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The U.K. wants to keep London at the center of European commercial legal disputes after Brexit. Except, without the European Court of Justice.
A paper published by the U.K. government on Tuesday gave few details about how this might be achieved, but it was clear that Britain doesn’t want to lose lucrative litigation business, which contributes more than 25 billion pounds ($32 billion) a year to the economy, according to business lobby group TheCityUK. Officials pointed to a paper on the ECJ due to be published on Wednesday as likely to give more information on that aspect.
Instead, the document focused on why such a deal would benefit both sides, highlighting the U.K.’s close links with the European Union. The danger for Britain is if EU members decide they want a larger share of international litigation — according to the government. English law currently governs around 40 percent of global commercial arbitration cases.
“The optimum outcome for both sides will be an agreement reflecting our close existing relationship,” the government said. “Where litigating a cross-border case involving U.K. and EU parties under civil law, wherever it might take place, will be easier, cheaper and more efficient for all involved.”
The U.K. plans to continue its membership of international treaties that cover cross-border litigation, including the Hague Conventions focused on civil disputes, and the Lugano Convention, which allows members of the European Free Trade Association to work with EU courts.
But once Britain leaves the EU and rejects any role for the ECJ in British law, the possibility of “drift” away from EU standards will make it an increasingly unattractive place for banks and insurers to resolve disputes, according to Peter Bert, a litigator at Taylor Wessing, which was formed as the result of a merger between law firms in England and Germany.
“”The question is how long U.K. law remains the law of choice for companies who are under EU regulatory oversight,” said Bert, who is based in Frankfurt. “Until now, if you choose U.K. law, you didn’t have to think twice because you chose a law that automatically was 100 percent EU-compatible.”
Lawyers — like banks seeking post-Brexit homes — may look to Germany and Ireland as the best places to file lawsuits, he said.
The U.K. will seek an agreement with the EU that allows “close and comprehensive” cross-border cooperation on a reciprocal basis, and the new legal framework will “mirror closely the current EU system,” according to the paper.
Some European regulations, which set out rules on which countries’ laws apply to agreements, will be incorporated into U.K. law to help give certainty to businesses and families as part of the withdrawal process. The document is clear, though, that the ECJ will no longer have direct control over U.K. law after Brexit.
“Beyond these concrete steps, the government’s position is largely aspirational, but that reflects the reality of the U.K.’s position,” said Simon James, a partner at law firm Clifford Chance in London. “The government would like to continue the current comprehensive cooperation with the EU, but will the EU agree, and, if so, on what terms and when?”
— With assistance by Cat Rutter Pooley, Stephanie Bodoni, and Karin Matussek