Brexit: Will English Law Remain the Market-Standard Choice of Governing Law?

english lawThe UK’s pivotal referendum on whether to leave or remain in the European Union is slated for June 23rd 2016, While both sides are campaigning heavily in the public eye, businesses in the UK are generally adopting a cautious approach to both any public statements on the issue as well as their approach to future business decisions. Whatever the outcome, there is likely to be some uncertainty, which will be particularly acute in the event of a ‘Leave’ decision.

One particular area of concern is the ramifications of a ‘Leave’ result on English law, not just in terms of its continued viability as the market-standard for governing commercial contracts and cross-border transactions in future, but also whether ‘Brexit’ would adversely impact existing English law-governed contracts.

UK-headquartered Allen & Overy, one of the world’s leading law firms, has released a series of analyses focusing on the potential legal consequences of Brexit. Their first article, “English governing law clauses – should commercial parties change their approach?” directly addresses preliminary concerns of businesses (and indeed some English solicitors who may be concerned about the diminished appeal of the legal services sector in England and Wales in the event of a Brexit).

It should be noted that Allen & Overy as a firm has not publicly stated the position it takes on either remaining in or leaving the EU.

In a high-level yet considered analysis, Allen & Overy’s general conclusion is that, subject to updating contractual documentation to reflect the new lay of the land post-Brexit, the UK leaving the EU would not significantly impact on English law’s viability or attractiveness as the governing law of choice for contracts, whether the parties are based in the UK or not.

Allen & Overy’s conclusion: “A choice of English law to govern both contractual and non-contractual obligations (ie principally torts) is a sound one and will remain so whatever the outcome of the Brexit referendum and even following Brexit itself.”

The analysis reaffirms that English law is one of, if not the most, popular choices of law for cross-border commercial parties (citing a January 2016 survey from Singapore’s Academy of law that over 48% of the 500 lawyers surveyed prefer English law when working on cross-border transactions).

Some of the key points in the analysis which stand out include:

  • the decision by parties to agree on English law as the governing law is primarily influenced by factors entirely unrelated to the UK’s membership of the EU, and this is unlikely to change in the event of a Brexit. These reasons include, inter alia, the flexible nature of English law, its market-wide familiarity, access to a strong, mature and competitive English legal services market with deep expertise and specialisms available, and that English law generally takes a commercial approach to contractual disputes;
  • substantive English contract law has largely been unaffected by the proliferation of EU law, at least in the context of general commercial contracts and will largely be unaffected by a Brexit;
  • there is no reason to think that English law will be any less flexible post-Brexit, nor would Brexit undermine the commercial and practical efficiencies of English law which lead many parties to choose it in the first place; and
  • although Rome I and II may no longer be applied by the English courts following Brexit, it is almost inconceivable that they would change their general approach to respecting a choice of English law post-Brexit.

While the issue of jurisdiction and enforcement is an issue considered by Allen & Overy separately, this analysis is reassuring for nervous businesses who may be unsure as to whether to alter their approach to transactions, whether with or between UK-based parties or internationally. This also suggests that, even post-Brexit, there will still be a need for English solicitors to act as trusted international legal advisers to their clients and employers.

International lawyers can enhance their professional skills and dual-qualify as English solicitors through the Qualified Lawyers Transfer Scheme (QLTS), with no prior experience required. Launched in 2010, the QLTS is an increasingly attractive option for international lawyers seeking to enhance their careers and broaden their offering to their firms and clients. While there is still much uncertainty as to the outcome of the UK’s referendum on EU membership, we are of the view that, whatever the outcome, there will continue to be a growing need for dual-qualified international lawyers.

qlts sra solicitor