In or out? Corporate counsel and Britain’s membership of the EU

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As the clock counts down to the UK referendum on whether to remain in or leave the European Union, Eduardo Reyes considers where in-house lawyers stand.

The United Kingdom’s referendum on its membership of the European Union – taking place on 23 June 2016 – has grabbed attention worldwide. ‘Asking the people’ started as a political solution for the UK government, but it has prompted interventions from European leaders, the US President, public officials, former spy chiefs and, of course, global businesses – some of whom have written to their employees warning of the dire consequences of ‘Brexit’.

Within the legal community, it’s fair to say the debate hasn’t exactly caught fire. Pro-leave group ‘Lawyers for Britain’ on its website claims to have ‘dozens’ of supporters. In the pro-remain camp, ‘Lawyers in for Britain’ fared a little better, launching with 250 ‘signatories’ and adding 81 since. At the time of writing, both groups have published one item since the start of March.

Talk to in-house lawyers, though, and their strength of feeling on the issue stands out – and those feelings are very strongly for the pro-remain camp. Attending a recent event for corporate legal teams, I couldn’t find a single Brexit supporter among the 150 people present. Neither from my 17-years’ worth of in-house contacts can I find a single one who is voting out of the EU.

Business caution

In part, in-house lawyers as professionals tend to be profoundly comfortable with the need to operate through collaboration and influence.

Their immediate concern with Britain potentially leaving the EU relates to the defining concern of in-house work – risk management. As Hanson’s head of legal, Ed Gretton, says: ‘Business tends to react very badly to uncertainty. Business likes to plan, budget, know what's happening. If you have a massive legal change, such as a separation, a [change in] jurisdictional sovereignty, between Europe and the UK, that would represent a large degree of uncertainty.’

That’s crucial, he adds, because it ‘makes planning and investment very difficult, so business tends to be really cautious about a legislative separation given the great uncertainty that would involve’.

 


In-house lawyers as professionals tend to be profoundly comfortable with the need to operate through collaboration and influence


 

Hogan Lovells partner Janet McDavid, a member of the IBA Antitrust Committee, confirms the general picture from working with clients on referendum scenario-planning. ‘Clients are generally united in their concerns about potential uncertainty and maintaining access to the single market,’ she says. ‘But, as the referendum approaches, clients are increasingly seeking advice on the more detailed practical implications [while] complying with current obligations.’

The point, though, seems to go beyond the general perceived risk. Gretton’s brief, in common with others, has led him to look at the EU reform ‘offer’ secured by the UK ahead of the referendum being called. The validity and reliability of the deal itself has been criticised by the leave campaign, and some EU supporters have even found the offer to be a distraction from the broad question of membership.

Corporate counsel like Gretton have nevertheless been tasked to look at the deal. His conclusion is the same as others spoken to for this article – that the reform deal, which involves treaty change, is valid. In his words: ‘The Council of Ministers is a legislative body of the EU and it expressly agreed treaty change. It's going to follow through in due course and nobody expects that treaty change not to be implemented.’

Exit to what?

The question of ‘exit to what?’ has been difficult to pin the pro-leave camp down on. Pro-leave lawyers argue for the need to leave the current treaties and then building new and constructive links with the EU. But aside from being free to get a ‘better deal with the rest of the world’, little is officially committed to. A recent roundtable discussion I organised got closer to the legal point of exit – identifying ‘regulations’ on which, to quote the UK Independence Party’s former national treasurer solicitor Andrew Reid, ‘common sense will prevail’ once the UK is out of the EU.

Relevant here are health and safety legislation, environmental laws and employment rights that would seem to be high on the list of ‘regulations’ that could be altered outside of the EU.

Karen Baxter, an employment partner at Lewis Silkin, makes this point: ‘A huge amount of the laws that we use on a daily basis come from Europe… holiday pay, family leave, TUPE transfers and collective bargaining.’

Gretton adds: ‘Pretty much all of our environment legislation comes directly from Europe. Whether it's water, air controls, plants, people, habitat, all that law on key environmental pollution waste matters comes directly from Europe… it's very beneficial and very positive. It all comes as a direct result of being part of the EU.’

He adds that a single source of such laws means that, for a business operating across borders, ‘it doesn't involve a large exercise to work out the legal mechanics’.

Another issue raised by corporate counsel relates to the short-term ‘spike’ in the demand for legal advice that would follow a potential UK exit. Put simply, if you replace 100 pages of regulation with 50, you have not cut 50 pages for someone getting their heads around the regulations, but have instead added 50 pages of work.

McDavid’s analysis also focuses on the immediate impact of a vote to leave: ‘The most significant area of concern is for our clients' businesses and the financial markets.’ In that respect, she adds, ‘our interests and concerns are very much aligned with those of our clients’.

In-house lawyers aren’t, on my evidence, bothered by the idea that laws emanating from Europe are the result of negotiation, argument and compromise – a key pro-leave objection. They operate in a world where collaboration, adaptability, thought and diplomacy are the only tools available.

Trade deals and regulations aside, from this perspective, corporate counsel are never going to be disconcerted by having to make decisions and set the rules of the game in a larger block. 

Eduardo Reyes is features editor of The Law Society Gazette and a former editor of In-House Lawyer Magazine.