A no-deal Brexit could result in a range of problems for law firms, including inter-office rifts, investigations by foreign regulators and increased costs for clients, according to leading industry figures.

Legal Week spoke with leading lawyers about what the worst-case Brexit scenario could be for top law firms if the U.K. crashes out of the European Union without agreeing terms – a prospect made more likely after Prime Minister Boris Johnson asked the Queen on Wednesday (August 29) to suspend parliament, limiting its ability to debate or prevent a hard exit.

Many pointed to people issues as the most immediate challenge.

"Lawyers across borders try their honest best to set the politics aside, but they are still people"

Clifford Chance banking and finance partner Simon Gleeson said that, "if the politics get nasty" and the relationship between the U.K. and the E.U. turned into a "cultural cold war", that could be mirrored at firm level.

"Lawyers across borders try their honest best to set the politics aside," he said, "but they are still people."

He added that EU lawyers who once seriously considered joining U.K. law firms may no longer view them as "an attractive prospect".

"You just never know when you might be, well, asked to leave"

A Brussels-based partner at a top U.S firm added that the risks inherent in joining a U.K.-based firm would "heighten". He added: "You just never know when you might be, well, asked to leave. It's a hazy transition period in which anything could happen, and I'm not sure I'd want to work under those circumstances."

The lawyer went on to suggest that non-U.K. lawyers might prove "a risk" for some law firms, as "their [immigration] status will perennially be under suspicion", adding that the situation was "awful" and "unpredictable".

Others argued that partnerships would be forced to cooperate more closely in the event of a hard divorce but admitted that could have knock-on consequences.

Philippe Ruttley, a consultant solicitor at Keystone law, emphasised that while there will be animosity between the blocks, and "very little patience with British arrogance in Brussels", it could mean that "law firms and their offices across the border will cooperate more", post-Brexit.

However, he added that were U.K. lawyers to be stripped of certain EU liberties, lawyers would have to deploy teams in both the U.K. and in the EU. And that will inevitably add another layer of costs to the client's legal bill.

The broad consensus among commentators is that a no-deal scenario will create a transactional work dip and a concurrent regulatory work spike.

Norton Rose Fulbright partner Jonathan Herbst suggested that, "if regulation becomes a political football, it would make things more difficult", for both lawyers and their clients, arguing that additional, more complex tariffs could slow, if not completely frustrate, deals.

"The demand for regulatory advice will go through the roof"

Conversely, Gleeson explained that "the demand for regulatory advice will go through the roof, and more money will be spent on lawyering rather than on transactions".

This sentiment was echoed by Miriam Gonzalez-Durante of Cohen & Gresser, while Ashurst disputes partner Lynn Dunne added it could also open doors for litigators as clients rush to abandon riskier deals.

Dunne also suggested that economic uncertainty often creates fertile ground for fraudsters, which generally translates to work for white-collar crime and regulatory lawyers.

But lawyers may also require advice themselves regarding the issue of legal professional privilege.

British lawyers currently benefit from an EU-wide privilege, which ensures that communications between lawyers and their clients are protected from the prying eyes of external investigations in criminal or civil matters.

"Under EU rules, legal privilege is only applicable to EU-qualified lawyers – with the exception of in-house lawyers," Ruttley explained. However, British lawyers who are not qualified and are practising in an EU member state will no longer have that protection come the Brexit deadline on October 31, Ruttley explained.

Cross-border confusion 

"The consequences for any firm that is not prepared for the worst could be quite severe"

With many U.K. lawyers taking up citizenship in Brussels and becoming Ireland-qualified, the threat of having one's qualifications called into question is too great for some, particularly those working in the competition and antitrust world.

Andrew Hood, a partner at Fieldfisher and a one-time adviser to former Prime Minister David Cameron, warned: "The consequences for any firm that is not prepared for the worst could be quite severe."

He added: "Those in the service industry – like lawyers – need to understand whether there will be any new limits on their ability to sell into the EU or provide services in the EU.

"The legal sector will face challenges and uncertainty around the recognition of qualifications and the ability to represent clients across borders and in the courts of the EU."

Keystone's Ruttley added that "not being in the EU means that U.K. lawyers will no longer have the right of audience in EU courts where they are not admitted", which, in his view, would "cut out a lot of the very good and experienced British barristers and solicitors" from practising in Europe.

"The real losers are the clients"

The Brussels-based partner added that, while solicitors have a big problem, "the real losers are the clients" in a no-deal scenario, adding: "Boris has piled yet more bullsh*t upon the no-deal catastrophe."

He said: "Clients are already facing uncertainty from other quarters of the market, the threat of supply chains collapsing, of an influx of unchecked materials. Now add to that the fact that their regular legal advisers may no longer be able to provide advice to them. What an absolute mess."