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What challenges does Brexit present to in-house lawyers?

21 Apr 17 - 10:30AM  | Legal
What challenges does Brexit present to in-house...On March 29th, the UK government triggered Article 50 of the Lisbon Treaty, ending months of speculation regarding when the country would start the Brexit process. A two-year negotiation period will now begin between Britain and the EU to decide the terms of the nation's withdrawal from the union. 

But just as one period of uncertainty ends, another now begins as prime minister Theresa May announced a surprise snap election, which will take place on June 8th. Even if the Conservatives remain in power - as the polls suggest they will - questions still remain over what line the government will take in Brexit negotiations. 

Will it be a hard or soft Brexit? And what challenges could in-house lawyers face over the coming years if leaving the EU becomes a bumpy ride? 

The freedom to practise 

The Law Society has urged politicians to tread lightly on Brexit, noting that an acrimonious split would damage the UK's £25.7 billion legal sector. The organisation is particularly keen to see reciprocal arrangements between Britain and the EU that would allow our lawyers to practise in member countries and vice versa. 

Currently, professionals have the freedom to practise across the single market through the lawyers' directives, which are the:
  • Lawyers' Services Directive 77/249/EC: The temporary provision of services; and
  • Establishment of Lawyers Directive 98/5/EC: For permanent establishment. 
"At present global access to legal services is extremely restricted. Building barriers to market access to the EU would have a significant impact," said Law Society president Robert Bourns. 

"'No deal' would raise the prospect of the UK having to negotiate with 27 individual markets, and while the mooted Trade in Services Agreement could improve transparency, it would not be a liberalisation of market access for legal services."

Writing for the Law Society Gazette, secretary general of the Council of Bars and Law Societies of Europe Jonathan Goldsmith said EU countries are unlikely to expel British law firms if a hard Brexit occurs. 

However, he claimed that access to courts and the practice of local law would most likely be withdrawn, while requalifying would also become more challenging. 

Data protection 

The EU's General Data Protection Regulation (GDPR) will represent one of the largest ever shifts in how organisations handle the information they collect. 

Individuals are expected to have far more power over how their data is used once the regulation in introduced, and data controllers could face stiff punishments for any breaches that occur. They must also report any incidents to the appropriate authority within 72 hours of becoming aware.

Failing to comply with the GDPR could see organisations facing fines of €20 million or four per cent of their total revenue, whichever is higher. But what happens when the UK leaves the EU? 

The GDPR comes into effect in May 2018, and Britain will be a member of the EU at least until late March 2019, meaning UK firms' lawyers must follow the new regulation for almost a year at a minimum. 

What will happen after that is uncertain, but the Solicitors Regulation Authority has advised in-house lawyers to consider:
  • Where their data is held;
  • Whether data is subject to the Privacy Shield - a framework protecting the flow of personal information between the EU and the US; and 
  • What compliance steps they'll need to take moving forward.
The Information Commissioners Office has already confirmed that it will be taking on significant extra resources in order to deal with GDPR compliance, but the future of data protection from a legal perspective is still unknown. 

Financial services fallout 

In-house lawyers practising for financial services (FS) firms are likely to experience the biggest impact from Brexit. This is a significant development considering the largest 50 FS groups contributed more than £70 billion in taxes in 2016, with £20 billion worth of services exported as a whole to the EU. 

Our recent Market Report for the legal sector showed 32 per cent of FS legal departments are already reporting that Brexit is influencing the work they undertake. The good news for in-house lawyers is that 29 per cent of organisations expect to need more resources to cope with Brexit-related activities in 2017. 

We've found that legal teams are already becoming involved in Brexit committees and steering groups, with a great deal of contingency planning already taking place in case of worst-case scenarios. Specifically, the absence of special access to the single market and bilateral agreements with key members could prove devastating for some FS firms. 

The outcomes of Brexit are far from certain; so, the result could be a leaner, less regulated and more agile UK finance industry. But whatever happens, we predict lawyers will be highly in demand as politicians look to renegotiate and rewrite existing legislation and contracts.

Our 2017 Market Report combines our review of the prevailing conditions in the in-house legal recruitment market together with the results of our latest employer survey.

Image: djedzura via iStockADNFCR-1684-ID-801834970-ADNFCR
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