Understand Your Rights. Solve Your Legal Problems
Prime Minister, Theresa May, has confirmed that following Brexit and the implementation of the Repeal Bill, the Court of Justice of the European Union (CJEU) will no longer have jurisdiction over UK courts, making the Supreme Court the 'ultimate arbiter' of UK law.
Emma Stevens, Solicitor at law firm Coffin Mew, told Lawyer Monthly: “A key consideration for UK Courts will be the extent to which judges are still required to consider Court of Justice of the European Union CJEU decisions in relation to domestic law following Brexit. UK Judges currently consider relevant decisions of other international courts, such as the United States’, where it is appropriate to do so. This means they will likely continue to have some regard for CJEU rulings, even though they will not be bound by them.
“UK courts are well-established and have a strong international reputation. At present, it is not uncommon for parties, both in the UK and overseas, to stipulate contractually that UK courts will have jurisdiction over any disputes which arise and there is no reason for this to change following Brexit. If anything, the fact that the Supreme Court will now be the ‘ultimate arbiter’, without need for references or appeals to the CJEU, may further encourage this.”
Responding to the government’s Enforcement and dispute resolution partnership paper, Chair of the Bar, Andrew Langdon QC, said: “The paper raises more questions than it seeks to answer on what is a matter of crucial significance to the UK. A number of suggested alternate mechanisms to the CJEU are listed, though it is not clear which, if any, the government favours. Whatever agreement the UK reaches with the EU, there must be some form of dispute resolution process with the EU post-Brexit in which all parties have confidence. There are important regulatory, economic and rights-based reasons for ensuring legal certainty which underline the ongoing relevance of the CJEU case law post March 2019. The Bar Council will be seeking to work closely with Whitehall on this important issue.”
Last week the UK government stated it did not want to establish any border posts between the republic of Ireland and Northern Ireland, creating a manned EU – UK border. The UK’s new position paper on Brexit has suggested a ‘new customs partnership’ or a ‘highly streamlined customs arrangement.’
Critics involved in the Brexit proposals have however spoken out against the lack detail followed towards these plans, claiming the UK’s suggestions are not backed by credible detail on how such ‘customs partnership’ can be achieved.
Lawyer Monthly this week heard Your Thoughts, and has below included some comments from experts on the subject.
Joanna Hunt, Senior Associate, Lewis Silkin:
The policy paper provides little insight into the Government’s plan for the Irish border issue. It is simply a statement of intent; that it wants to continue to protect the common travel area which allows free movement for Irish and British Nationals across the border and provides for minimal checks for other nationalities. In the paper they simply state that ‘the future immigration system will not impact on the ability to enter the UK from within the CTA free from routine border controls’ and ‘the continued operation of the CTA would not result in any negative implications for other EEA nationals exercising their free movement rights in Ireland’.
At the very best this is wishful thinking on the part of the Government. The policy paper that was issued in June on the status of EEA nationals and their family members made clear that they would be brought within the UK’s immigration system as they were to be given indefinite leave to remain in the UK. It is to be assumed therefore that in the future, EEA nationals visiting the UK will require entry clearance as a visitor at a border. If they are entering freely into Ireland by virtue of EU free movement law, at which point will they be granted entry clearance to the UK if there is to be no official border between Ireland and Northern Ireland? The policy paper has next to no detail on how this will actually work and offers little in the way of ideas as to how this complex issue will be resolved.
If EU nationals in the future are going to be required to gain entry clearance as visitors to the UK, as other nationalities beyond the EU do now, then there needs to be a physical examination of their passport. Currently at borders this is done either by an Immigration Official or by a biometric passport reader. Either way, it requires an individual to stop at a ‘border’. It is very difficult to imagine how a passport can be checked without there being some form of physical infrastructure there to complete the check lawfully. The end result would be that EEA nationals would easily be able to continue to enter the UK and the Government’s stated aim of controlling immigration will be unachievable.
I think the EU are going to be unimpressed by these proposals. The Government has simply stated an intention to keep the CTA as is and has not attempted to provide any realistic answer to how the movement of EEA nationals is to be controlled. The policy paper puts the ball back in the EU’s court to come up with a response which can only aggravate their negotiating counterparts in Brussels.
Jonathan Beech, Managing Director, Migrate UK:
With open borders for all EU citizens, the onus will be on UK employers to understand who can work for them and who can’t. Open border controls for EU citizens will mean that no immigration endorsements will be provided that would normally make it clear to one’s immigration status and restrictions. This will put more pressure on HR professionals to understand how to comply with working rights and immigration rules.
The Home Office have recently published a policy paper that tries to clarify an EU citizen’s immigration status in the future. This puts forward a number of scenarios that are linked to (yet to be confirmed) dates to when an EU citizen is deemed to be a ‘qualified person’. There could be some confusion here which in turn could impact whether UK employees wish to hire EEA citizens at all in the future.
We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!
With the UK leaving the EU, many legal experts are eagerly anticipating the various changes and methods the UK administration will address, and the legislative changes and adoptions at hand.
We hear from Aleksandra Kowalik who always offers such insightful thoughts to Lawyer Monthly; drawing on her bilateral experience, she touches on the European Arrest Warrant (EAW), and the problems the UK may face in criminal law, if they rule out the ease of extradition by withdrawing use of the EAW.
Mutual legal assistance consists of cooperation between different countries, for the purpose of gathering and exchanging information and requesting and providing assistance in obtaining evidence located in one country, in order to assist in criminal investigations or proceedings in the other.
Extradition is the legal process by which an individual is transferred from one state to another for the purposes of facing trial or sentence. To simplify and speed up the extradition proceedings, mechanisms have been put in place within the EU Member States and for cooperation to provide a framework for these exchanges.
The first conception has been ruled by the European Council in Tampere in 1999. The clue of the Council intentions was to rule the new EAW proceedings pursuant to a principle of mutual respect and recognition. The final result of the initial EAW related establishments was The Council Framework Decision of 13 June 2002 on the European Arrest Warrant and the surrender procedures between Member States. The proceedings finally became faster and less complicated than the classic extraditions.
Finally, the citizenship related bar was previously ruled in article 6 of The European Extradition Convention, stating that political issues were supposed to be excluded as a potential obstacle to bring the offender into justice.
On 29th March 2017 article 50 was triggered which means a tremendous challenge faces the British authorities, British administration and British lawyers; they will have to face and potentially reorganise the entire, extremely well organised legal (criminal) cooperation within EU.
The wave of changes ought to not omit the EAW as well.
Following the current views of the British governing party, it seems that the EAW can be an issue, as the question is how to keep its structure without the supervision of the European Courts of Justice.
Thus, the question at hand is what direction the United Kingdom should set to go towards regarding the EAW, either: exemption, limitation or full implementation as a third party, with a consideration of supervision by the European Courts of Justice.
A proper base for discussion could be the Marian Dorobek’s case; Borobek had been sentenced to 10 years for multiple rape and child sexual abuse in Poland. He has been sought by a District Court in Grudziadz and was arrested at Heysham port after he arrived off the ferry from Douglas, Isle of Man.
It later emerged that he could not be arrested in the Isle of Man as European Arrest Warrants cannot be executed here. Therefore in this case, Dorobek could have stayed safe for much longer, but the Polish Judicial Authority was forced to issue a classic request for an extradition.
Respectfully to the results of long lasting researchers in Poland, supervised and directed by Ms M. Mozgawa- Saj (the author of “Extradition in Polish Criminal Proceedings; chapter IV), the average time of a classic extradition request that has been exercised is 293 days. The longest case took 1219 days, whereas the EAW request must be dealt within 60 days. When we address the time difference between the implication of the order of an extradition request, in comparison to the EAW, the issue at hand is very clear; the UK will need to consider whether the mutual criminal cooperation and assistance can be fully followed if a classic structure of an extradition is implied again in replace of the EAW.
It must be strongly underlined that criminal cooperation does not limit to the EAW only.
The EU has adopted several legislative instruments in accordance with the principle of mutual recognition – please consult relevant subpages (for online readers) to find more information on:
The above instruments create a well organised structure whereby the most significant aim is to bring any failure in complying with a rule of law, in terms of its criminal area, to justice. How the United Kingdom will be able to manage with this complicated challenge, without affecting the interests of justice and legal needs and proceedings, as well at the pre- trial or trial itself, will be the main question.
The last, but definitely not the least issue, is a question about potential amendments of the EAW structure if the UK decides to stay within its legal scope.
Regarding the cooperation of the EAW in relation to the United Kingdom and Poland, the widest problem lies in complying with a proportionality of rules when the EAW is issued. As it is commonly well-known, Poland is a leader in issuing EAWs to the United Kingdom. Warrants are issued for very minor offences, low sentences or to exercise 14 days of a temporary arrest at the pre- trial stage, regardless of the proportionality principle and legal common senses; therefore, the European legislators should take into their consideration that article 30.1 (Expanses) of the Council Framework Decision could be amended in order to impose the obligation of covering the fees by the issuing Member State for the proceedings in the executing state. It seems a bit unfair to me that when the requested person exercises his rights in terms of refusing a voluntary surrender, the executing state is obliged to cover all the cost proceedings related.
However, if it was an issuing state, there is a chance the specified judicial or designated authority wouldn’t pursue the EAW in minor offences, as it would be simply too expensive comparing to an interest of justice.
Aleksandra Kowalik
Justitia Chambers
Fox Court
14 Gray's Inn Road
WC1X 8HN
London
The UK’s current government, in its recent electoral manifesto, has vowed to get rid of the Serious Fraud Office (SFO), and replace it with a separate entity post-Brexit. Below Dominic Carman, an expert legal commentator, explains the current situation and what we can expect.
Driven by Theresa May, the Conservative manifesto pledged to scrap the Serious Fraud Office and roll it into the National Crime Agency. In response, the legal friends of the SFO got together and lobbied heavily against its abolition. Their efforts, however, proved to be unnecessary.
When the general election ended with the government being re-elected with a reduced mandate, the Queen’s Speech that followed was dominated by Brexit: a host of pledges were hurriedly thrown on the bonfire, including the SFO merger plan. It was safe. At least for the time being.
But rather like the government which wanted to see the SFO being consigned to history, its authority was reduced and its reputation diminished: the sentence having been passed, it is probably only a matter of time before the final execution is eventually carried out.
For now, and for at least the next two years, Brexit is set to consume the attention of every cabinet minister, sometimes to the exclusion of almost everything else. This will include the PM and her successor as home secretary, Amber Rudd.
Fraudsters, however, wait for no-one. Recorded crime may have fallen by 25% since 2010 but fraud has increased. Of the 11.5m incidents of crime recorded by the Crime Survey of England and Wales (CSEW) last year, 47% were fraud and computer misuse offences - a remarkable 5.4 million offences in total.
For all the intense debate over the number of police officers, virtually no mention of fraud was made by any politician during the election campaign and its aftermath - despite ONS figures showing that 4.5% of all adults were a victim of bank or credit card fraud, by far the most common crime affecting adults in Britain.
The first duty of government is to protect the life, liberty and property of its citizens. Although the nature of the threat changes over time the fundamental responsibility never does. As the Telegraph commented ‘The recent ransomware attack on the NHS is an indictment of a state that is not doing its job properly. Britain has a cybercrime problem; the next government must make tackling this an absolute priority.’
This was written only days before the Manchester bombing. Terrorism does, rightly, grab the headlines, but it too plays a part in the same deterrent narrative: keeping people and their property safe. Nowhere is this better exemplified than in the awful consequences of the Grenfell fire.
Tackling fraud, which may fund everything from terrorism to criminal self-enrichment, should be at the heart of this government’s agenda. While the immediate focus is inevitably on trade, the single market, the customs union and the transition period before Brexit is finally achieved, there is a real danger that fraud will be further side-lined and overlooked.
One of the less discussed consequences of Brexit is the potential loss of cooperation with different branches of the EU security network which help to combat fraud: national and EU-wide regulators and criminal investigation agencies. Less input from them will make investigations harder and prosecutions fewer, leading to even worse prosecution and conviction rates for the SFO.
The most senior British EU official, Commissioner Sir Julian King, recently spoke out to warn of the need for strong security cooperation in Europe. He said that it was vital for EU member states to work closely together to combat international cyber attacks, terrorists and hostile states and “be prepared for whatever the future holds”. Brexit, he confirmed, potentially risks future security cooperation.
Intelligence sharing may play a pivotal role in Brexit negotiations, we are told. But as the UK stands to lose international influence if deep security links with Europe are lost, there have been implicit indications that Britain may also use its highly valued intelligence services as a bargaining chip in Brussels talks.
Sir Julian described how the world is facing a “new and darker phase” in its relationship with technology, but added that countries must work collectively to tackle the threats confronting them.
He wrote: “Working with colleagues across the European Commission, we are determined to implement a plan for reducing our vulnerability to cyber threats by increasing our resilience to attacks, reinforcing security by design, stepping up the fight against cyber crime, investing in cyber security, and strengthening international cooperation.
“The interconnected world offers many opportunities for citizens, governments and public and private enterprises to make a positive contribution to society. But it also offers unprecedented opportunities to criminals, terrorists, and hostile states. We must be better prepared for whatever the future holds.”
Sir Julian highlighted Europol’s work exposing how sophisticated crime syndicates exploit online trade in illicit goods, adding that “online fraud is now the most common crime in the UK”.
This year, the SFO has been devoting its energies to negotiating Deferred Prosecution Agreements with Tesco and Rolls-Royce. It has taken a gamble in charging four Barclays senior executives alongside Barclays itself in an alleged fraud involving the bank’s dealings with Qatar during its £11.8bn fundraising during the financial crisis nearly a decade ago.
Looking ahead, we must be better prepared, as Sir Julian put it, “for whatever the future holds” in serious fraud, especially cyber crime.
The real suspicion is that the government, so all-consumed by Brexit, does not have the time, the political will or the capacity to devote to fraud as it should. Likewise, the SFO needs to look forward not back, and be ready to meet the challenges posed by tomorrow’s fraudsters. The task of doing that outside the EU seems set to become much harder.
“This repeal bill is the start of the mammoth task of transposing EU law on to the UK statute books,” Chair of the Bar Andrew Langdon QC said of the European Union (Withdrawal) Bill, published last week.
“Not only is this a vast undertaking, it throws up some important constitutional questions, such as the extent to which Government Ministers should be able to re-shape the law without scrutiny by Parliament.”
Transposing EU legislation to UK law is complicated by the fact that some EU laws and directives relate to the powers of EU agencies which will no longer have authority in the UK, so they will need to be amended accordingly. Where such laws need amending rather than simply transposing, the European Union (Withdrawal) Bill gives Government Ministers the power to do so using secondary legislation, which does not require full parliamentary scrutiny.
Andrew Langdon QC said: “Where Ministers are given the power to make secondary legislation, this should be limited to technical amendments and should not be used to make substantive changes in policy, which should be made only by primary legislation, subject to full parliamentary scrutiny.
“The Government appears to have taken on board the concerns raised by the Bar Council and others. Following a white paper earlier this year, Section 7 of the Bill provides a more detailed criteria for the ways in which Ministers will be able to use their law-making powers. Ministers may not, for example, use secondary legislation to create a criminal offence or to increase taxation.
“The Bar Council will be looking closely at the Bill, including how it addresses the status of repatriated EU legislation, the role of the CJEU and the EU charter of fundamental rights.
"For example, there remain some big questions as to how the Government will stick to its commitment to pull away from the jurisdiction of the European Court of Justice without jeopardising deals that could benefit the economy. Under the proposed Withdrawal Agreement, government, citizens and businesses on both sides of the Channel will need some way to obtain a definitive ruling on interpretation, and an alternative to the CJEU has not yet been articulated by the Government.”
(Source: The Bar Council)
Alan Kennedy, Associate at national law firm Bond Dickinson, explains for Lawyer Monthly the intricacies of the UK Government’s plans set for post-Brexit rights and they mean for the 3 million EU citizens living in the UK.
Speaking in the House of Commons on 26th June, Theresa May announced the Government's proposals outlining how it intends to protect the rights of EU citizens living in the UK. The announcement has been long awaited, particularly given the uncertainty around the status of EU citizens following Brexit. The Prime Minister also provided some reassurance to the 1.2 million British expats currently living in the EU and made it clear that the offer was not unilateral and must be part of a "reciprocal agreement".
The Home Office has published a 15-page policy paper entitled "Safeguarding the position of EU citizens in the UK and UK nationals living in the EU", which provides a detailed summary of the Government's proposals. In summary, the paper confirms the creation of a new "settled status" for EU citizens who arrive before a "cut-off date" and will require all EU citizens (and their families) to apply for a new "residence" document. The cut-off date is yet to be decided and will be agreed as part of the UK's negotiations with the EU. However, the Government has indicated that it will fall between 29 March 2017 and 29 March 2019, the date the UK leaves the EU.
We have set out below some of the key points from the proposals.
Key Points
The Government has also confirmed that those EU citizens who are granted "settled" status will be treated like a comparable UK national and entitled to broadly the same rights and benefits. For example, they will continue to be entitled to use public services and receive benefits, including pensions, healthcare, education housing etc. on the same basis as British citizens. They will also be able to apply for British citizenship.
Theresa May has also insisted that no EU national currently resident in the UK will have to leave at the point of Brexit and that there will be a "grace" period of up to 2 years. This will provide EU citizens (and their families), including those who arrive after the cut-off date, with permission to stay in the UK for a fixed period of time, which will allow them to apply for and receive their new residence documentation. However, if an individual has not received the required documents by the end of the grace period they will no longer have permission to remain in the UK.
The Application Process
The Government has confirmed that all EU citizens in the UK (and their families) will need to apply to the Home Office for permission to stay in the UK and will be required to apply for a new residence document to demonstrate their settled status. This will also include all those individuals (around 150,000) who have already applied for and received permanent residency cards.
The Government has not confirmed exactly how the application process will work in practice. However, it has stated that it will involve an online application system which will be "as streamlined and user-friendly as possible". This is expected to go live at some point in 2018.
The Government has also made it clear that there will be no rush on people applying for their new immigration status and has assured both EU citizens living in the UK and UK businesses (who employ EU citizens) that there "is no need to do anything now". It has also stated that all qualifying EU citizens will be given adequate time to apply for their new residence status after the UK's exit and that there will be no "cliff-edge" at the point the UK leaves the EU.
The process will also involve an assessment of conduct and criminality and the proposals confirm that applications will be rejected if an individual is a "serious or persistent criminal" and who is considered "a threat to the UK". Further, the proposals also state that "settled" status can lapse, if the holder stays outside the UK for a continuous period of more than two years, unless they have strong ties in the UK.
Summary
So far the proposals have received a mixed reaction and have been criticised as being vague and inadequate. They also appear to lack any real detail and there is a lot of information which is still yet to be decided, which is likely to form part of the UK's negotiations with the EU. This includes the following outstanding points:-
Whilst the proposals provide some clarity on how the Government intends to protect the status of both EU citizens in the UK and UK nationals living in the EU, there is still much to be decided and there are a number of questions which remain unanswered. No doubt the proposals will receive further criticism over the coming weeks and Donald Tusk, President of the European Council, has already stated that the Government's offer was “below expectations” and would worsen the rights of EU citizens.
The impact of Brexit will not be uniform and there will be winners and losers, which as lawyers is something that we see every day. Below, Lawyer Monthly hears more on this from Archie Sherbrooke at Moore Blatch Solicitors.
I practice in the commercial property sector, which is an area that many people assume could be negatively impacted by Brexit. However, my personal view is that Brexit has created a set of circumstances that, rather than having a negative impact, has had a positive one with respect to commercial property investment, especially as a result of exchange rate movements.
This is supported by industry data from the Royal Institute of Chartered Surveyors, which saw the UK commercial property market continue to grow in Q1 this year, both for rental incomes and capital value growth. This is the third consecutive quarter growth, all following the Brexit vote.
As a result of the falling pound commercial property, especially prime real estate in London and some of the UK’s major cities, has become extremely attractive and affordable to overseas investors. We have therefore seen an increase in instructions from overseas clients who are looking for long term investments and can see beyond any short-term volatility that Brexit may cause.
In addition, contrary to the purveyors of doom our economy is strong and continues to attract overseas investment. But, what is happening is that the dynamics of our industry is, and will continue, to change. For example, as the logistics industry evolves, serving our changing buying preferences, we are working on many more distribution hubs.
So professionally I see commercial property being a growth opportunity for lawyers working in this sector, as it’s based on fundamental economics that are not massively impacted by Brexit in the long term.
I am Michael King, a Senior Director in GVA’s Valuation Consultancy team, and am based in the firm’s Manchester office. I am a Fellow of the Royal Institution of Chartered Surveyors and an RICS registered valuer and accredited expert witness. I am also an RICS accredited Evaluative Mediator and provide alternative dispute resolution mediation services. I lead GVA’s UK expert witness service offer, focusing in particular on training, related expert accreditation and quality assurance. GVA has a UK wide network of surveyors experienced in expert witness work, many of whom are also RICS accredited experts, and who cover the full set of property skill sets and hence potential areas of dispute in real estate in Courts, Tribunals and Inquiries, and alternative dispute resolution arenas, such as Mediation. My personal experience is in property valuation, involving both commercial and residential assets, involving owner occupied, investment and development real estate. I also have a 34-year career long experience in all matters concerning compulsory purchase and compensation. GVA is a top 5 UK property consultancy with a strong regional office network, and offers a comprehensive real estate service throughout the UK through its strong regional presence, and with European, South East Asia/Pacific and North/South America coverage via our global affiliation network of firms under our GVA Worldwide brand initiative.
Have you seen property related disputes change over time? Have there been any particular trends you have noticed throughout time?
In the period following the end of the property boom in 2007 and the recession from 2008, there was a significant increase in professional negligence litigation, much centred on negligent value cases, particularly with banks/lenders taking action against imprudent secured lending valuation advice prepared by valuers. Some of the general excesses of the property boom certainly came home to roost, with some valuers appearing guilty of abandoning prudent valuation practices during the very active transactional market, presumably overly comforted by the upward trend in property asset values. This was mirrored by the insatiable appetite of banks to lend to real estate, which itself underpinned a very significant volume of secured lending valuations undertaken, and which was exasperated by the very active property investment and development market that existed up to the end of 2007.The recession also meant that many stakeholders in property investment and development lost money as economic and property market conditions worsened, or necessarily ceased being able to trade, out of choice, or forcibly from banks calling in loans. This inherently resulted in a greater propensity by parties to seek somebody to blame if possible, leading to an increase in property related professional negligence litigation across the professions generally. It also became apparent that a by-product to some extent of the stresses of the post-recession period, was on a personal level evident in an increase in marital dispute emanating from hardship pressures, and an increase in the need for expert valuer evidence into disputes over asset values, and in particular property assets. As limitation periods on post-recession professional negligence cases have resulted in a diminishing number of recent new cases, and not withstanding lawyers ingenious work in extending those limitation timeframes, there does seem to be an increase in the number of cases currently being taken by former borrowers against bank lenders for consequential losses arising from miss-selling on base rate swap loan products. Similarly, there appears to be an increasing number of cases against lenders or their appointed receivers where action has been taken to foreclose on bad loans, and former borrowers are questioning the actions and conduct in terms of the banks and their appointed advisers in prudently realising optimum property asset value as obliged. There has certainly been some general criticism of the conduct of certain banks in terms of their policies dealing with their bad debt loan book. This cycle of varying types of real estate litigation at any given point in the market cycle is not untypical, and goes hand in hand with the regular broad spectrum of property disputes which is ever present for varying reasons.
How often does the instability of the property market and its economy pose difficulties/ lawsuits for those invested in estate? What advice would you give to those who fall victim to this?
It is clear that the health of the economy and real estate market does have a direct impact on the propensity for particular litigation, and the likelihood of action being taken by key real estate stakeholders. A deteriorating economic and property market dynamic will more likely result in losses being incurred by property investors, speculators and developers, and it follows that there can be a greater propensity to take litigation against professional advisers engaged in real estate advice to endeavour to recover losses, and clearly where fundamentally it is felt the advice has been a contributory factor.
What further considerations must be made for projects which are on a larger scale, and internationally based?
The scale of project can of course influence the inherent make up of a dispute, primarily in terms of a commensurately increased number of key stakeholders being a party to a project, and in terms of the complexity of the project and any related contractual obligations. Combine this with a varying cross border key stakeholder dynamic, which can also enhance the complexity and potential for disputes, as there can be fundamental differences in approach and in terms of output expectations from parties with varying international credentials. To negate the potential adverse factors that might serve to undermine a project, it is again critical to appoint professional advisers who are wise to, and have experience of, these nuances within the context of the project, and can be aware of them from the outset to structure contractual agreements, and deal with varying demands/expectations accordingly.
Aside from remaining objective, what other characteristics do you think accounts towards being a good expert witness?
The ultimate requirement for experts under Part 35 and 25 Civil Procedure Rule and other such protocols, and indeed the RICS guidance to surveyors acting as expert witnesses, is to maintain an expert’s ultimate duty to the Court in preparing and presenting evidence, and obviously not to their instructing parties. This is of paramount importance to the measure of a “good expert witness”, and goes hand in hand with remaining robust against the inevitable pressures from instructing clients to see it their way. Ultimately, any negating of this obligation will likely only disadvantage the client, by likely extending the litigation process and related cost, without enhancing the evidence upon which an acceptable settlement might be attained. However, of equal importance, ultimately is an expert having a thorough knowledge of the subject matter forming the basis of their evidence, and also having a propensity to review opinion if presented with information during the process that warrants it, rather than allowing such matters to ultimately undermine an expert’s position under cross examination. A reluctance to embrace new credible information has the potential to undermine an expert’s overall evidence, and a Court’s opinion of an expert’s standing and credibility. A Court is often faced with two learned experts offering greatly varying evidence and opinion, and in such circumstances, it may be that a more confident presentation and defence of an expert’s evidence under cross examination in contrast to an opposing expert’s less assured performance, may ultimately be the defining factor upon which a Court determines which expert has offered the more persuasive arguments.
Michael King
Senior Director
T: +44 (0)161 956 4008 | M: 07786 020741
michael.king@gva.co.uk | www.gva.co.uk
We speak with Dr Geza Toth-Feher about Brexit and the real estate market. He explains: “Brexit will not prompt the final sell-out of the UK, this process began many years ago. Therefore, I believe the UK will provide ample opportunity for foreign investors to buy opportunistically for the next eighteen to twenty-four months.”
In this insightful interview, he reveals what the impact of Brexit has been on the investment market and what the future looks like for transactions and FDI in the upcoming months.
What is the immediate impact of the referendum?
Last spring no member of the investment or financial community expected the people to ‘vote leave’. The referendum campaign was fought on the shallowest of levels, on both sides of the campaign trail. The arguments that were exchanged were ill-prepared to absurd, and the notion of an entire country plunging itself voluntarily into the abyss was just unthinkable. The representatives of the leave campaigns were perceived by many people in the finance and investment community as clowns, thriving on a neo-populist wave that rallies against everything that is modern and foreign and somehow not tightly controlled. Against this background, the decision truly came as a shock.
Therefore, the immediate aftermath of the referendum decision was dominated by turmoil in the financial markets and a major political crisis, which in my opinion, is still ongoing. To exacerbate matters, there was a legal vacuum. No one seemed to have thought this through or was prepared to show leadership. The public were confronted with details of the process only after the event and even then, the information given was scarce at best, often wrong, intellectually on mickey-mouse level.
The decision, ultimately born out of a Tory political backbencher quarrel that David Cameron simply could not quell, has thrown open largely unprecedented challenges, and it will take the United Kingdom some decades to overcome all of those. The technicalities of the referendum outcome and next steps are unclear, so are the solutions.
The UK negotiators, who will have to be trained first, are under massive pressure due to an ever-tighter timetable, set in motion by the article 50 notice. The fact that the 8 June 2017 election may have produced a minority government does not make this task easier. As a result, uncertainty about prevailing market conditions, as well as uncertainty about the political spectrum, as it now presents itself after the general election on the 8 of June 2017, prevail and affect investor sentiment.
How does the currency market affect real estate investments?
A prudent real estate investor will look at an investment not only with regard to its sector fundamentals, but also with regard to the currency in which the transaction is done, especially if the repatriation of returns (such as rental income or refinancing proceeds or sales proceeds) occurs into a currency other than sterling. For example, the famous (and fully let) Gherkin Tower had to enter receivership because it was financed in a multi-currency-structure, mainly made up of Swiss Francs Tranches. When in 2013/2014 the Swiss Franc rose, the loan amounted to roughly £644m, versus its original value of £396m.
The dramatic drop of the sterling against the two other relevant currencies (sterling came down from almost €1.35 to below €1.10, and from almost $1.45 to below $1.25) in the weeks and months following the referendum decision has sparked substantial trading activity on the currency markets. Furthermore, the US dollar and EUR property buyers are beginning to take advantage of the correction of the sterling value, which they perceive as being temporary.
In a way, the currency disaster provided some relief. It took some of the heat out of the Central London property market. The ‘Brexiteers’ never became tired of selling the currency development as a success.
However, the currency impact is of course relative, especially in commercial property investments, at least as long as rental income and other proceeds will be received in the same currency as the acquisition currency. Hence, real estate transactions will have an element of hedging and speculative currency trading as part of their normal risk profile. This uncertainty will eventually drive prices down.
It is unclear, what the long-term impact on sterling figures will be with: the Eurozone regrouping and reforming; France and Germany apparently able to defeat the ghosts of populism and isolationist politics, and the notion of parity between sterling and the EUR – and we have been close before – seems to becomes quite a likely scenario.
Has the referendum result sparked transactional activity?
It almost certainly has. Now, almost twelve months down the road from the original referendum decision, transactional activity has picked up and the paralysis that was seen in the days and weeks following the Brexit decision has lifted to some extent. The key element of uncertainty is the exact shape such Brexit is going to take. Is it a ‘soft’ or ‘hard’ Brexit, with additional uncertainty as to what exactly these terms mean.
It is difficult to have a comprehensive analysis of Foreign Direct Investment (FDI) into the UK, but Ernst & Young have compiled a report (EY’s UK Attractiveness Survey 2017: Time to Act) which is published on www.ey.com.
Looking at the statistics in that report, the UK has retained its top spot for FDI performance, ahead of Germany, with a 7% rise in total projects (1,144), the highest figure on record. It is also Europe’s leading beneficiary of FDI-related jobs, with a 2% rise to 44,665. However, this development was far outpaced by the increase across Europe as a whole, meaning that the UK’s market share of all FDI projects in Europe fell from 21% to 19%.
Aside from these numbers, the impression of most market participants is that there are lot of large-scale investors “kicking the tyres” on large deals in the UK. There are a number of very substantial property transactions under negotiation or under offer. One cannot help but feel that the interested buyers are more of the opportunistic, bargain-hunting nature, and that this is a first sign of an impending downturn, not from a healthy and functioning property market. We should not forget that the sector also suffers from the UK’s own home-grown problems, in particular the notorious shortage of affordable housing and the somewhat paralysed UK mortgage market.
Will the UK become a tax haven for offshore investments?
In the months following the referendum, it appeared that this might be the direction the government would take. By the end of 2016 it was widely expected and reported in the press that we would see a regime of falling corporate income and dividend taxation and a general relaxation of investment rules, the traditional cures for low activity and productivity.
Strangely, the government in its 8 June 2017 election campaign led by Theresa May, seemed to try to embrace a socio-economic approach, very contrary to what a stronger chancellor would be able to propose. With Philip Hammond gagged, the Tory party was suddenly becoming the champion of traditional new labour values. During the election campaign Theresa May refused to rule out tax rises.
With the result of the general election being as it is, the chancellor’s hand appears strengthened again. At this stage, no one can exclude yet another U-turn in this never-ending tale of political miscalculations.
Of course, the reality is that the United Kingdom, and with that one means the Greater London area, the commuter belt with good transport links to London, and maybe the powerhouses in the North, still provides investors with an investment market of considerable breadth and depth. Taxation is one factor an investor should consider but it cannot or at least should not be the main investment driver.
What is the impact of the referendum results on the fund and hedge fund industry?
The fund industry dislikes change. The hedge fund industry usually thrives on it. Change prompts transactional activity and returns. Of course it brings risks – a lack of certainty in the fields of taxation, of cross border dividends post Brexit, the absence of a unified approach to the regulation of the industry, and a drain on the UK based pool of human capital and talent.
Where the immediate impact of the referendum, at least legally speaking, is non-existent, during the Brexit negotiations the funds regulation will have to change and quite fundamentally. This applies not only to funds, but also to financial services, insurance and other regulated industries.
It is entirely unclear which regulator regulates what in the future. As an example - if a fund is located in Luxembourg, within the EU, but does investments in the United Kingdom, will there be a double layer of regulation, one coming from Brussels and one from Westminster? These questions need answering and fast.
How have you adjusted your investment strategies?
We are generally opportunistic in our approach, as are our investors. We, therefore, see opportunity, not without challenge, in these difficult market conditions. The main issue for us is not so much the worsening of the general outlook but the extreme volatility. Market sentiments and economic outlook on the world, post Brexit, change on an almost weekly basis, with a few U-turns here and there.
As a result of our fluid outlook, we at CBE Trapp & Co. have adjusted and solidified our investment strategy. We continue looking at the investment fundamentals. The market conditions are what prompts the activity that promote a transaction and pressure points. However, we try not to fall into the trap of doing a deal just because of that.
We look for those deals where a good asset is caught in a market-driven special situation and is therefore, artificially and temporarily, undervalued. We prefer solid and tangible value, capital growth and income growth in defendable positions, but not necessarily with a long-term view.
Investments have become larger and the composition of investors has changed. We see large institutional amounts piling into the UK and we are now, more than before, keen to secure large scale portfolios or platform transactions, where the assets will be worked on by an experienced management team.
How concerned are you that organisations will move to cities such as Paris or Frankfurt?
Banks and financial institutions have always been toing and froing between Frankfurt and London. In my personal career, which I started in Germany, Frankfurt became a boom town for some years in the 90s, then the sentiment swung towards London, then back again. A new phenomenon of the post Brexit area is the wooing, with Paris and Berlin sending clear – almost shameless – signals to the talent pools in the UK to try and attract them away from London. This may work well for the start-up industries (and generally for ‘hipsters’ working on ‘projects’) in Berlin, and for natural sciences in France. However, people forget that London is a metropolitan city with enormous attractivity for families and young professionals, and they do not – and often simply cannot - just move over night.
I believe that talent will always seek the best place of employment and opportunity, and we will see more people commuting between London and Paris. In a way, these two cities have almost merged into one Pan-European unit.
I am also convinced that Paris will have political difficulties in offering ‘sweetheart’ deals for bankers, this may be different for other talent such as technological, pharmaceutical or the academia.
How is the banking and lending market affected by the referendum results?
The banking and lending market reacted as all institutional markets first did, with paralyses. Lending became scarce and the availability of debt finance for commercial and real estate transaction was limited. The markets have since relaxed a little bit and we now find bankers, if not bullish, but at least willing to participate in the natural course of business.
The hurdles for any bank to make a lending decision have become higher. Once the decision in principle has been made, lending values, LTV and repayment terms are just as aggressive as they were ten years ago.
The European banks, in particularly those with a license to issue German Pfandbrief as a means of refinancing, are taking a large share of the markets, together with their US counterparts, who now benefit from a massive competitive advantage in that the US is beginning to deregulate its banking system under the Trump administration.
What is your prognosis for the future of the real estate market in the UK?
As I said before, the UK remains a property market with quite considerable breadth and depth. I would firmly expect to see a temporary correction, with a lot of influx of foreign investment capital into the UK, and I would not be surprised if some of the landmark buildings around town and some prized companies and infrastructure assets were changing hands.
Mini Questionnaire – ‘Food for Thought’:
What do you want to achieve in 2017?
We would like to achieve further growth in our property portfolio and we would also like to add more partners to the firm.
Do you have a mantra or motto you live by when it comes to helping your clients?
Nice and simple: focus.
How do you measure your success?
On the returns achieved for us and for our investors.
My name is Geza Toth-Feher. I am the Managing Partner of CBE Trapp & Co Ltd., London, a multi-family office with German, Swiss, Austrian and UK investors and co-investors. The firm acts as lead investor and operating partner for multinational private equity transactions. Additionally, we provide advisory support, usually in special situations, restructurings and/or recapitalisations. The firm invests in commercial real estate in the UK, Germany, Austria and Italy with prime emphasis on special situations or particularly complicated structures. The firm has recently been involved in one of the largest commercial real estate transactions post Brexit in 2016. We co-arranged the sale of a property portfolio of Marks & Spencer retail outlets to Fortress and funds managed by Fortress, Los Angeles.
Dr. Geza Toth-Feher Lord of Kennal
Managing Partner of CBE Trapp & Co Ltd.
4 St James's Place
London SW1A 1NP
United Kingdom
Tel: +44 2074 994 596
E-Mail: gtf@cbetrapp.com
Below, Rose Carey, Partner at Charles Russell Speechlys LLP, tells Lawyer Monthly how it’s going to go in regard to immigration law, the so called ‘settled status’ proposed, and discusses some other angles on what’s to be of UK based EU nationals.
Theresa May has offered to allow EEA nationals who have lived in the UK the right to apply for settled status (aka indefinite leave to remain/permanent residence). She has also suggested a two year transitional arrangement for those not eligible for settled status at the time of Brexit.
As it currently stands EEA nationals who have lived in the UK for 5 years should be eligible to apply for permanent residence (settled status) by law. This law is in place until Brexit. This means between now and Brexit an EEA national can apply for settled status and they have a legal right to this status if they meet the requirements. Theresa May’s offer is therefore nothing more than what EEA nationals are already legally entitled to.
Her offer to extend the opportunity for settled status and bring in transitional arrangements for 2 years is what we expected her to offer at the very least. Mainly because it would be virtually impossible for the government to seek to remove those EEA nationals who had not acquired permanent residence by the point of Brexit. There would be numerous issues as those EEA nationals may have employment in the UK with British businesses relying on their continued employment, property in the UK, children at school etc. The resources needed to impose immigration control on those EEA nationals would be inordinate. Logistically this is the only sensible solution for the government.
So, in summary, May’s offer is nothing new or unexpected.
EEA nationals currently resident in the UK should apply for an EEA Permanent Residence Card under the current system as soon as they are eligible. As a permanent resident they would not be subject to immigration control. It makes sense to secure what one is legal entitled to while that law is in place and has clearly defined parameters.
