'Brexit should be seen as an opportunity' - Shearman's Reynolds on the post-referendum positives
Shearman partner Barnabas Reynolds on the key post-Brexit opportunities for English lawyers and the UK's courts
September 15, 2017 at 04:08 AM
5 minute read
With Brexit now taking place, the question is no longer whether we remain or leave. The debate has moved on and it is the duty of common law practitioners in England and Wales, and their colleagues in Scotland and Northern Ireland, to be at the vanguard of shaping what comes next, minimising the risks and maximising the opportunities.
Two key opportunities that arise are for English law lawyers and the UK's courts.
English transactional and advisory lawyers are well positioned to continue their successful run regardless of Brexit. They have the tools and skills to create stability and certainty in changing environments. Common law practitioners also have a proven ability to reach out into the wider world and to generate business.
The common law itself has the dynamic ability to evolve continuously and pragmatically in a way that other legal systems cannot rival. This, in part, explains why it has been adopted in so many places around the world and, in the hands of local judges, has tailored itself to local environments.
Numerous countries are reaching out to common law practitioners in the UK to help them adopt English common law in financial free zones, special economic areas and the like, and many other initiatives seek to replicate it elsewhere. The benefits of common law in substance are neither based nor dependent on EU law, and its advantages will continue regardless of Brexit. What will be affected, however, is the English common law way of 'doing' law: its approach to interpretation, its reliance on judicial reasoning and its precedent-based system. These have always sat uneasily below the EU's civil law requirements, but will no longer be so constrained once the Supreme Court is supreme.
Brexit presents an opportunity to reinvigorate the usage of the UK's courts
Today's legal, financial and commercial markets are ever-converging and Brexit should be seen as a chance for the UK to reinvigorate relationships beyond its near-neighbours, with the wider world. English law already governs more international transactions – often without any English or UK nexus – than any other country's law. The UK's courts are renowned for their expertise, pragmatism, commerciality and sophistication. Consequently, parties regularly confer exclusive jurisdiction on them to determine disputes. Parties who elect to resolve their disputes by arbitration frequently appoint UK lawyers (including judges) to arbitrate them.
Brexit presents an opportunity to reinvigorate the usage of the UK's courts. During the past year, one of the questions most frequently asked has been whether Brexit will affect the enforceability of UK court judgments in the EU after the UK leaves in March 2019. It seems likely that, following Brexit, the Recast Brussels Regulation will cease to apply between the UK and the EU, at least as regards litigation commenced after the withdrawal date.
However, this does not mean that UK court judgment creditors will no longer be able to have their judgments enforced in the EU. Post-Brexit, the UK will be a non-EU country, meaning that, absent any agreement between the UK and the EU, UK court judgment creditors can obtain recognition and enforcement of their judgments in the relevant member state by following each member state's domestic procedure. This is the same process that judgment creditors seeking to enforce judgments from the US and elsewhere follow when dealing with EU member states' courts.
The key question is the volume of UK court business. In that context, the current setup has been less effective than might be desired. The 20th century saw arbitration overtake litigation as the preferred mechanism for resolving cross-border disputes. Ninety percent of respondents to the latest Queen Mary survey on international arbitration indicated it is their preferred method for resolving cross-border disputes, either as a standalone mechanism (56%) or together with other forms of alternative dispute resolution (34%) – up 17% since 2006.
There is substantial empirical evidence that the key reason for this is the ease with which award creditors can obtain recognition and enforcement of arbitral awards. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards has been adopted by 157 states.
There is no equivalent convention for foreign court judgments. Brexit brings with it a chance for UK lawyers and the UK Government to remedy this anomaly.
The UK and its lawyers should lead the drive
Since 1992, the Hague Conference has been working on a convention on the recognition and enforcement of foreign court judgments in cross-border civil and commercial litigation. The current draft, which was published in February 2017, is more expansive than the Hague Convention on Choice of Court Agreements 2005 and draws inspiration from the New York Convention and the Recast Brussels Regulation.
While it is unclear how many countries will sign and ratify this convention (the 2005 Convention has five signatories, with only three ratifications), there can be no doubt that a new, robust and expansive international convention on the reciprocal recognition and enforcement of foreign court judgments is long overdue.
The UK, and its lawyers, should lead the drive towards making this a reality, such that the benefits of Brexit are felt not just in the UK but more widely across the world.
Barnabas Reynolds is a partner at Shearman & Sterling and head of the global financial institutions advisory practice. His recent publications, A Blueprint For Brexit, and A Template For Enhanced Equivalence, published by Politeia in November 2016 and July 2017 respectively, set out his thinking on the post-Brexit environment for financial services.
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