With just under a year to go – Brexit is a key subject on most in house lawyer’s minds. There are many issues to be considered and Brexit will affect all businesses differently, therefore, when it comes to legal support needs will vary. In this article, Kelly Loydon, a member of SSQ’s In-House legal search team and specialist in temporary and contract recruitment, outlines some of the key practice areas we are expecting to be particularly busy within the financial services sector before 29 March 2019 and onwards throughout the transition period to 31 December 2020.
Theresa May has confirmed that the UK will not be allowed to continuing passporting post Brexit. This is likely to be the most significant legal challenge for the financial services sector due to the huge volume of contracts that will need to be repapered. The Bank of England has suggested that 6 million insurance policies in the UK could need rewriting along with millions of contracts for derivatives, loans and swaps. We have already worked with a number of clients on such projects, for example, those relating to Variation Margin, Initial Margin and MiFID II. Many clients hire paralegals of varying seniority to handle outreach and basic repapering, along with experienced documentation negotiators or specialist lawyers to handle the more complex renegotiation. We are able to scale our services for clients to suit the volume of contracts affected. We have previously helped bulk out legal teams with contractors which enables the existing team to focus on “business as usual” work, safe in the knowledge that the temporary contractors are covering the project work. With other clients, where the scale of repapering is far greater, we have worked in conjunction with reputable partners who manage contractors and provide the technology needed to cope with high volume.
Businesses in the UK that have commercial contracts with others in the EU and vice versa will be aware that some of these contracts could become invalid as a result of Brexit. Many legal teams are considering adding commercial lawyers to deal with affected agreements and ensure that their company’s interests are well-maintained. The market for such interim commercial lawyers is particularly buoyant. Candidates are keen to take on such roles as they offer exciting and interesting work.
There will inevitably be changes to the drafting of future contracts as the laws of the UK and EU begin to differ. Businesses may foresee more complex or long term issues and they are already bolstering their legal teams with experienced commercial lawyers. As with insurance and derivatives contracts – supply contracts may need to be widely repapered and again we are working with clients who are hiring contractors at all levels to deal with client outreach or high volume negotiations.
Immigration & employment
A briefing published by the House of Commons in February 2018 stated that in 2016 there were 3.6 million EU citizens living in the UK. Conversely, the UN reported that around 1.2 million UK nationals are living in other EU countries (2015). Many of the businesses we deal with will have highly skilled employees from the EU. The rules around immigration post Brexit remain to be seen, but if significant changes are made then we expect lawyers with skills in employment or immigration law will be in demand. As a general rule – immigration and employment recruitment has always been client led as there are usually relatively few such in house roles available. This may change whilst businesses assess how best to retain their workforce depending upon the outcome of the negotiations around immigration. We have already seen one proactive financial services client take a contractor in this area to scope and determine possible solutions for current and future employees.
Direct & indirect tax
Post Brexit the UK may change its tax laws to attract business from overseas and therefore organisations need to evaluate current structures internationally for such exposure. For businesses dealing with cross border trade between the UK and EU, additional costs and delays may well occur after the UK leaves the single market. Tax lawyers may be required to deal with some or all of the issues arising out of such changes. Finding a commercially minded specialist to move in house who can assess the impact of Brexit, implement solutions and capitalise on opportunities is a potential consideration for many clients. Historically we typically see very limited demand from in-house clients for tax lawyers on either a permanent or interim basis. We envisage the demand for such talent will increase and we recommend clients act quickly to ensure they have the pick of available talent.
It will be difficult to evaluate the impact of Brexit on the legal in-house market for some time yet. Until negotiations are finalised, businesses will be unable to come up with a clear strategy around how they are to operate. However, what we do know is that the makeup of legal teams will change, potentially in both the short to medium term and longer-term.
For more information on how Brexit is expected to impact the legal market please contact [email protected].