In addition to Mr. Leonard, I am joined by my colleague, Mr. Patrick Mair, and by Ms Ciara Murphy who is director of the Bar Council. We are delighted that the committee is taking time to have us here today to outline some of our views on the issues that are for its consideration.
Our submissions are confined to certain issues that may arise in the field of civil justice as a result of Brexit. Although media commentary has focused on the implications for financial services and insurance companies over the loss of passporting rights, the rights of citizens of the EU to remain in the United Kingdom after Brexit and vice versa, customs and tariffs issues, the Bar of Ireland wishes to highlight the wide range of civil justice issues that are raised by Brexit, particularly in a hard Brexit scenario. As a country with deep personal and economic ties with the United Kingdom, the issues here have the potential to affect Ireland more than perhaps any other country in the European Union. The Bar of Ireland also wishes to highlight some opportunities for Ireland in the context of marketing legal services.
We have identified a number of areas of concern. In order to highlight these, I will explain briefly what they are. The first relates to civil jurisdiction, and the recognition and enforcement of foreign judgments. In order to ensure the smooth flow of commerce between the member states, it is essential that the judgments of one member state’s courts are recognised in the other member states. Similarly, it is important that companies and individuals know which courts will deal with disputes, and how court papers from one member state’s court system may be served in another member state. In the existing legal order, in civil and commercial matters, these issues are comprehensively dealt with by the recast Brussels regulation which deals with both the jurisdiction of courts and the recognition and enforcement on judgments across EU borders in civil and commercial matters. That regulation which is directly effective as the force of law in all member states provides that judgments of courts of one state are enforced throughout the other member states as if they were the judgments of the court of that member state. In general, if a person is domiciled in an EU state, he or she must be sued in that state. Where parties choose in their contract that any disputes should be resolved in one member state, the courts of the other member states must abide by that choice.
In addition, there is a range of EU rules on the service of judicial and extra-judicial documents. The benefit to such a system is, of course, self-evident. If an Irish company obtains a judgment in Ireland, it will be entitled to enforce that judgment against a defendant in any other member state. Similarly, the Irish company can be satisfied that it will only be sued in Ireland, unless the rules of the recast regulation permit it to be sued elsewhere. In the context of a hard Brexit, none of these rules will apply so that European companies will find it difficult to enforce European judgments in the courts of the United Kingdom. United Kingdom judgments may be unenforceable in certain member states, and their enforcement in Ireland will be rendered more difficult and more expensive. These issues also affect multinational businesses based in Ireland, or those considering whether to relocate to Ireland.
Much of the regulation of the financial services and insurance sector in Europe derives from European Union regulation. Part of that system allows what is known as passporting. I am sure the committee will have heard about this from various other parties which have been before it. Under that system, where a regulated entity is situated in one member state, it is, under certain conditions, entitled to provide services to businesses and consumers in other member states. Many of the financial services and insurance businesses established in the City of London use those rights to provide services across the European Union. Similarly, there are many financial services and insurance businesses across the European Union which use passporting to provide services to what is the very large United Kingdom market. In the context of a hard Brexit, it is likely that the right of companies to passport either out of or into the United Kingdom will be removed. This will give rise to significant disruption in the provision of financial services. Whereas there may be a migration of some businesses to Ireland and, therefore, benefits, some Irish companies may lose the right to provide services to the United Kingdom.
There is a Europe-wide insolvency regime which is given effect by the insolvency regulation. Under the rules established by this regulation, the courts of the member state where a company’s centre of main interests is situated have jurisdiction to open main insolvency proceedings in respect of that company. The clarity provided by the insolvency regulation is especially valuable where companies routinely trade across borders and have assets and operations across multiple jurisdictions. In the scenario of a hard Brexit, the courts of EU member states are unlikely to recognise the United Kingdom and vice versa in an insolvency situation.
These are just headline issues. There are a wide variety of other legal issues that affect citizens across the EU, particularly in Ireland. There are many other areas where citizens’ rights could be affected, such as family law, immigration and employment law, consumer law, competition, tax and so on. The effect of a hard Brexit will be seen in the application of legal provisions affecting ordinary people on a day-to-day basis.
What can be done about it? In the absence of agreement between the European Union and the United Kingdom in a range of areas relevant to civil justice, businesses and individuals will have to fall back on pre-existing international treaties, where they exist, or develop new ones, or on long-standing rules of public and private international law. That is a very complex concept and is likely to give rise to increased cost and uncertainty in the conduct of commerce and in the movement of people between the European Union and the United Kingdom.
Political considerations fall outside the remit of the Bar of Ireland but it is clearly in the interests of both the European Union and the United Kingdom to seek replacements for the Brussels recast regulation, the insolvency regulation, and the other rules which are currently in force across the European Union. The Bar of Ireland notes the stated objective of the United Kingdom to remove its legal system fully from the jurisdiction of the Court of Justice of the European Union. This stated desire may prevent agreement being reached in respect of many of the areas of civil justice where it is clearly desirable that there be the fullest possible co-operation. It may be that some compromise can be reached whereby the United Kingdom would accept the jurisdiction of the Court of Justice of the European Union on the type of procedural issues involved - for example, in the context of jurisdiction and enforcement and, perhaps, regarding the service of documents, now governed by Brussels' recast regulation as opposed to substantive private international and public international law.
These are the macro issues. We also want to highlight the significant opportunities to expand the market for legal services in Ireland. The provision of legal services increasingly has a prominent international dimension and regularly involves international issues. The growth in international trade and investment has increased demand for cross-border legal advice and representation. Over many years, the United Kingdom has consolidated efforts across a wide range of stakeholders to increase its share of the international legal services market and it has been hugely successful in so doing. At present the United Kingdom is believed to account for 10% of global legal services fee revenue and 20% of European legal services fee revenue.
One of the factors that underpins the United Kingdom’s position as the second largest market for legal services globally is parties to international commercial contracts choosing English law to govern their agreements. This is borne out by the volume of litigation and arbitration involving non-UK parties that occurs in the United Kingdom. For example, the data we have collated suggests that since 2010 around 80% of all London commercial court cases each year have involved at least one non-UK party. In almost 50% of all cases, all parties are not UK-based or linked.
Brexit creates an opportunity for Ireland to increase trade in legal services from Ireland to the international sector. First, Brexit creates considerable uncertainty among UK legal services providers concerning their ability post-Brexit to service their clients as before, given that they will no longer be part of the European legal order. Second, Brexit has significantly lessened the attractiveness of English choice of law clauses in commercial contracts. According to a survey conducted for the Bar Council of England and Wales, European clients are already considering moving away from English choice of law and jurisdiction clauses. In addition, according to the same survey, some international parties have already chosen not to issue proceedings in England because there is a fear that final orders will have to be made after Brexit and there is great uncertainty about the enforcement of those orders.
Following Brexit, Ireland will be the only English-speaking common law jurisdiction fully integrated into the European legal order. This should help to attract financial and other services industries into Ireland and provide an opportunity to increase the market for legal services in Ireland.
We think it will encourage international clients and companies to incorporate Irish law as the governing law of contracts in place of English law, to designate Ireland as the forum for the resolution of disputes about those contracts by way of litigation or arbitration and to use Irish lawyers to advise on European law. What is interesting about the statistics that we have come across is that London is the second-largest centre for the provision of advice about EU law outside Brussels, which is extraordinary when one thinks about it. The reality is that that will have to change after a hard Brexit. The availability of highly-skilled common law and English-speaking lawyers in Ireland is an important support for the international business that flows through Ireland. Considerable expertise has been built up by the large firms in this country in areas like funds and aircraft leasing, for example. Irish firms are able to rival the large international firms in these and other sectors.
There is further potential for Irish solicitors’ firms and barristers to provide legal services from Ireland to clients outside Ireland. Considerable work is required to take advantage of the opportunity to increase trade of legal services to the international sector. Over time, and this is only going to happen over time, it ought to be possible to significantly increase trade in legal services from Ireland in Dublin, with increased business opportunities and revenue arising from ancillary support services and increased tax revenues for the State, both by way of income tax and VAT. The potential rewards to the economy are very significant. One of the figures that emerges from looking at the raw data is that, in 2015, the net export value of legal services in the UK, by which we really mean London, was about €4 billion. Not all of that is necessarily affected by the Brexit scenario, but that is a figure that we think significantly understates the export value of the English legal services market. One does not have to be particularly ambitious to see how even taking a small chunk of that would involve a significant increase in revenues here and for the State.
It is important to say, as we have said, that in common with many other sectors, we are not talking about competition between Ireland and the UK. These are businesses, clients and firms that we know are actively considering moving because of Brexit, and therefore it is a question of them deciding whether they come to Dublin as opposed to Paris, Frankfurt or Amsterdam, not whether they stay in London or come to Dublin. Over time, it is possible to increase the trade. If Ireland becomes a place in which international litigation and arbitration is routinely carried out, it inevitably enhances the reputation of Ireland as a place to do business. The circle, in essence, goes around, particularly for the type of financial service providers that are now considering a move.
That is an outline of our position on it. As the Chairman has noted, we have supplied the raw data behind it. That is constantly being monitored and updated on our side, because all the reports are being prepared on a regular basis.
