(Article written by Alexander Pelopidas)
Greetings from (mostly) sunny Cannes where Rosling King are attending MIPIM 2018, the global property exhibition and conference event. With over 24,000 people from the property world due to attend, we are already braced for the tidal wave of prediction, analysis and crystal ball gazing which are characteristic of such gatherings.
If all this appears daunting then do not worry – for the team at Rosling King will be providing analysis and commentary on the key themes and events of the conference, beginning with the giant elephant in the room that is Brexit.
As a London (or UK) based law firm, the potential impact of Brexit is all too apparent. With politicians on both sides of the Channel moving (slightly) on from empty rhetoric and beginning negotiations in earnest, there remains several key issues which both investors and lenders need to consider.
The first relates to passporting. Prior to Brexit, EU passporting rules allowed finance companies to sell their services across the 28-member block with a local licence. This meant that they did not have to secure individual operating licences in each member country where it seeks to do business.
In her speech just under a fortnight ago, Theresa May ruled out securing passporting rights: “We are not looking for passporting because we understand that it is intrinsic to the single market of which we would no longer be a member.”
Such clarity, after months of confusion is welcome but it does raise the question of what sort of access the PM is looking for. If a deal on passporting between the UK and the EU can’t be secured, then the former would have to reapply as a third country for access to the single market. This will almost certainly be under more limited terms than is currently enjoyed by UK firms and could hinder London’s ability to attract inward investment from (or via) Europe. Such a result would also make it more difficult for British firms to sell a variety of financial services to Europe – one of their largest markets.
Brexit also raises questions over legal enforcement in EU jurisdictions. Leaving the Single Market will/ could limit the ability of UK firms to enforce judgements against their European counterparties – forcing them to rely on the rules of the relevant local jurisdiction. Needless to say, such a course would be harder and costlier for UK firms.
All of this begs the question whether London, and English Law, will retain its primary position as the preferred governing law for financial documents? Much of the debate around London and Brexit has focused on whether ‘the City’ will suffer as a result of banks moving to the likes of Frankfurt or Paris. We have recently moved on from this slightly – recognising that the more likely destination for any such move would be New York or Singapore. New York law is seen by many as a sturdy alternative and does pose a significant threat to London’s current pre-eminence.
Overall, however, the body of English Law and the approach of London’s commercial courts should continue to ensure London remains an attractive jurisdiction to operate in. Brexit will put to the test the institutions and sectors on which London’s financial success is built upon and will reveal which of those are fit to compete globally.