Following the triggering of Article 50 today, will London become less strategically important for European firms and clients? The Lawyer gathers thoughts from a core part of the UK legal market – the European firms in London.
Niamh Ryan, head of London, A&L Goodbody: London has always been an important location for us. We have a high level of business that originates from clients in the UK or through the UK as well as through working alongside UK law firms. With Brexit it will become even more important as we will continue to maintain close links with our UK, and London-based international clients who transact or invest in Ireland.
Camille Bourke, head of London, Arendt & Medernach: Brexit is giving an additional rationale to our firm having a base in London. This is true obviously on a short-term basis because a lot of our clients (banks, investment managers, insurance companies, etc) are asking questions on a daily basis on how to use Luxembourg as an option for relocating some of their activities “onshore”. But it is also true on a mid- to long-term basis.
With Brexit, our presence is London is proving to be all the more useful when it comes to conveying the right messages coming from the UK community to the Luxembourg authorities. Similarly, our office in London is the direct recipient of the voice in Luxembourg with regard to the government’s approach to Brexit.
Massimiliano Nitti, London managing partner, Chiomenti: There’s no doubt that Brexit represents a serious threat to the continuing role of London as the preferred gateway for international investments into Continental Europe.
Chiomenti intends to monitor closely the impact of the forthcoming EU/UK negotiations on the international strategies of the many extra-EU investors (mainly US) that today look at Italy through London-based teams. As long as these investors and major US law firms remain in London we see no reason why Chiomenti should leave or reduce its presence.
Andrea De Tomas, London partner, NCTM: The signs are not encouraging in terms of the capacity of London to retain its role as the main financial hub in Europe.
Dimitry Afanasiev, Chariman, Egorov Puginsky Afanasiev & Partners: Private clients are no longer viewing the UK as unquestionably the number one place to bring their families and their money. Other jurisdictions are being considered more seriously.
Ignacio Corbera Dale, London partner, Garrigues: London’s strategic position has not changed it and will not as long as the UK is able to keep its position as a leading business and financial hub like New York, which has never been part of the EU.
At the end of the day, our strategic plans vis-à-vis London will depend on whether or not our key business partners (multinational companies, investors, private equity firms, banks and leading law firms) keep a substantial presence, and, even more important, their decision-making powers for Iberian matters in London.
Kristien Carbonez, head of London, Liedekerke Wolters Waelbroeck Kirkpatrick: If the EU’s passporting regime goes, and with it the US and international banks, asset managers and insurance companies, part of the reason we are in London will disappear. Similarly, if the European headquarters of non-EU corporations decide to relocate to other European locations and the international and UK law firms we work with decide to slim down in London, we may need to consider shifting the focus of our own investment and efforts.
Dunja Koch, London managing partner, Froriep: We believe that, irrespective of Brexit, London may stay a strategic location if London law firms keep their dominance in the international legal market and English law and courts remain a popular choice for dispute resolution.
Stefan Kraus, co-head of London, Luther: Brexit will have a negative effect on London as a strategic location for law firms. For example, it does not make so much sense anymore to opt for English law in contracts for parties from EU countries.
Thomas Schulz, head of London, Noerr: Some of the financial services industry might move to other European capitals including Frankfurt. But even if this happens it will take some time and there may be mitigating factors too. And after all, the UK Government might even be able to negotiate a good deal preserving access for the financial services industry into the EU. I’m convinced London will remain relevant as an investor-friendly location.
UK-based companies and clients will inevitably need more European legal advice in London to cope with the Brexit process. Which areas of law will have see the highest demand?
Ryan: UK-based clients always need legal advice specific to European countries, including Ireland, and we would expect that to increase post-Brexit. At the moment, we are already assisting existing clients with contingency planning in relation to their operations in Ireland and how they may be impacted by Brexit, and new clients looking to establish some part of their business in Ireland to maintain a presence in the EU.
We expect the highest demand for advice to be in the area of financial services, including banking, insurance and funds, and that reflects the type of queries we are addressing.
Bourke: There is and will continue to be increased demand from our UK-based clients to receive advice on ‘onshore’ alternatives, such as Luxembourg.
The areas of law to see the highest demand are most likely on the asset management side – UK-based managers looking at marketing their funds in the EU, using Luxembourg as a hub for their fund, special purpose vehicle and, increasingly, their alternative fund manager. These clients are looking at reaching a robust position on the regulatory side and also, importantly in this evolving environment, on the tax side. Luxembourg is able to offer this.
Massimiliano Danusso, London managing partner, Bonelli Erede Pappalardo: I believe UK-based companies will be willing to explore any chance to maintain full access to the single market. Regulated sectors such as banking, financial and insurance are obviously expected to be most affected, given the strong impact of the free circulation of services in the EU on their business.
Nitti: We already see a number of clients willing to revise tax structures to minimise the possible effects of Brexit. More importantly, we note the concerns of many UK-based financial intermediaries who are weighing risks related to the potential inability of passporting their UK licenses to provide financial services into Italy. This suggests that the areas where there will likely be an increased demand for legal services are tax and regulatory compliance.
Antonio Baena, London managing partner, Cuatrecasas Gonçalves Pereira: We’ve set up a Brexit task force to channel the needs of our clients resulting from the Brexit process and we anticipate, and are already experiencing, a significant demand across areas such as finance, corporate, litigation and arbitration, capital markets, employment and tax.
Niek Biegman, London partner, De Brauw Blackstone Westbroek: Some UK-based companies, or companies with European headquarters in the UK, are looking at all strategic options and considering moving at least part of their business to a EU country, including the Netherlands. We advise them on a range of areas including financial markets regulation, corporate advisory, tax, employment and capital markets.
Afanasiev: Arbitration and litigation will see high demand because contracts have been signed and will stay in effect in the long term. We are looking to bring in an experienced commercial litigator to help co-ordinate the cases we refer to our friends in London law firms.
Georg Frowein, partner, Hengeler Mueller: It is clear that all business models relating to the UK must be put to the test. All contractual agreements subject to, or referring to, UK law should be carefully reviewed. Obviously, cross-border rules for banks and investment firms will need to be analysed in detail and we expect high demand in areas of law relating to cross-border M&A, banking and finance.
Schulz: There is already a lot of interest among law firms and financial services clients to understand the process involving the German regulator Bafin. Regulatory lawyers are naturally going to be busy over the next few years as the UK attempts to untangle itself from decades of EU law. Financial services passporting and equivalence issues will also be key, although this will be different for banks, asset managers and insurers. If a satisfactory deal cannot be reached for the relevant sectors, UK-based financial services providers will look at their business models and may decide to move their headquarters to an EU country such as Germany. That will be particularly true for fintechs, which have to scale their business models quickly. A raft of advice will be needed: regulatory, corporate, tax, employment and immigration, real estate etc.
Maurits Kalff, partner, Van Doorne: In many reports on Brexit, Amsterdam and the Netherlands are pointed out as favourable locations for business post-Brexit. We, of course, couldn’t agree more. We expect a high demand for regulatory and corporate law work, as well as in real estate, tax and commercial. Besides, many international clients have contracts with suppliers and other businesses in the EU. Once the Brexit terms are more clear, these will all need to be reviewed and possibly amended. So even without a physical presence or registered office in the Netherlands, UK-based companies doing business with the Netherlands will need legal advice in the long run.
Stephen Keogh, head of London, William Fry: UK clients are seeking Irish legal advice as part of their general Brexit planning. We expect this to continue, especially as the prospect of a hard Brexit comes into sharper focus. The first wave of enquiries has come mainly from the regulated financial services sector, so our finance lawyers, insurance lawyers and investment funds lawyers have been in demand.
Koch: Our London office has always been relatively small. This enables us to stay versatile and cope with ups and downs. With the value of the sterling slumping the pressure on fees is even higher.
Brexit may also affect the internal running of the London office. All our fee-earners are Swiss nationals. Switzerland has gained access to the European single market through bilateral treaties with the EU and our fee-earners benefit from freedom of movement. Rotation of lawyers from our home offices to London is easy, no work permits are required, registration with the SRA is fast, and social security and pension issues are a mere formality. In the event all this changes, our firm may have a different view on the strategic importance of being in London.
Rupert Reece, partner in charge of London office, Gide Loyrette Nouel: It’s hard to see how Brexit can make a long-term positive contribution to the growth of the legal market in the UK. If there is any impact on the overall market it is likely to be negative rather than positive. However, there may be a counter-cyclical effect for independent foreign firms that are able to maintain a presence here. We would anticipate finding increased potential for work with UK clients and law firms, which continue to have business in Europe.
Larger UK firms that already have a significant presence in Europe should not have too much difficulty in maintaining it, although there may be some restriction on their ability to move lawyers and staff around their network. On the other hand, it would presumably become harder for UK firms that do not already have a presence to establish a one. Overall, the effect should logically be to increase the need for UK firms to build relations with independent European firms and increase the opportunities for referrals, rather than reduce them.