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Brexit is still a hot topic. It has dominated the news since the referendum on 23 June 2016, and will undoubtedly continue to do so. This means that you could well expect to be asked about it at interview. For example:
“What do you think will be the implications of Brexit for our firm and its clients?”
In order to answer these questions, you need:
- Up-to-date knowledge about Brexit generally; and
- Specific knowledge, focussing on the legal profession, the firm itself and its clients.
Variations of this question include:
“What are the implications of Brexit for the legal profession?”
or more broadly:
“Explain the importance of [a specific news story] to our clients”
“Talk us through the implications of a current issue affecting law firms”
Such questions will depend on what is going on at the time of your interview, and different types of firm will ask different questions. Be careful with your answer. This is not an opportunity for you to give a forthright answer based on your own political views. You need to be aware of the firm’s client base and operations, and demonstrate your ability to present a balanced view.
If we go back to the first question, you should start by acknowledging the question and showing that you understand that you are being asked about Brexit, and its implications for the firm and its client – a brief introduction.
To help you, here is a summary of the situation immediately following the UK (Withdrawal Agreement) Act 2020.
Brexit
At midnight (European Time) on 31 January 2020, based on Article 50, the UK left the European Union, of which it has been a member since 1973. Contrary to the expectations of many commentators, the UK left with a withdrawal deal, implemented by the UK (Withdrawal Agreement) Act 2020 (“WAA”).
This is by no means the end of a very long running saga. There now follows a transition period (described in the WAA as the “implantation period”) until 31 December 2020. Although the UK is no longer a member of the EU, the EU will still be subject to EU rules, and remain a member of the single market and the customs union.
We are going to concentrate on what will happen during the transition period, but you should also be aware of the background. Bear in mind that there have been political, constitutional, economic and legal issues which you need to consider. For an excellent summary, look, for example, at the BBC website: “Brexit: all you need to know about the UK leaving the EU” or the Euronews Article: “Brexit Guide: Where are we now – and how did we get here?” (written on Exit Day: 31 January 2020)
https://www.bbc.co.uk/news/uk-politics-32810887
https://www.euronews.com/2019/11/01/brexit-draft-deal-first-of-many-hurdles-to-a-smooth-exit
Make sure you know who are the ‘key players’, e.g. Michel Barnier is, and has been, the chief EU negotiator and in January 2020, Boris Johnson, the Prime Minister, appointed David Frost, his European Advisor, to conduct the negotiations on his behalf.
Withdrawal Agreement and Political Declaration
These were agreed in October 2019.
- The Withdrawal Agreement set out the terms of the UK’s exit from the EU
- The Political Declaration sets out the framework for the future relationship between the UK and the EU
The WAA (which runs to over 500 pages) implements the Withdrawal Agreement and also certain commitments made in the Political Declaration, e.g. in relation to workers’ rights.
Transition period
The transition period will begin immediately after exit day. During this time, the EU and the UK will negotiate their future relationship, including its future trade relationship and security co-operation. The transition period, which lasts until the 31 December 2020 will provide time for these negotiations to take place. The end date was originally agreed in Theresa May’s original withdrawal agreement (which did not get through Parliament) and would have given 21 months for the negotiations to be concluded. The date has not changed, so there is now only 11 months, which critics say is too short a period for an agreement to be reached on highly complex issues. The European Commission has described the timetable as “extremely challenging”.
What happens during the transition period?
- Legally and constitutionally
As the UK will cease to be a member of the EU, it will no longer be a member of any of the EU political institutions, i.e. there will be no UK MEP’s in the European Parliament, no UK member of the EU Commission and UK ministers will no longer take part in meetings of the European Council.
However, the UK remains subject to EU law (and any EU laws that come into force during the transition period – and without membership of the political institutions, it will have no say in those new laws, i.e. a ‘law taker’ rather than a ‘law maker’).
The UK will also be subject to any rulings of the European Court of Justice during the transition period.
- Citizens’ Rights
Freedom of movement will remain in place and citizens’ rights will remain the same, so, for example, UK residents and their non-EU family members who are living in the EU can continue to be ‘legally resident’ there.
- Politically and economically
The UK remains in essentially the same economic relationship with the EU as now. It will remain part of the EU’s economic institutions. It will continue to be treated as a member of the single market and customs union and, although technically non-EU states that have free trade agreements with the EU are not obliged to treat the UK as part of the EU, the EU has requested that they do so.
The UK will continue to contribute to the EU budget.
- Trade
The priority during the transition period is the negotiation of a trade relationship, covering goods and services, including financial services. The type of trade agreement sought by the UK is described as “different and looser” than before. The Political Declaration states that both the UK and EU “agree to develop an ambitious, wide-ranging and balanced economic partnership with a “comprehensive and balanced Free Trade Agreement at its core”, making it easier for the UK to secure trade agreements with non-EU countries.
See, for example, Harari, D, ‘Brexit deal: potential economic impact’, House of Commons Library, 18 October 2019. https://commonslibrary.parliament.uk/brexit/brexit-deal-potential-economic-impact/
However, the negotiations will not all revolve around trade. The goals of the UK in leaving the EU, for example, the end of free movement, the jurisdiction of the European Court of Justice and regulatory alignment, as well as demands for an independent trade policy, will mean that the EU will demand concessions in return. The argument is that the UK cannot ‘cherry pick’ – keeping the advantages of EU membership without taking on any obligations. The EU is concerned to keep a level playing field between the parties and will argue that it is unfair that the EU27 are subject to, for example, social and environmental regulations that do not affect the UK. Given this, and the complexity of negotiating trade agreements, (the EU’s free trade agreement with Canada took seven years to negotiate), the timing is very tight.
The Withdrawal Agreement does allow the UK to enter into independent trade negotiations with non-EU states, such as the US, provided that any trade deal concluded with a non-EU state does not take effect until after the transition period.
Further aspects of the UK/EU relationship will need to be negotiated. Possibly the most important are the arrangements for future security co-operation, but other issues include access to fishing waters, electricity and gas supplies or licensing and regulation of medicines.
Even if a trade deal is reached, given the time scale, it is likely to be limited in scope and negotiations will need to continue to fine tune the detail and to sort out arrangements for other aspects of the relationship
What happens if a trade deal is not reached within the transition period?
- Extending the transition period
Under the terms of the Withdrawal Agreement, the transition period can be extended once for up to two years, provided that an application to extend it is made before 1 July 2020. However, the government has said that it will not apply to extend it and is proposing to legislate for a commitment not to extend the transition period.
- There is no trade agreement
All future trade would take place on World Trade Organisation terms. Tariffs and trade would apply in the same way as they do now to non-EU states (with whom there is no EU trade deal). The implementation of tariffs is highly complex. Each member of the WTO has its own lists of tariffs and quotas (WTO schedules) that apply to other states.
Remember that a ‘no trade agreement’ Brexit is not the same as a ‘no deal’ Brexit, which was contemplated before October 2019. The Withdrawal Agreement remains in place with protections for citizens rights, the parties would be committed to the financial settlement and the agreement on Northern Ireland would remain in place.
- There is a partially completed agreement, with a trade deal in place, in which case negotiations on other aspects of the UK/EU relationship could continue.
Implications for law firms and clients
Any event that is newsworthy offers opportunities, as well as challenges, for lawyers. This includes Brexit. Below are some general points but make sure you tailor your response to the firm for which you are interviewing and its clients.
Clients are worried about Brexit and in every sector, they need advice on how to plan for a best and worst case scenario. Firms are providing advice and guidance to their clients about the implications of Brexit for them. For example, Clifford Chance has a ‘Brexit hub’:
https://www.cliffordchance.com/microsites/brexit-hub/home.html
You should look at any equivalent on the website of the firm for which you are interviewing.
The knock-on effect of the demand for Brexit related advisory work has meant, certainly for the City law firms, an increase in revenues and profits for partners. The revenues of the top 100 firms increased on average by nearly 8% in 2019. Obviously, the answer will differ for different types of client – the implications are far greater if you practice competition or intellectual property law than if you are a probate lawyer.
See for example: https://targetjobs.co.uk/career-sectors/law-solicitors/464185-how-can-i-talk-about-brexit-in-a-training-contract-interview
The Brexit uncertainty has caused a slow-down in some sectors, e.g. real estate, where there have been rumours of redundancies, but there are signs that the property market is already picking up. It goes without saying that a lot will depend on how the economy performs. At the time of writing, we are seeing the effects of what has been described as the ‘Boris bounce’, with an increase in business confidence following the election result in December 2019. Growth has undoubtedly been slow since 2016 as a result of the referendum vote. However, more recently, the International Monetary fund upgraded its 2020 UK growth estimate - to growth of 1.4% for the UK, which is faster than Germany or France or the Eurozone as a whole.
London remains one of the largest and most important financial centres for international investment. International investors have continued to invest in the UK, with the FTSE 250 reaching a record high straight after the general election. [Shares subsequently fell back in reaction to the Corona virus] (for a discussion of share prices, see answer to Question 3 of the Thought Provoking Questions for Chapter 19).
A downturn in the UK economy, for whatever reason, has a greater impact on small and medium sized firms. Firms that have a greater global presence are less affected and this has (and may continue) to encourage global mergers with mergers with US firms particularly attractive (see for example Leighton Paisner’s merger with the US firm, Brian Cave in 2018). If London loses some of its importance as a global financial centre as a result of Brexit, global firms could concentrate their operations in their other offices outside the UK, meaning that there are fewer lawyers, particularly in the City in future. However, until we know the details of the negotiations and their outcome, all this has to be speculation.
Further areas for discussion include:
- London’s primacy as a centre for dispute resolution
- Mutual recognition of professional qualifications
- Representation in EU courts
- Ongoing civil judicial co-operation
See https://www.lawsociety.org.uk/support-services/advice/articles/brexit-transition-period/
Where the outcome is as uncertain as Brexit, it is more difficult to give your own critical opinion. However, look for comments from practitioners in the legal press and be prepared to explain what they are saying and how far you agree with them.