Brexit: Banking and Financial Services

Posted on 11 Nov 2016 by Brick Court

Sophie Shaw

On Thursday 10th November, Brick Court hosted the latest in its series of panel discussions on the legal implications of Brexit. The event was moderated by Mark Hapgood QC, who opened by observing that one of the most important issues arising from Brexit is the impact it will have on banking and financial services in the UK. He posed two questions: what degree of risk is posed to the banking and financial services industries by leaving the EU, and what is the best way to mitigate that risk?

Andrew Henshaw QC spoke about the existing passporting arrangements and the position the UK will find itself in if it neither joins the EEA nor negotiates full access to the single market. He considered investment and retail business, banking and insurance and reinsurance, identifying the existence of equivalence decision regimes and the opportunities for third country branches to operate within the EU. He noted that there are many gaps in these systems, and equivalence decisions may be hard to obtain for political reasons. In addition, no equivalence decisions are likely to be taken before the UK leaves the EU, and therefore financial institutions must plan for the worst. In this context, he also raised the possibility of both legal and practical ‘work-arounds’ that financial institutions may want to consider.

Caroline Binham (Financial Times) considered the risk to the pre-eminent position of London with regard to banking and financial services posed by Brexit. She noted that the risk depends on the form that Brexit ultimately takes, but observed that the mood in the City is increasingly sombre. The threats to jobs and GDP are severe, and the contagion effect means that the impact of Brexit will be felt well beyond the banking and finance industries. She also highlighted the fact that EU stands to lose as a result of Brexit, and doubted the attractiveness of relocating financial business to New York following the election of Donald Trump.

Damien Bisseker (Credit Suisse) provided an in-house banking perspective. He observed that banks are in a difficult situation. They are under pressure from regulators to have plans in place for the worst case scenario, while it remains unclear what the post-Brexit regulatory framework will look like. Banks are also under time pressure to act. Factors banks must consider include the significance of their business with EEA counterparties, the attractiveness of different jurisdictions and the different models that could be adopted. He also noted the importance both of lobbying by banks and the lobbying of banks by foreign jurisdictions. Finally, he made the practical suggestion that banks should ensure that process agents are available throughout Europe.

Jasbir Dhillon QC addressed the likely role for English law in international banking and finance transactions after Brexit. Considering choice of law, he observed that market counterparties are unlikely to move away from English law given its certainty, stability, familiarity and commerciality. Similarly, he expressed the view that market counterparties are likely to continue to prefer English jurisdiction. The knowledgeable judiciary, adherence to the freedom of contract and fidelity to the rule of law all make England an attractive place to litigate. There may even be a shift towards exclusive jurisdiction clauses if the UK ratifies the Hague Convention on Choice of Court Agreements as judgments obtained pursuant to such clauses will be enforceable throughout the EU. Finally, he observed that international arbitration will not be adversely affected by the UK’s departure from the EU.

Simon Firth (Linklaters) spoke about the effect of Brexit on derivatives and the future of the ISDA Master Agreement. He also considered that English law will remain the favoured law in the context of derivatives for two key reasons. First, the characteristic series of transactions designed to hedge each other require a consistent choice of law to prevent exposure on any one transaction. In the absence of an obvious alternative to English law, it is unlikely the choice of law will shift. Second, the derivatives market has historically suffered from a lack of predictability as a result of the paucity of case law. However, this has been markedly improved by a series of good judgments from the English courts. A shift to a different choice of law would require his process to be restarted from scratch.

The presentations were followed by a lively Q&A session, and comments were invited from the floor. Topics addressed included whether any positives could be seen as resulting from Brexit, the extent to which the UK could or would retain EU standards and legislation after leaving the EU, the market’s view on the model of Brexit likely to be adopted and the relevance of economic difficulties already facing Europe.

Please click here to view a recording of the event.

Brexit: FRAND, Pharmaceuticals and Intellectual Property

Posted on 07 Nov 2016 by Brick Court

Sophie Shaw

On Tuesday 1st November, Brick Court hosted the latest in its series of panel discussions on the legal implications of Brexit. The event was moderated by Lord Hoffmann, who opened the evening by observing that IP is likely to be one of the areas of law in the UK that is most affected by Brexit. 

Morag Macdonald (Bird & Bird) spoke first about the Unified Patent Court (UPC), initially highlighting the unique nature of the UPC as the first court intended to deal with civil claims on a multinational basis. She noted that the Brexit referendum has put the UPC in jeopardy, and outlined the issues concerning the ratification of the UPCA and the significance of the role the UK had been intended to play. She considered it very unclear what will happen next. The UK could ratify the UPCA, expecting to fall out of the system on leaving the UK, the remaining EU Member States could carry on with the UPC without the UK’s involvement, or a way to implement the UPCA including the UK could be found. All three options will, however, give rise to difficulties.

Richard Vary (Bird & Bird) considered the impact of Brexit on FRAND litigation in the UK. He noted that the primary reason for choosing one jurisdiction over another is speed in obtaining an injunction. At present, Germany is the forum of choice for this reason. The International Trade Commission (ITC) in the USA is also attractive given the large number of consumers covered by its jurisdiction. The UPC was on course to become a very fast court, covering more consumers than the ITC. If the UPC does continue without the UK, the UK could respond by refining its court procedures to make the process faster than the UPC.

Katharine Stephens (Bird & Bird) addressed the topics of EU Trademarks (EUTMs) and Registered Community Designs (RCDs), observing first that these rights will, in the absence of any additional measures, cease to cover the UK on withdrawal from the EU. This could cause significant problems for rights owners, who may seek to pursue claims against the UK Government for deprivation of property. Considering the different ways in which these problems could be resolved, she suggested that the best option for EUTMs and RCDs would be for a scheme to be put in place to bring these rights onto the UK registers. Unregistered designs will present a more interesting challenge given the differing scope of EU and UK protection. She also noted problems concerning enforcement after Brexit, both in respect of newly granted and existing injunctive relief, and touched upon the new Trademark Directive and the exhaustion of rights.

Simon Thorley QC spoke about supplementary protection certificates (SPCs) and the UPC. He outlined the background and purpose of SPCs, and observed that the UK will have to decide whether to provide such protection after Brexit, and if so in what form. In addition, it will have to be determined whether the European Medicines Agency will remain in London. Turning to the UPC, Mr Thorley QC highlighted the additional issue of the ratification of the Protocol on Privileges and Immunities. Having weighed up the potential options for the UPC, he expressed concern that the Brexit vote may have brought about its demise.

Finally, Mr Justice Henry Carr considered the future of patent litigation in London. Optimists may consider that the UK has a large economy and a huge market, so the need for litigation in London will continue. Pessimists, on the other hand, would say that no-one sues everywhere, instead looking for an early decision in a key jurisdiction. Further, an amendment to the Brussels Recast Regulation gives the UPC jurisdiction over infringements of EU patents occurring outside the UPC territory in certain circumstances. If infringements in the UK can be added to a UPC claim, there will be no need to sue separately in the UK.  The UK could, however, avoid this consequence by joining the Lugano Convention.

Mr Justice Carr also noted that he was more positive than many of the other speakers about the prospects of the UK becoming and remaining part of the UPC, and of the UPC surviving even without the involvement of the UK.

The presentations were followed by a Q&A session. Mr Justice Arnold (the judge in charge of the Patents Court) responded to the suggestion that English procedure could be made quicker by highlighting the Chancery Division fixed end trial scheme and two recent cases in which decisions on patent infringement and validity had been heard very rapidly. In one of these cases the first instance decision and decision of the Court of Appeal had taken only 9 months in total from issue of proceedings.

Please click here to view the notes and a recording of the event.

Government loses Article 50 judicial review

Posted on 03 Nov 2016 by Brick Court

The Divisional Court has handed down its judgment this morning on the Article 50 judicial review proceedings on which we have been reporting. The judgment is here, a summary here, and hearing transcripts here. The name of the case is R (Gina Miller & Dos Santos) v Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin). The judges were the Lord Chief Justice (Lord Thomas of Cwmgiedd DJ), the Master of the Rolls (Sir Terence Etherton MR) and Lord Justice Sales.

The Divisional Court has decided that the Government may not use its Executive prerogative powers to give notice of its intention to withdraw the United Kingdom from the European Union under Article 50 of the Treaty on European Union, because this is a matter for Parliament.  Giving notice under Article 50 will inevitably result in the removal of some fundamental rights in EU law enshrined in domestic law by Parliament in the European Communities Act 1972.  The UK constitution does not permit the Executive to alter domestic law by removing those fundamental rights through exercise of its prerogative powers; only Parliament could do so.

The Government has said that it will appeal against the judgment, the Divisional Court issued a certificate permitting the case to “leapfrog” straight to the UK Supreme Court, and the Supreme Court has indicated that it will hear the case over 4 days during the week of 5th December 2016 with a larger than usual panel of judges.