Majority of EU GCs have done no Brexit prep

A Thomson Reuters survey on the attitude of general counsel to Brexit shows a varying level of preparation for a post-Brexit Europe.

The level of preparedness of in-house teams is resting on the mantra that ‘nothing is agreed until everything is agreed’, the research shows.

The Thomson Reuters pollsters spoke to 254 respondents across mainland Europe to understand how in-house legal teams will be reviewing tasks and reacting to change as a result of Brexit.

Of these firms, 68 % had legal needs in the UK. Organisation turnover ranged from €10 million to over €25 billion.

Some organisations are more exposed than others, but uncertainty around the post-Brexit environment remains a significant obstacle to concrete decisions and making substantive changes.

Time

Three-quarters of in-house counsel are spending less than 10% of their time preparing for Brexit, and the majority are dedicating no time at all. Only a handful of respondents are spending more than a quarter of their time getting ready for Brexit.

So Brexit is not significantly impacting on the workload of legal departments, as yet.

But respondents are dedicating most of their time on commercial contracts and drafting, which is one of the areas most affected by Brexit.

A total of 70% expect to spend more time on compliance with new regulations after the final deal is in place.

Risks

Risk reviews in terms of contracts and business licences, data privacy, tax and governing jurisdictions are areas of concern, the survey shows.

But only one-third of organisations had a Brexit taskforce in place, and almost half had not conducted a Brexit audit.

Uncertainty is preventing organisations from undertaking risk reviews, and where risk has been identified, any changes are open to adjustment.

Those organisations very well exposed to trading with non-EU jurisdictions have limited exposure to Brexit consequences.

External advice

The most proactive respondents had sought external legal advice, established a Brexit steering committee and conducted internal risk reviews. However, only 17 %had taken this proactive response.

Those spending the most time on Brexit preparation were most likely to work in financial institutions.

A full 63% of respondents expect business as usual post-Brexit, increasing to 73 % where there are no legal needs in the UK.

But a no-deal scenario changes this picture dramatically, with half believing their time will be more taken up with Brexit in this instance.

Becoming an attractive employer brand is a concern, with many organisations worried about the availability of talent.

Continental firms

An Irish lawyer told Thomson Reuters that they will start using continental law firms if there is a push to use local EU law.

Though external counsel can’t provide full answers at this stage, many law firms are updating clients on developments, and building relationships with partner firms in relevant European jurisdictions.

A Dublin-based lawyer points out that the large number of financial-services firms setting up in Dublin are seeking experienced Irish legal professionals.

Opportunity

“To some people, it’s an opportunity,” the lawyer said.

As regards attracting talent, Ireland, Germany, Luxembourg and the Netherlands were all mentioned as attractive locations.

A Spanish lawyer has questioned whether they will still use English law post-Brexit, or whether organisations will have to choose a different presiding jurisdiction.

Arbitration

“How will arbitration judgments from an English court be enforceable in Spain?” this lawyer wonders.

Organisations are clearly weighing up which jurisdictions will be most favourable to their business.

One German respondent believed that their use of law firms in Britain would actually increase, taking advantage of a presumed favourable economic climate to curtail necessary increases in budget.

One Irish lawyer revealed that their firm’s focus is on increasing revenue, but maintaining headcount.

“It is easier to get permission to increase your spend on external consultants than to get a new headcount,” the lawyer said.

External counsel

And 75 % of organisations surveyed in Ireland foresee increased use of external counsel.

While there is no consensus on whether organisations would continue to use their current legal panel in a no-deal situation, or rely on continental offices, many legal buyers believe they will continue to rely on their existing preferred firms.

But in some cases, law firms’ relationships will have to change.