange if they did not. The ECJ will have strong persuasive authority in this country, even when it ceases to have actual authority. I do not think that is a significant change.
Q181 Chair: Is there a difficulty that we have strong persuasive authority over decisions in due course for a court in which we actually do not have the ability to appear and be involved in the making of those decisions?
Simon Gleeson: That would be a nuisance, yes.
Q182 Chair: A nuisance, but maybe one we have to live with.
Andrew Langdon: Yes. That is the only point I was going to add. It is one thing having to take into account that jurisprudence, and we will continue to do so. At the moment we are at the thick of it. We are involved in shaping it. The fact that we are unlikely to be so will obviously have that consequence.
Q183 Mr Hanson: Can we look a bit deeper into the financial sector? I look to you, Mr Gleeson, as the lead on this initially. We obviously have a very large banking, insurance, fund management and security sector. I just want to get a sense from you, first of all, as to how important that is for the UK economy, and which are the really key sectors within that large sector that we need to focus on in relation to the impact of Brexit.
Simon Gleeson: On importance to the UK economy—
Q184 Mr Hanson: It goes back to the legal sector.
Simon Gleeson: Yes. There are some very good CityUK figures that address that. I am afraid I do not have them to hand, but I would be happy to share. As far as impact on that business is concerned, anywhere a UK firm does business with a customer in continental Europe, there is potential disruption and post B-day potential illegality.
Taking those in turn, business disruption is largely a matter of regulatory agreement or lack thereof. The key point is that a UK firm is perfectly entitled today to agree to provide services to a European customer for the next five years. If that becomes illegal in that country on Brexit, the UK firm may well be liable in damages or to pay compensation for non-performance of its contract. That has a chilling effect on dealings with those customers generally. The places where that impacts hardest are hard-core sales and trading, dealing in derivatives and, to a lesser extent, securities, loans and insurance—products that have an extended term.
Q185 Mr Hanson: Have you noticed since 24 June at approximately five in the morning any downturn in business, or take-up or interest in dealing with European companies on either side?
Simon Gleeson: There has been an awful lot of discussion about whether continental firms can continue to deal with London counterparts. There has been no downturn that I am aware of at the moment. Our expectation is that, as we get closer and closer to B-day, more and more people will sit back and say, “Should we be doing this business with this entity?”
Q186 Mr Hanson: Are there any other multipliers in terms of the impact on the legal profession as a whole from the potential of Brexit?
Simon Gleeson: The biggest one is location of infrastructures. If the stock exchange, for example, were to move to Germany, the business it does would go with it, and would very probably be dealt with under German law rather than English law.
Q187 Mr Hanson: We have already seen banks threatening potential moves. We saw one last week in Ireland, and HSBC and UBS have been talking about locating bankers to Paris and to Frankfurt. Is there any impact on your business from that happening, if it did indeed happen?
Simon Gleeson: Absolutely. If you are a German institution dealing with a German customer, you are much more likely to want to deal under German law. We would like you to come to Clifford Chance in Germany in order to do that, but sadly you have a number of other options, at least some of which you will take up.
Q188 Mr Hanson: Genuinely, if Brexit happens under the current terms, where you think we are now, do you expect to see a legal brain drain or business drain to other parts of the European Union, which means that effectively the business might still be based in London but the day-to-day income of people like yourself will be spent in Frankfurt?
Simon Gleeson: That is already happening. It is important to remember that it is happening on both sides. Not only are we as firms gearing up to service more people in continental Europe, but banks’ asset managers and others are moving internal legal folk to those places. If both sides of the thing move, it is much more likely.
Q189 Mr Hanson: I suppose the dual question is, first, in this foggy interim, what should the Government be doing to encourage the retention of banking and financial services businesses based in the UK? Question two is, from your perspective what are the key priorities for us to secure and on which to make representations to Government during this foggy period in relation to the post-Brexit period, whatever shape that takes?
Simon Gleeson: As regards your first question, many of us do not believe that continental European countries actually want huge amounts of market risk relocated into their jurisdiction and, as they perceive it, landed on their taxpayers. There is a perfectly feasible deal to be done whereby London remains Europe’s financial centre. The cost for that will be some degree of European involvement in the regulation of that financial centre, but that takes you well beyond my pay grade.
In terms of your second question—what can be done in order to try to stop this as far as possible?—part of it is ensuring that English law retains the infrastructure for enforceability. That means two-way enforcement of judgments, access and the issues we talked about earlier. The second part of that is that we need to be perceived to be co-operative with the rest of Europe. It is already the case that European law firms are saying to our clients, “Why would you want to use English law? England is moving out of Europe. English law is no longer European law. Surely you want a European law.” That is not true, but it is a perception that is being aggressively promulgated by European lawyers. In a way, because it is a perception, it can be disseminated by appropriate public statements by appropriate people.
Q190 Mr Hanson: Do you have any assessment of how many European nationals, not of the British variety, are working in your sector in London at the moment?
Simon Gleeson: As a wholly unscientific representative sample, the regulatory group in Clifford Chance in London is almost exactly 50:50 Brits and non-Brits. I suspect that is typical.
Robert Bourns: Possibly I can assist. As far as we are concerned, going back to the earlier question, about 44% of turnover in City firms is attributable to financial services, but it is a national phenomenon. My firm has a City office but is principally a UK firm, right across the UK; 45% of our turnover is attributable to financial services. It is an incredibly influential sector. We have already set out what we think is required in order to maintain the infrastructure that does business through the City of London and through England and Wales more generally.
There are some 200 foreign law firms with offices in the City of London, or otherwise in England and Wales. We understand that approximately 60 of those are attributable directly to other European countries in London—foreign lawyers. There are about 3,000 foreign, European lawyers who are engaged in English firms in this jurisdiction. There is a really interesting and dynamic community of professionals working in England and Wales. We are a very open jurisdiction. That is part of the infrastructure provision that supports all those financial transactions, because they use common law. Happily, it has the label English and Welsh common law at the moment, but other jurisdictions have access to common law and use it. As Simon said, they are promulgating the perception that it is no longer going to be useful.
One thing that concerns me is that at the moment there is a lot of activity, in terms of legal services, dealing with the uncertainties and the advice that is required in the current circumstances. If we get important parts of financial institutions relocating, naturally the work will follow them. My understanding is that the majority of lawyers working in Clifford Chance in Frankfurt will be German lawyers, and in Paris they will be French lawyers. The suggestion that there is just going to be a pick-up-and-go from the City is wrong. My concern would be that, if those offices are downsizing, English lawyers will be out of work in the medium term.
Q191 Mr Hanson: I have one brief, final question. You indicated in earlier contributions that there is a considerable amount of work outside the City of London. As a Welsh MP bordering Liverpool and Manchester, with Scottish colleagues and others here, I just want a one-word answer as to whether these considerations focus minds outside London as well as in the City.
Robert Bourns: I have been to Liverpool, Manchester and Birmingham. We have offices in Glasgow, Edinburgh, Bristol and Manchester. Yes, they do, but that is largely a concern as to how this market is viewed as against others—the size. There is a question about diminishment. There are broader questions in relation to the way it impacts on the state of the economy—the rural economy in Wales, for example—and the influence of public subsidy.
People will say, “It is our money; it is just being recycled,” but at the moment it has an impact on those economies, which support local business and of course generate transactional work going through the legal services sector. I certainly heard, when I was in Cardiff, concerns about the impact in the medium term. Obviously in the short term we understand that CAP calculated in euros led to an increase of 16% for the current year in terms of value domestically, but that is unlikely to be maintained over time. There is a question mark, and that is the issue that is really worrying people at that level.
Q192 Richard Arkless: There has been lots of talk about potential special arrangements for different parts of the UK. Scotland and the City of London have been mooted. Clearly, there are substantial legal and political difficulties in any of those arrangements. If we leave that aside and imagine that the situation came to pass that London, for instance, was able to stay within the single market and benefit from the free movement of lawyers and still remain part of the UK single market, but the rest of the UK was not in the EU, would that help?
Alison Hook: It might help some people.
Q193 Richard Arkless: Politics aside, imagine a situation where London is in the EEA through EFTA and the rest of the UK is not but is still part of the UK single market.
Alison Hook: I think this comes back to a point that builds on what Robert was just saying about the financial sector and integration outside London. It is important to remember that, while financial services are hugely important to legal services and there is a very close relationship between the two, legal services are not entirely subsumed within the financial sector. There are huge interests outside that which remain extremely important for the relationship, and for lawyers who maintain that relationship within the European Union.
Outside London, you will find many other industries that rely equally on the ability of lawyers and legal services to be able to move across European borders, and on certainty about those relationships and contracts. There is also national integration of the big law firms in London across the UK. Many of the biggest law firms in London also now have large operations outside London where, for cost reasons, it makes sense to locate some of your activity in Sheffield, Cardiff or elsewhere.
Simon Gleeson: You would end up with something very similar to the Dubai International Financial Centre. What we learn from that is that it would be somewhat helpful to finance, but as far as the rest of the practice is concerned, we would just have to practise two legal systems instead of one, which is potentially unhelpful.
Andrew Langdon: I echo something Alison said in relation to the benefit of the legal services outside the financial sector. Of course, businesses all over the country get an enormous amount of confidence, when they are thinking about entering into export, from the fact that they can have the benefit of lawyers they know and trust and have a relationship with. For a lot of smaller businesses, and perhaps even some of the medium-sized ones, venturing into a new market when you are going to be reliant on lawyers who are not UK based is a different and perhaps more risky prospect. There are all sorts of other ways in which, from a national point of view, that remains a relevant consideration.
Q194 Chair: That is very helpful. Finally on the financial services sector, what are the key bits of EU financial services law that we need to retain? Are there some bits that we would be happier to be rid of?
Simon Gleeson: The one that everybody says we would be happier to be rid of is the alternative investment management directive, to which the answer is, “Well, yes, fine, but good luck deregulating hedge funds.” In broad terms, I do not think there are any substantial bits of European law, certainly in the financial services sector, where you look at them and think, “We can’t wait to be rid of that.”
There are one or two things such as the bonus cap that, on a personal level, everybody would like to be shot of, but actually on a policy level there are not particularly good arguments for getting rid of it completely, although there are arguments for restructuring it to some extent. There really isn’t a big, target piece of legislation that we just cannot wait to see the back of.
Q195 Chair: Are there some bits that you would say we absolutely must keep?
Simon Gleeson: If we could keep some degree of access, it would be helpful. The big problem that we face around B-day is that nobody knows what happens when you de-authorise a bank, an insurance firm or an asset management firm, or indeed any other sort of licensed entity, in the middle of a contract. In real life that does not happen. In real life you wait until all the contracts have run off before you de-authorise the entity.
When UK firms lose their ability to do transactions with European counterparts suddenly and overnight, neither we, nor, I suspect, the European authorities, know exactly what the legal consequences of that are, or for that matter should be. It should not be beyond the wit of man to construct some sort of meaningful transition in respect of those contracts.
Q196 Chair: I think what you are saying—a point on which I do not think anyone would disagree—is that transition is very important in all of this, and not just a short transition.
Simon Gleeson: Yes.
Q197 Chair: A meaningful one, whatever that may mean.
Simon Gleeson: Absolutely. The average duration of most of those contracts is about two years. At the moment, people are thinking, “All right, we’ll be inside the time.” As soon as the expected transition of any contract goes over what we now have as B-day, legal issues will arise, and the closer we get, the more pointed those issues will be.
Q198 Chair: It has been suggested by some Ministers that maybe you could have a variable transition for differing sectors. Is that practical or doable?
Simon Gleeson: It is absolutely doable in the context of authorisations. There is no earthly reason why the transition for derivatives, for example, should be the same period as the transition for, say, insurance policies. Those products characteristically have very different durations, so in a way the logical approach would be different periods for different types of activity.
Q199 John Howell: I want to return to the rights of the profession to practise in the EU. What you have described is a form of either direct or indirect protectionism in Europe. What is the best way of discouraging that, if we go down the Brexit route?
Robert Bourns: It is, first, to ensure that nothing is done to allow or enable any of our colleagues on the continent to raise a question mark over the quality of our practitioners, such as alterations to training programmes or regulation domestically that enable anybody to advance an argument that we are not independent practitioners. It is an argument that our colleagues on the continent have been raising for some time, because our regulatory framework is different from theirs.
I also hope that, given the population of European colleagues who work within this jurisdiction, we can identify the mutual advantage there is in being part of that community of practitioners. We know anecdotally that our colleagues from Germany find it useful to be able to work through the City of London as limited liability partnerships. They would not be able to do that in their domestic market.
If we can emphasise the benefits to all of continuing to work in what is an open professional service market in this jurisdiction, it seems to me that we might demonstrate a stronger negotiating path. It is about the standing of our profession and the advantage they have of working through this jurisdiction. That goes back to maintaining openness of the jurisdiction for all purposes, so that people perceive a real advantage.
Alison Hook: There are two things. One is that if we are entirely outside any EEA relationship, or perhaps we do not even echo what Switzerland has done, we will find ourselves having to try to negotiate our way back in, which will require three things: one is the ability to access that market through market access arrangements; the second is a network of regulatory agreements, mutual recognition of professional qualifications but also of regulation; and the third, which will be particularly important, is free movement of professionals.
There is an interaction between those three things. From discussions I have had with Bars in the European Union, there is a desire to keep this regime together, because there is a sense in which people feel it has really worked for citizens and clients and, therefore, that it is really important. They will be helpful as far as they can, but it requires us to be conscious of what they need on their side.
Andrew Langdon: Those in member states that have an interest in preserving the free movement of their lawyers working in the UK may help us in negotiations, either during the Brexit process, or if that is unsuccessful, thereafter in bilateral negotiations. It is worth bringing back to mind the immediate reaction of those we met at European Bar level to the news of the result of the referendum. It included concerns expressed on their part as to how they would suffer if they could not move freely within the UK.
If we are in a position whereby we have to negotiate our way back in, as Switzerland has done, we are in a very different position from the Swiss because we have a much more significant presence in Europe. European lawyers may want to benefit from protectionism—to get to your question—in so far as anyone ever does benefit from protectionism. That makes the negotiations much more complex and challenging, because different member states have different definitions of what their legal services are and what their reserve legal activities are, whereas in the UK we have a much more liberal regime with relatively few areas reserved to lawyers. If, unhappily, we are in the position where we are trying to negotiate our way back in, it becomes extremely complex having to deal with a whole variety of different regimes.
Robert Bourns: One of the things that needs to be recognised is this. We have charming conversations with colleagues in various Bars across Europe. In Paris, what are regarded as Anglo-Saxon firms employ about 30% of the Paris Bar, and train about 30% of the Paris Bar. If there is a feeling that protectionism will rid them of this unhelpful, competitive beast, it will not happen, because there will be a restructuring; but they will still have that large common law infrastructure within their marketplace. Obviously that may disadvantage us if we are locked out, but actually it does not necessarily alter the dynamic.
The danger, of course, for the whole of Europe is that you diminish the whole and that the jurisdiction that really wins out is outside Europe altogether. Certainly, some of the fierce competition, with the best infrastructure, is probably to be found in New York or some of the fast-engaging jurisdictions in the far east. There is a danger for the whole of Europe by dismantling or pulling out. The way I put it is that it will not add up to the sum of the parts.
Q200 John Howell: Picking up what you have just said, the issue of access is based on a number of directives. What is wrong with simply continuing those and incorporating the implemented legislation?
Robert Bourns: In my view, there would be no problem at all.
Alison Hook: The ideal would be to continue with those directives. The important thing to bear in mind is that that gets you part of the way back in to where we are now. There are a couple of other things, in particular legal professional privilege and national treatment, which you have as a member of the European economic area, and that Swiss lawyers, for example, do not have. While the directives, I would say, are really almost an essential prerequisite for the legal sector to be able to continue with the relationships it has at the moment, that is a necessary but insufficient condition to get something as good as we have at the moment.
Q201 John Howell: What would you see as the practical barriers to persuading EU member states to accept that situation?
Alison Hook: To accept the continuation of the directives?
John Howell: Yes.
Alison Hook: The essential thing with that will be the ability of lawyers to move across borders.
Q202 John Howell: In the scheme of things, would the UK revert to WTO rules regarding the provision of legal services?
Alison Hook: We don’t know. If we did not have arrangements in place, one assumption might be that we reverted to WTO. If we did, there are all kinds of barriers that we could then find. Realistically, there would probably be willingness to find arrangements to suit individuals who are out there or in the midst of training across borders, or individuals who have been resident in European countries for a long time. There would probably be a willingness to find grandfathering arrangements, but that does not solve the longer-term problem.
If we reverted to WTO rules, there are a whole raft of countries around the European Union where treatment of lawyers outside the European Union is considerably worse, in that you have no automatic right to give advice even from your home jurisdiction into those jurisdictions. There is certainly no possibility of requalifying. There may be no possibility of having a commercial presence in those countries. There is a raft of complications if we go to WTO rules.
Simon Gleeson: I will give a specific example, because this is something we worry about a lot. Even if we are able to practise in a particular country, if we do not have the benefit of legal privilege in that country, that right to practise is effectively useless. Depriving foreign lawyers of legal privilege does not, at least in my view, contravene GATS in any way. There is nothing difficult about creating effective barriers without breaching WTO obligations.
Alison Hook: In many ways the WTO is just the entry point, and beyond that the raft of regulatory barriers is the real challenge. That is another issue for us if we look to the future beyond the relationship with the European Union, negotiating free trade agreements with the rest of the world. Even if we can secure market access in legal services in a lot of other jurisdictions, which is a pretty big “if”, we then end up with the question of how the regulatory systems in those jurisdictions allow access, and the willingness of those jurisdictions, effectively, to allow access.
Andrew Langdon: If the directives that enable rights of audience and permission to advise clients in EU states were to be preserved, that would be a significant achievement. Just to bring to life a little bit the consequences of failing to preserve that, and what it would mean if we were in a third country position under the WTO regime, I have a few examples.
In 12 member states, including France, Germany, Spain and Italy, UK-based lawyers would not be able to give any legal advice, even to UK clients living or holidaying in those countries and even when the matter in question related to domestic affairs. A second example is that in 14 different member states, including, for example, Greece and Spain, UK lawyers would not be able to work within the EU, save where they could establish something that would be pretty difficult to establish in most cases, which is a local economic needs test.
Thirdly, legal advice to any client in the EEA could not be kept private subject to legal professional privilege. What brings that into focus in particular is advising clients who are at the wrong end of an investigation by the European Commission. Obviously, no business will want to instruct a lawyer where there is some risk that the advice is not privileged. That has a huge impact on confidence. There are many other, lesser examples, but those are pretty stark headlines. When one is thinking of the position of the negotiators, we want them to have those thoughts very much in mind when pressing the need for the preservation of the directives that currently exist.
Q203 John Howell: Do you think there is an understanding of what the losses are likely to be in not continuing with the directives or participating in them?
Alison Hook: No, but I think I would put even more emphasis on the professional privilege point. It is not only a matter of once your client is engaged in a Commission competition investigation. There is a raft of industries that are regularly subject to issues around competition, potential price fixing, cartels and whatever else. The kinds of industries affected are pharmaceuticals, glass, chemicals, technology and agribusiness. The list is endless.
If you are a general counsel for a client in that industry, you will think very seriously about what kind of lawyer you are going to appoint to conduct your business. One kind of issue that you are going to think about right from the outset—not necessarily waiting further down the road until there is some kind of investigation—is, “Do I have privilege?” If you do not have privilege, you might as well appoint anyone; it does not have to be a lawyer.
Robert Bourns: I emphasise that point; it is very valuable. Over 20% of our profession are working in-house. The issue of protection of legal professional privilege within that context is incredibly important. The approach adopted in Europe at the moment is something that causes them concern. It is another important advantage of this jurisdiction over others.
Q204 Alex Chalk: First of all, thank you very much. That has been set out very clearly, and it is quite sobering. It has been particularly helpful for me because a lot of people were under the impression that the UK, which has pre-eminence and expertise in UK legal services, was a magnet and therefore you would have a lot of people choosing this as a jurisdiction and coming here; whereas the clear evidence we are getting is that, yes, that is part of it, but a huge amount is the work that English and Welsh lawyers are doing overseas. It would be helpful to understand—this is just finishing the point that Andrew Langdon was making—what proportion of our profits, that £20 billion or whatever it is, is attributable to the work we are doing overseas in Europe. How big is this deal that you set out so starkly?
Andrew Langdon: I will give way to others who may be able to answer more precisely, but I think one of the challenges for anyone trying to assess the value of something is that it is almost impossible to define. In a relationship with a client, perhaps especially a very large client, a certain amount of activity happens within the European Union, and a certain amount of activity happens at home. Quite how you apportion the figures one way or the other, I do not know.
These things are inextricably interlinked. Perhaps we can do little more than guess, but it is a pretty sound guess that if you reach a stark position whereby you very significantly damage the prospect of UK-based lawyers being engaged by international clients, for the reasons we have articulated, the knock-on effect, which begins to seep into, for example, the predominance of English law in arbitration contracts and so on, means that pretty quickly the whole thing can be measured by reference to the total benefit.
Q205 Alex Chalk: I appreciate that it bleeds into culture, perception and all those sorts of things, but is there anything that one can do?
Simon Gleeson: If you want a very rough attempt to quantify it, if you look at Clifford Chance, for example, 45% of our headcount is in the UK. I think it is slightly more than half of turnover. Of the 55% of the headcount who are not in the UK, the majority of them are in continental Europe in one place or another. Most of the rest are probably in the far east. That probably roughly scopes for firms like ours the importance of Europe as far as overall turnover is concerned.
Q206 Alex Chalk: You mentioned that it is important that these concerns are taken forward in the negotiations, and I respectfully echo that. To what extent do you feel that your sector has been engaged by Government and that your concerns are properly at the place in the pecking order where they should be?
Robert Bourns: We have been very engaged with Government and various Departments. I hope that we have been useful in contributing knowledge. We are all learning, certainly post-23 June, which bits of regulation actually promote and connect. There has been full engagement by Ministers and officials in order to acquire that knowledge. We were reassured by the Lord Chancellor on the infrastructure points in terms of enforcements of judgments and recognition at that level.
I have to say that the concern is that it looks like special pleading for a sector in relation to practice rights. At that level, we are concerned to ensure—through this Committee, we hope—that attention is paid to those practice rights and importantly the connection that that has with what we were just talking about in terms of legal professional privilege.
Going back to the point in your earlier question about the value, we see what we do as a profession as enabling and supporting. It is just pulling bits out of it. It is not going to be ring-fenced and discrete to the bit that has gone. Overall, it alters sentiment. Overall, it alters the usefulness of this jurisdiction and we diminish it.
Q207 Alex Chalk: Thank you very much. I imagine those views are shared so I will not ask everyone. You very helpfully set out what you think are the key things we ought to try to achieve. You have spoken about legal professional privilege, and so on. We have some wonderful brains and wonderful expertise, so what is the suggested tactical approach? Is there anything that the Government should be doing in the way they seek to achieve these things that would stand them the best chance of success? In other words, how would you advise the Government tactically to approach getting what we all agree we need to get?
Robert Bourns: It is a matter of trying to establish and recognise that community—all the foreign firms that are here, why they are here, what they get out of it and what they export back to their European offices. We must try to develop a narrative around mutual advantage; otherwise we look as if we are simply trying to maintain a position that some people will perceive to be to their detriment within their home market.
Andrew Langdon: It partly relates, Mr Chalk, to the first question you asked. I am sure it is true of everyone but, as you know, at the Bar Council we have been producing Brexit papers. We have been engaging with civil servants, not just from the MOJ but in many Government Departments. We had a meeting with nine representatives from different Government Departments at the Bar Council quite recently. There is a process of our trying to use our expertise to demonstrate what we can foresee will be the consequences if nothing is done. That is obviously the central part of the process.
On the second part of your question, in relation to negotiation, there has been a dawning realisation, one hopes—certainly it is part of our function to shine a light at it—that the legal services sector underpins so many other things, most obviously the financial sector, that the negotiators need to be willing to understand that this is not going to be about trading rights within the legal sector. They need to understand that they need to reach further, beyond our sector. Because of the value of the prize not just to the legal services but to everything they underpin, they will need to be prepared to consider what else is on the negotiating table when ensuring that they preserve what we regard as pretty fundamental to the entire picture.
Simon Gleeson: I am afraid there is an element of tails and dogs to this. If the UK has taken a policy decision that it wishes to remain an international financial centre, part of that is the preservation of free access to the UK for lawyers from other jurisdictions. International banks need international legal services. We cannot plausibly threaten to shut out lawyers from other jurisdictions. The starting point has to be, “We are open, we will remain open and we think you should reciprocate.”
Q208 Alex Chalk: Are there any other specifics about the tactical approach? You have stressed mutual advantage. That seems eminently sensible. Being conciliatory, co-operative and all that sort of thing seems eminently sensible, but are there any other levers you would invite the Government to pull in order to secure what you perceive to be the best outcome?
Alison Hook: One of the difficulties we have—it also reflects the wider picture of negotiating outside the European Union—is that because, as Simon says, we are very open, we actually do not have a lot in our negotiating hand in the legal sector to play with. Unless we were to completely change the basis of the way we regulated the legal sector here, and shut out, at huge cost to ourselves, lawyers from other jurisdictions being able to practise here, or shut down the ability of lawyers wishing to come here from any country to arbitrate or appear in court, all we can do is say, as Simon says, “We are open and we think you should be too. We think it is in the interests of your citizens and ours.” I do not see that we have an awful lot of other tactical advantage to play with, unfortunately.
Andrew Langdon: I agree with Alison. We have to build on the positives. It is going to be a very bad idea for us to threaten protectionism of our own, because our whole success has been built on our openness. We will shoot ourselves in the foot if we are, as it were, threatening retaliatory measures. I would have thought, to try to answer the question, that you build alliances with those member states who have a benefit in preserving and enhancing the current set-up as much as possible.
Robert mentioned in a slightly different context the fact that a third of Parisian lawyers do part of their training at UK firms in Paris. They do not do that because they have to; they do it because they recognise the value of it. They recognise the value of it in part because of the benefit of the common law system being understood. That is the legal training that we bring. If one concentrates on all the things that will be lost and seeks to build on that, I would have thought it was a more productive route in terms of a negotiation strategy.
Alison Hook: One thing that occurs to me is that it is worth stressing that within the European Union there are a lot of arrangements for different professions. Lawyers are unique in having a set of directives that apply only to them. It is worth stressing that that almost allows you to treat legal services, to some extent, in a sui generis way because that is effectively how the European Union has treated them.
Alex Chalk: I was meant to ask about LPP, but I went a bit off-piste. I think we have dealt with it already.
Chair: I think we got the point very clearly.
Q209 Victoria Prentis: I have two completely off-the-wall questions. Given what we know about what happens in some of your offices abroad, in Paris and in Frankfurt, do you think it is possible that, if this does not go well, the common law will continue to operate without us on the continent?
Robert Bourns: Yes, absolutely. People have told me, “It isn’t your common law,” and there are plenty of jurisdictions where they are constructing English-speaking tribunal rooms using and applying the common law, and very often inviting members of the senior judiciary to attend to provide—
Q210 Victoria Prentis: As consultants?
Robert Bourns: Yes. It will go on without us; that is the danger.
Victoria Prentis: Another slightly off-the-wall question—
Andrew Langdon: On the choice of English law as opposed to a common law system in relation to arbitrations and so on, I am not sure that is immune if things go very badly in the long term. That is obviously slightly different.
Q211 Victoria Prentis: I took that as read. Is there much evidence of people, and barristers in particular, trying to dual qualify with Ireland at the moment?
Andrew Langdon: Not as far as the Bar is concerned in relation to Ireland, although I think the position is slightly different for the Law Society.
Robert Bourns: Yes. It has been well reported. The Irish Law Society tell me that at this rate, by 2020 they will have completed a reverse takeover. That may be a solution; I don’t know.
Chair: Perhaps I should have declared that I am a member of King’s Inns as well as Middle Temple.
Alex Chalk: You must mention it at every meeting.
Chair: It has suddenly become very valuable, perhaps.
Q212 Victoria Prentis: I think that’s enough. Do you think it is valuable to be a member of King’s Inns?
Simon Gleeson: I think you will find that every competition lawyer in London has now done that, because if you are engaged in competition inquiries, particularly in front of the Commission, they will almost certainly extend over B-day.
Robert Bourns: There is a cautionary word in relation to nationality. Does it deal with that aspect of it? Does it secure your rights to practise? It is a precautionary measure.
Q213 Chair: Are there limitations on the qualification and how you do it?
Alison Hook: It is worth stressing that at the moment requalification for an English solicitor with the Irish Law Society is incredibly straightforward. It is based on a 1991 agreement, but it also stems from our membership of the European Union to a great extent. I have spoken to the Law Society of Ireland recently, and it is worth knowing the up-to-date numbers. They have had 806 requalifiers from England and Wales since June.
Victoria Prentis: Crikey!
Alison Hook: Bear in mind that the national qualification rate in Ireland of solicitors is between 400 and 700 a year. They have had 115 since 1 January. All of this is simply solving a problem for people who are qualified now, because, if we leave the European Union and we are not members of the European economic area, they are statutorily obliged to revert to reciprocity. That will then depend very much on arrangements that we have for requalification here, which are under review at present. My advice would be that, if you can get requalified, do it now because you may not be able to in future.
Andrew Langdon: I do not believe anyone is suggesting that the business of being able to qualify in Dublin has sorted the problem. Obviously, it is a rather fragile position, and just a temporary reaction to a serious problem that is looming.
Alison Hook: It does not solve the problem but, as Andrew says, it creates a comfort blanket initially. Most of the people who have requalified have gone on the roll in Ireland, but increasingly they are beginning to feel that they will probably need a practising certificate. You will try to suggest that you are an Irish solicitor in order to be able to use that qualification. You may also need an effective practising address in Ireland.
Q214 Victoria Prentis: Are firms moving that way?
Alison Hook: Yes.
Q215 Victoria Prentis: Is it something you are looking at?
Alison Hook: Since the end of last year and the beginning of this year we are beginning to see English law firms opening more substantial presences and looking potentially for merger partners.
Victoria Prentis: It is quite important that we know the reality of what is happening at the moment.
Q216 Chair: It is almost analogous to the situation of financial services institutions. You cannot just put a plaque on a door in Brussels; you may have to capitalise your operation.
Alison Hook: Yes. With all these arrangements, over time you will start to see decisions increasingly moving, whether it is where you build up your future presence or where you locate in future. At the margins, the decision will be taken to be outside England and Wales.
Robert Bourns: Simon has spoken about the size and shape of his own business. It is important to recognise that they are international businesses. One of these events begins to focus the mind within the business on the fact that the partners are probably no longer majority England and Wales solicitors. An executive group will be making decisions on how best to promote their own business, and they will take decisions on the best information available at any given time.
Simon Gleeson: If I may make a point that goes back to your first question about common law, if you raise your eyes from Europe for a second, the titanic legal struggle of our times is going on around the Pacific as we speak, between English and New York law. In some respects, how that falls out matters more to some extent than a lot of this. English law was advantaged primarily by the fact that the Americans have a terrifying court system, which is wonderful for us. If you look at this from the Pacific, it really is the common law.
There are plenty of court systems—Singapore, Australia and Hong Kong—which are good, respected and can handle this stuff very easily. The real fear about all of this viewed from there is that England becomes negative and protectionist, and makes it difficult for people to access. Weird though it sounds, there is no shortage in that bit of the world of good, respectable court systems able to deal with English law.
Chair: That is very helpful.
Q217 Alex Chalk: If I have understood you correctly, you are saying that, important though Europe is, there is a world out there with perceptions about how we do this. If we are perceived to retreat into ourselves, we lose that huge prize, so we have to ensure that any suggestion of Fortress Britain, either by what we say or do, is banished.
Simon Gleeson: Yes.
Alex Chalk: It is very important to emphasise that.
Chair: It is very important indeed.
Alex Chalk: Can we note that?
Q218 Chair: It will definitely find its way into the report; there is no doubt about that. Can we look briefly at the converse, which is the position of EU national lawyers in the UK? The Government say they want to protect the position of EU nationals. That is one thing, but what are the asks you will be putting to the Government from the profession’s point of view about the position of European EU lawyers currently working in, say, London or somewhere else? We need to preserve that position. Would there be a loss if that was harmed?
Robert Bourns: Yes, I think so. Going back to Simon’s point, there is a very large population of US firms. I mentioned the number of the Paris Bar being trained by Anglo-Saxon firms, but 30% of our trainees in the City of London will be employed in American firms. My suggestion is that we should demonstrate a continuing open approach to work in this jurisdiction.
Alison Hook: Essentially, there are three things that a European lawyer has at the moment that a lawyer from a jurisdiction outside the EEA does not have. One of those is the right to automatic requalification after a period of three years as a result of the establishment directive. That has been used by a considerable number of lawyers over time, which makes it very difficult for us to know the exact numbers of European lawyers who are here, because many no longer manifest themselves purely as lawyers from their original country.
The second thing is the ability to appear in court. Although most European lawyers, like lawyers generally, very sensibly do not choose to stand up on their own in a foreign court, none the less those rights are extremely important. We regularly get requests from lawyers from elsewhere in the European Union, particularly in the family area, who say, “Can I just come?” It is important that we do not focus just on financial services, because those rights to appear in court are particularly important for areas outside the commercial sector.
The third thing goes back to the old bone of contention: free movement. At the moment, the right simply to be able to come and set up business as a lawyer is considerably easier if you are from the European Union, rather than anywhere else. Those would be the three things that I think other jurisdictions in the European Union would focus on in terms of the differences between now and the future.
Q219 Chair: Assuming the Government say they want some constraints on freedom of movement, what are the practical ways of minimising the damage that might come from that?
Robert Bourns: People talk about controlling migration, don’t they, so it depends on the criteria you attach to that control? It is perfectly possible, I would hope, to recognise the value of people coming and going to the jurisdiction.
Alison Hook: You need an ability for business and professional visitors to come here and consult with their clients without fear that somehow or other they are practising illegally. You need a situation in which firms that want to second people between offices can do that in a relatively straightforward way, so you need arrangements for work permits and visas that cover all the different categories. Particularly important is to have arrangements for independent service suppliers, something that is often left out of arrangements. That is particularly important in the legal sector, because quite often lawyers manifest themselves as being outside and are seconded as intra‑corporate transferees between offices, for example.
Q220 Chair: I get the sense there is consensus.
Andrew Langdon: Yes. From the Bar’s perspective, although it does not just apply to the Bar, outside Brussels we have the highest concentration of EU law experts anywhere in the world based here. The fluidity of arrangements has meant that we can work with European lawyers on the same cases. No one has been troubling themselves to worry about borders in that regard. There are many European lawyers who would want to preserve those arrangements.
Chair: That is very helpful.
Q221 Keith Vaz: Mr Langdon, you are obviously a remainer, because you understand the importance of Britain being part of the EU. Were you shocked and surprised at the level of attacks made on the judiciary during the recent case in the Supreme Court?
Andrew Langdon: The first thing to say is that, as you would expect, Mr Vaz, whatever my personal views are, I am here to represent the Bar. What I have been expressing is not a personal take on things.
In relation to your second and very important question, yes, the whole profession, not just ours, was extremely disappointed about the attack on the independence of the judiciary. We were reassured, as it were, by what happened when the Supreme Court issued its ruling. It seemed to us that those who previously did not understand the importance of what had gone wrong the first time around certainly understood it by the second time around. I do not think we feel that means we need no longer worry about it.
If there is any sense either among the press or politicians that somehow or other attacks upon the independence of the judiciary are now fair game, that is to be deprecated and any serious-minded person will do what they can to discourage it. As you would expect, we are a little more wary than we used to be. It is not just the commercial consequence, which is what we have really been discussing; there are all sorts of other aspects.
Q222 Keith Vaz: I know it sounds very Trump‑like, but you make the point that we are the best in the world—Britain first—but as far as legal services are concerned, we really are the best, aren’t we?
Andrew Langdon: I do not know whether it is English reticence or whatever, but we have a gold standard and unquestionably we punch very significantly above our weight, and we are and should be inordinately proud of that. We do not do that just because of what lawyers are up to; we do it because of the reputation of the jurisdiction.
Q223 Keith Vaz: Ms Hook, and perhaps the others, isn’t it a sad reflection that you do not appear to have a champion in Government? In David Davis’s speech to the Commons yesterday, you hardly got a mention. This was not at the top of the agenda, but it will have huge implications, will it not? Was it £26 billion? Was it £1.6 billion a year? I am sorry; those were the fees of Clifford Chance.
It was £26 billion to the economy. You do not seem to have a champion at the top table. In answer to a question from Mr Chalk you said it was a priority, or you were engaged with civil servants, but no Government Minister is standing up to say, “My God, we are the most important country as far as legal services are concerned.” Do you not get the feeling that you are not being championed enough?
Alison Hook: I do not think it is for me to say.
Q224 Keith Vaz: You are here, so I want to know your views.
Alison Hook: It is more a question for the Law Society and the Bar. It is disappointing that the importance of the legal sector is not understood, but that is in part because it is a complex set of issues that covers both economic and other matters. It is a sector like others.
Q225 Keith Vaz: But do you think you should get a champion to get that across to people, Parliament and Ministers? Is that missing at the moment?
Alison Hook: One of the things I have noted in my dealings with Whitehall over a number of years is that interest in the issue comes and goes. One of the difficulties is maintaining a continuous approach to the importance of the sector. Back in the mid-2000s, the UK Government and Whitehall were very engaged, and that began the whole process of looking at the legal sector as an important export industry.
Q226 Keith Vaz: Sure. I am talking about now in terms of the Brexit negotiations. You are being a politician; you are trying not to criticise Government. Mr Gleeson, I understand you set up a war room at Clifford Chance with a 24‑hour hotline to prepare your clients for a possible Brexit, and a Brexit rapid response unit. How has it gone? Have you had many calls?
Simon Gleeson: We were incredibly busy. The purpose of the war room was to prepare for potential crisis in the currency and financial markets, which to some extent happened. During that 24‑hour period we were extremely busy.
Q227 Keith Vaz: Has it been disbanded now?
Simon Gleeson: Yes. We are now talking to people about how this might work and how they might respond. Given that it takes two years to restructure a financial services group, and we have roughly two years to decide what to do, we are spending a lot of time at the moment playing “What if?” with our clients. We will stop playing “What if?” and start doing things.
Q228 Keith Vaz: In terms of your relationship with Government, there is a view that the Government need to hire a lot of experts to do with EU law. Some may well come from Clifford Chance. Are you currently doing work for Government on Brexit?
Simon Gleeson: No. The conflicts involved in our working directly with Government would probably be intolerable. The Government need an awful lot more expertise on this. It is a classic emergency requiring hiring, but the people who are hired to do it cannot be anything other than full-time, 100% Government employees.
Q229 Keith Vaz: Of course, but where do they get those experts from? You are absolutely right. At the moment, it is so complex and difficult. There is no White Paper, so there is no plan as such, apart from the Prime Minister’s speech. Where do they hire the experts that they so desperately need to help them over the next two years? If they cannot go to Clifford Chance, where do they go?
Simon Gleeson: If I knew that, I would be out there in front of them trying to hire them myself.
Q230 Keith Vaz: Is it a problem—I mean for our report?
Simon Gleeson: Yes.
Q231 Keith Vaz: It is going to be a problem to find the right people to give the Government advice.
Simon Gleeson: Despite the fact that, as has been mentioned, we have the highest concentration of EU lawyers in Europe, finding enough EU lawyers to deal with this is going to be a major problem.
Q232 Keith Vaz: Mr Bourns, I should ask you this question since you are before us. At the Law Society, you have had your own Brexit moment, with your secretary general resigning.
Robert Bourns: Chief executive.
Q233 Keith Vaz: Has that now been sorted out?
Robert Bourns: We have appointed an interim CEO. Catherine Dixon leaves the Law Society today. I have been reassured by the response of our senior management team, and I am confident that business as usual will carry on. It is very sad to see Catherine go; she has done a very good job.
Q234 Keith Vaz: She was quite critical of yourself and your colleagues. She said she could not in good faith continue to be chief executive of an organisation that was not prepared to change.
Robert Bourns: That was what she said in a note that was to be confidential between herself and Council members in circumstances where we are partway through a review of our governance.
Chair: Mr Vaz, we are not going to pursue that matter any further. It is nothing to do with the point.
Q235 Keith Vaz: But you are sorting it out anyway—since you are before the Committee.
Robert Bourns: Yes.
Q236 Keith Vaz: In respect of the Solicitors Regulation Authority, do you think that Brexit is going to provide them with an opportunity to restructure the way in which solicitors are monitored? They have made a statement to that effect.
Robert Bourns: They have given evidence and made a statement to that effect. My view is that there is not the time in Parliament, or for others who should be engaged, to carry out a proper consideration of which regulatory framework might be appropriate. My view is that the understanding of the nature of regulation has changed since 2007 when the Legal Services Act was passed, and there could be a worthwhile discussion to be had, but it has to be had in a proper context.
At the moment, for all the reasons we have been talking about, it seems to me that the job of work in hand is getting through Brexit sensibly to the advantage of the economy. Frankly, with our colleagues in Europe looking on, this is not the time, in my view, to be engaging in further regulatory change.
Q237 Keith Vaz: Mr Gleeson, you might be able to help the Committee on a unified patent court. I do not know whether patents are one of your areas, or whether anyone else round the Committee knows anything about this. Is it your area, Mr Bourns?
Robert Bourns: It is not my area, but we can comment on it. What was your question?
Q238 Keith Vaz: Is it going to make any difference if we stay in or come out?
Robert Bourns: We were interested in it. One of the things we were concerned about was whether it was appropriate to go ahead with ratification. Obviously, with the life sciences element of it to be established in London, we were anticipating an income of between £600 million and £1.5 billion attributable to that activity, in circumstances where a lot of the industry supporting patent applications is located in the UK.
We are a member of the European Union, so we have gone ahead with ratification. Of the three major economies—France, Germany and the UK—we are No. 2, so we have moved it from a point of discussion on to the EU balance sheet to be negotiated about. I think it has important potential consequences in relation to other sectors that are producing patent work.
Q239 Keith Vaz: Mr Langdon, I have a final question for you. We have a vote at 7 o’clock today. A lot of people have been saying in their contributions in Parliament that the result of the referendum was not binding but advisory. What is your view as chairman of the Bar?
Andrew Langdon: I am reassured that the Supreme Court thought this was a decision for Parliament, and beyond that I am not prepared to go.
Victoria Prentis: A very good answer.
Q240 Keith Vaz: You are passing on that.
Andrew Langdon: No, I have nothing further to add on that point, but there is a serious point about the need for champions; I do not know whether you as a Committee regard yourselves as such. We understand that part of the purpose of this investigation is that you make certain recommendations. We need as many champions as we can find who can articulate our concerns. I would not want you to think that somehow we were shy of asking for champions or for help.
There is a slightly wider point—you have successfully widened the discussion, and I know the Chair will want to limit it. When the world is looking on, it is not just Brexit and the things we have been discussing today that matter, is it? It is the whole of what we deliver by way of justice, including the way we look after the most vulnerable and the consequences of cuts to legal aid. We need our champions for all of that, because the thing is indivisible. We have reached our position of pre‑eminence because of the pride we have in what we deliver everywhere.
Chair: You cannot take one brick away without risk of damaging the whole. Thank you very much. That is helpful.
Q241 Alex Chalk: Turning to opportunities—because it is right we should do that—I want to pick up what Mr Gleeson said. I got the sense that, other things being equal, if Brexit had not happened, the proportion of your work and that of your peers in the Pacific region would be likely to increase, and presumably, ex hypothesi, the proportion in the EU would decrease. Is there a sense in which this could now present an opportunity for us to accelerate that process and therefore mitigate some of the potential loss in Europe?
Simon Gleeson: The two are unconnected. If you were to ask the senior management of Clifford Chance what their primary strategic objective is over the next five years, I have no doubt they would tell you that it was expanding the practice across the Pacific. We are fighting the war for English law very hard and in China we think we might be winning it, but that is a big fight. Our hope in this regard is that nothing happens in the context of Brexit to damage that, but I think the two are unconnected.
Q242 Alex Chalk: You have looked at the Pacific. What about other areas of the world? Should we be looking at south America, for example? We have some historical links there.
Simon Gleeson: South America is harder because it is very much New York law dominated. The way into south America is through our Madrid practice, and to a lesser extent, Portugal into Brazil. There is a flourishing south America practice, although it is somewhat on the back foot. By contrast, the Africa practice is very much on the front foot because Africa is to some extent an English law zone, although there we are under heavy pressure from the French, as well as the Americans.
Q243 Alex Chalk: To what extent is the ability to secure a free trade deal the gateway to English law prospering? What is the connection between the two?
Simon Gleeson: I don’t think there is a strong connection.
Alex Chalk: That is helpful.
Q244 Keith Vaz: I want to raise India. I know that the Law Society in particular has worked extremely hard to develop relationships with India. Alison Hook was the international officer at some stage in her career at the Law Society. I know the Bar Council has been very keen to get rights of audience over there. Is that not a market? Why are we not hearing more from the professions about trying to develop relations with a country like India?
Robert Bourns: It is a continuous discussion. As you will probably be aware, you find yourself dealing with both Government and the local Bar. We think there has been some progress at governmental level, and colleagues continue to advise me to pencil dates in diaries for signing off a memorandum of understanding and otherwise advancing it, but it does not happen. We are working on it.
Q245 Keith Vaz: Do you have a branch in Delhi, Mr Gleeson?
Simon Gleeson: Several years ago we had a strategic alliance with one of the largest Indian law firms, which we were effectively forced to abandon. I think I have in my pocket the business card I am required to carry in India, which says, “Director of Clifford Chance (Pacific) Ltd,” because even carrying a business card describing me as a partner in Clifford Chance is potentially contrary to Indian law.
Q246 Keith Vaz: Mr Langdon, isn’t this the opportunity Mr Chalk was talking about? The world is there for us.
Andrew Langdon: Referring to the memorandum of understanding we are seeking, the impression I had, rather like Robert, was that we were not very far away from achieving it. We are constantly seeking to do so for reasons we regard as mutually beneficial. You will also know that the Bar Council has projects and long-standing relationships with China and various other business markets.
Q247 Keith Vaz: You do not need Government; you can do it yourself.
Andrew Langdon: The point is that, as you would expect, the professions are constantly trying to form international links and strengthen them for all sorts of reasons, partly commerce and partly the rule of law, and the more help and support we can get from Government in the furtherance of those aims, the better.
Q248 Chair: We will be banging the drum for UK trade in the legal sector.
Andrew Langdon: Indeed.
Alison Hook: I spend quite a lot of time slogging backwards and forward around the world trying to secure better access for English lawyers. There are two things I would point out. In the last 20 years, the only progress we have made around the world has been down to two things. One is that countries have themselves been taking unilateral action to liberalise—Malaysia, Israel and South Korea—because of the importance of financial services sectors to them, and their desire to develop those and therefore being persuaded into the argument that access for lawyers is important. It has been a decision for those countries themselves, and that is the only thing that will open India. The other thing is that, because we have been part of the European Union, we have been able to trade access to the German car market for our lawyers being able to get access to those other jurisdictions. One of the problems we will have is that our negotiating hand in free trade agreements, as far as the legal sector is concerned, will be considerably diminished by the fact that we are outside the European Union.
Q249 Chair: That is a very helpful point. Finally, there is one technical point I want to pick up. It is probably for Mr Gleeson. We have dealt specifically with the patents court. One other specific matter I want to look at is article 46 of the Markets in Financial Instruments Regulation 2014. As I understand it, that requires financial services from third countries to arrange for disputes to be resolved within an EU member state. If that remains the case—I assume that if we leave it will still be there as an EU directive—what is the impact on our legal sector? Is it manageable or is it something we need to worry about?
Simon Gleeson: It largely depends, to be honest, on whether those provisions ever get used and the UK is ever recognised as equivalent under them. At the moment, the expectation is that that will not happen, so there has not been too much focus on the dispute resolution issues. However, it is clearly correct that, if the partial solution to the problems of doing European business from London were to be equivalence under that provision, we would end up doing a lot more in European courts. We would probably end up in a strange situation where we would be doing ISDAs under English law with dispute resolution provisions that reflected the requirements of the article, which would be very odd.
Chair: That emphasises a number of the points you made about the complexity of transitions and so on. Thank you very much for all your evidence; it is very much appreciated. It has been very helpful to us. We do see ourselves where necessary as champions. I hope we did that when inappropriate comments were made about the High Court ruling. You may remember that this Committee issued a statement.
I share your view, Mr Langdon: I am glad that was not necessary the second time around. We take these things seriously, and we will continue to do so. I promise you that. We will be making very specific recommendations to Government in our report. The points are well made. I am grateful to you for your time and evidence.