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Theresa May suffers three Brexit defeats in Commons

Theresa May has suffered three Brexit defeats in the Commons as she set out to sell her EU deal to sceptical MPs.

Ministers have agreed to publish the government’s full legal advice on the deal after MPs found them in contempt of Parliament for issuing a summary.

And MPs backed calls for the Commons to have a direct say in what happens if the PM’s deal is rejected next Tuesday.

Mrs May said MPs had a duty to deliver on the 2016 Brexit vote and the deal on offer was an “honourable compromise”.

She was addressing the Commons at the start of a five-day debate on her proposed agreement on the terms of the UK’s withdrawal and future relations with the EU.

The agreement has been endorsed by EU leaders but must also be backed by the UK Parliament if it is to come into force. MPs will decide whether to reject or accept it on Tuesday 11 December.

Mrs May said Brexit divisions had become “corrosive” to UK politics and the public believed the issue had “gone on long enough” and must be resolved.

In other Brexit-related developments:

Analysis: A terrible day for May but..

The BBC’s political editor Laura Kuenssberg

The prime minister has had a terrible day today as the government made history in two excruciating ways.

Ministers were found to be in contempt of Parliament – a very serious telling off – and the government had a hat trick of defeats – the first time since the 1970s that’s happened.

As you’d expect too, MP after MP after MP rose after Theresa May’s remarks to slam her deal as Tory divisions were played out on the green benches, with harsh words exchanged.

But in this topsy-turvy world, the overall outcome of the day for Mrs May’s big test a week tonight might have been not all bad…

What was the legal advice row?

By 311 votes to 293, the Commons supported a motion demanding full disclosure of the legal advice given to cabinet before the Brexit deal was agreed.

The move was backed by six opposition parties, including Northern Ireland’s Democratic Unionist Party which has a parliamentary pact with the Conservatives.

It came after Attorney General Geoffrey Cox published a summary of the advice on Monday and answered MPs questions for three hours – but argued that full publication would not be in the national interest.

Labour had accused ministers of “wilfully refusing to comply” with a binding Commons vote last month demanding they provided the attorney general’s full and final advice.

After Labour demanded the advice should be released ahead of next Tuesday’s key vote on Mrs May’s deal, Commons Speaker John Bercow said it was “unimaginable” this would not happen.

In response, Commons Leader Andrea Leadsom said she would “respond” on Wednesday, but would ask the Commons Privileges Committee to consider the constitutional repercussions.

Brexit-shattered-glass

Theresa May: “I Will Make the Case for This Deal With All My Heart”

Theresa May ‘full of optimism’ The prime minister says the EU endorsement of her Brexit deal marks the start of “a crucial national debate.”

Brexit legal challenge: UK government appeals

The UK Supreme Court is considering whether to hear an appeal filed by the government over a Brexit legal challenge to be heard in Europe.

On November 27 an emergency hearing of the European Court of Justice (ECJ) in Luxembourg will examine whether a majority vote against Brexit in the House of Commons will be able to arrest the UK’s minimal progress out of the EU. The Brexit legal challenge, submitted by a group of pro-Remain MPs and campaigners, was referred to the ECJ by the Edinburgh Court of Session, Scotland’s supreme civil court.

A cross-party group of Scottish MPs, MSPs and MEPs teamed with Good Law Project director Jolyon Maugham QC to bring the Brexit legal challenge, arguing that MPs should be able to vote to revoke Article 50 without the permission of the government or other Member States. They said Brexit was “not inevitable” and that allowing parliament to vote to stay in the EU could be essential to avoid a “no deal disaster”.

The Court of Session initially turned down the group’s bid to refer their Brexit legal challenge to the ECJ, but after the group successfully appealed the court’s decision the case was passed to the ECJ with a request for an expedited procedure due to the time sensitivity of the issue.

The UK government has asked the Supreme Court for permission to appeal against the Court of Session’s decision to refer the Brexit legal challenge to the ECJ, citing the terms of Article 50 of the Treaty on European Union. Lawyers for the Department for Exiting the European Union (Dexeu) say the issue of reversing Article 50, thereby stopping Brexit, is hypothetical as the government has declared it has no intention of doing so; and that remaining in the EU would undermine the sovereignty of parliament.

The Supreme Court has not set a date to hear the appeal. A statement from the court said: “The court is aware of the urgency of this matter.”

75% of City partners back second Brexit referendum

Three out of four City partners are in favour of a second Brexit referendum, according to a new a survey which has also found strong concerns among lawyers over the impact of a ‘no deal’ scenario on the legal sector.

Three-quarters (75%) of all respondents to the latest Big Question survey said there should be a second referendum, with a similar proportion saying that Brexit will negatively affect the ability of UK law firms to attract the best talent and compete with increasingly aggressive US rivals.

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‘There is a pre-Brexit window to aim for’

London capital markets partners are anticipating a flurry of initial public offerings (IPOs) this year, ahead of the UK’s exit from the European Union in 2019.

Partners says there is an impetus to start IPO processes early in order to avoid any uncertainty in the run-up to Brexit, scheduled for 29 March next year.

Clifford Chance (CC) global capital markets head Adrian Cartwright (pictured above) comments: “Most companies are looking to get IPOs away in 2018, as the first half of 2019 will be overshadowed by Brexit. You really need to be getting a process underway in the next two to three months to hit an execution window in the second half of 2018.”

White & Case partner Jonathan Parry (pictured right) adds: “There is definitely a pre-Brexit window to aim for. A number of IPOs are expected to hit the early summer window.”

With Brexit looming, partners say the volume of deals will at least match 2017. Last year, there were 106 IPOs raising a total of £15bn in London, a three-year high – a strong increase on 2016, which saw 65 IPOs raise £5.7bn.

 

If you haven’t got a deal done by the end of the third quarter, you will be getting into a nervous period

Key IPOs in 2017 include the Irish Government’s May flotation of a 25% stake in Allied Irish Bank, which valued the group at €12bn (£10.5bn). The dual-listing in London and Dublin threw up roles for Linklaters, Allen & Overy and Herbert Smith Freehills.

Meanwhile, in November, Russian aluminium company EN+ floated in London and Moscow, giving the overall business a value of $8bn (£5.6bn). It was the first major primary listing by a Russian company in London since sanctions were imposed on Moscow. White & Case acted for EN+ and Linklaters advised the banks.

In April, logistics company Eddie Stobart raised £393m on AIM, the largest AIM IPO since 2005. King & Spalding acted for Eddie Stobart while Hogan Lovells advised the banks.

Ashurst partner Nicholas Holmes comments: “I think 2018 could be broadly comparable to 2017, but my suspicion is that activity in 2018 will be compressed into three rather than four quarters. If you haven’t got a deal done by the end of the third quarter, you will be getting into a nervous period as Brexit becomes more imminent.”

Parry adds: “Overall volumes could be higher this year. Last year, volumes in the first half were pretty low in terms of premium listing IPOs and it was a very sluggish market. There was a change post-summer – the IPO pipeline picked up considerably in Q3, and as a result overall volumes for the 2017 were fairly high.”

At the same time, some companies may opt to take their chances in a less crowded market in early 2019, comments Allen & Overy partner James Roe (pictured right). “There’s an impetus to get transactions done before October 2018, but equally if the market is crowded as a consequence there may be opportunities towards the end of this year or the first quarter of 2019 for a prepared company to IPO.”

By region, partners say the London listings are expected to come from a range of locations including Turkey – spurred on by general elections in the country scheduled for November 2019 – Greece and the Middle East.

Cartwright comments: “There is activity across a whole mix of jurisdictions, including the UK, continental Europe, Turkey, and Russia is also back, despite the threat of further sanctions. The Middle East is also busy.”

Herbert Smith Freehills equity capital markets head Charles Howarth adds: “There are some UK IPOs of non-UK companies, but much of the IPOs are from the far end of the Mediterranean, Turkish and Greek. There is a burgeoning pipeline of Turkish IPOs, both domestic and London, driven in part by uncertainty over the elections due late next year.”

Much talk in the market is dominated by the potentially record-breaking Saudi Aramco IPO, which could value the company at as much as $2.5trn (£1.7trn). It is understood the company has shortlisted London, New York and Hong Kong for the international portion of the listing. White & Case is acting for Saudi Aramco, but further legal advisers have yet to be appointed.

Other IPOs that could launch this year include UK cinema chain Vue Cinema International, which would reportedly value the group at at least £1.6bn, while its rival Odeon is also looking at a listing of a similar value.

Overall, companies and investors seem more likely to take their chances sooner rather than later.

Parry concludes: “There is still very little clarity as to what is going to happen in March 2019. At the moment, with investor sentiment and stock market valuations where they are, there does seem to be an open window that issuers and investment banks are looking to take advantage of.”

Simmons third INTL Firm to open in Dublin since Brexit vote

Simmons & Simmons has hired a partner from Mason Hayes & Curran to spearhead a launch in Dublin.

Simmons has hired the Irish firm’s head of investment funds and financial regulation, Fionan Breathnach, ahead of the planned opening.

Breathnach has been at Mason Hayes since 2003. He was previously an associate at PwC legacy law firm Landwell and also spent time in-house at banking giant HSBC.

The Dublin base will represent the first new office for Simmons since 2015, when it opened in Luxembourg. Before that, it launched bases in Munich and Singapore in 2013. However, it has also shut its doors in locations such as Rome in 2015 and Abu Dhabi in 2016.

Simmons managing partner Jeremy Hoyland told Legal Week: “We are going to be opening an office in Dublin. It will focus initially on our asset management clients. We already service those clients in Singapore and Luxembourg but Ireland is a key jurisdiction for fund formation and it is a gap in our offering that we are keen to close. It is currently an important location and it will become more important going forward due to the referendum result.

“Brexit is obviously a fluid situation and we are trying to stay at the forefront of changes. There is a lot of uncertainty.”

The timing and further details of the launch are yet to be confirmed, however, Hoyland said that the office could become full service over time.

Mason Hayes managing partner Declan Black said: “Fionan has made a great contribution to MHC over the years and he will retain many friends here when he leaves. We wish him the very best of fortune.”

The Irish legal market has become increasingly attractive for UK and international firms since the Brexit vote last year.

Like their major clients in the banking sector, many law firms have been examining their post-Brexit footprints to ensure they continue to have access to the European Union (EU) single market and the EU’s courts and decision-making bodies when the UK leaves the EU.

Last month, Legal Week revealed that US firm Covington & Burling is currently waiting for regulatory clearance from the Irish Law Society to launch a life sciences and technology focused office in Dublin.

Earlier this year, Pinsent Masons opened in Dublin with the hire of three partners from local firms, making it the first international firm to open in Ireland following last year’s Brexit vote.

Other UK and international firms with bases in the Irish capital include Eversheds Sutherland, DWF, which hired William Fry corporate partner Ross Little last year to launch a full-service practice, insurance players DAC Beachcroft, Kennedys and BLM,  US firm Dechert, and offshore firms Maples & Calder and Walkers.

Local partners also expect global giant DLA Piper to enter the market. Earlier this year the firm’s senior partner  Juan Picon told Legal Week: “Post-Brexit, there will be more institutions looking to have a presence in Ireland, so opening there would be consistent with our strategy.”

 

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‘Brexit should be seen as an opportunity’ – Shearman’s Reynolds

Shearman partner Barnabas Reynolds, a partner from Shearman’s believes Brexit provides opportunities for English lawyers and the UK’s courts.

With Brexit now taking place, the question is no longer whether we remain or leave. The debate has moved on and it is the duty of common law practitioners in England and Wales, and their colleagues in Scotland and Northern Ireland, to be at the vanguard of shaping what comes next, minimising the risks and maximising the opportunities.

Two key opportunities that arise are for English law lawyers and the UK’s courts.

London lawyers plan for Brexit:

Following the official triggering of Article 50 this morning, law firms have begun to bulk up their Brexit taskforces and prepare for two years of unprecedented change.

So far, Freshfields Bruckhaus Deringer and DLA Piper have made key hires into their Brexit taskforces. More firms are expected to follow suit.

Freshfields has hired former European Commissioner Jonathan Hill as a senior adviser, while DLA Piper has hired ex-EU legal adviser to the House of Lords Paul Hardy as a lead Brexit specialist and support the firm’s Brexit committee alongside its existing government affairs, trade and regulatory capabilities.

Reactions from UK and US firms have been mixed, with many more concerned about the UK’s chances of bartering a good deal rather than the UK’s status as an attraction for international investment.

London will prevail

The City will lose some financial services jobs to continental Europe, Dentons partner Andrew Cheung said, but some global players have also announced their commitment to London as there is no other equivalent in the continent.

“It is true that, absent certainty about passporting and equivalence, London-based financial institutions (and professional services firms) will need to have a material base in the EU,” explained Cheung. “But where?  No single other City has or could within the foreseeable future replicate London’s vast business infrastructure – everything from the size of its huge professional services infrastructure and pool of labour (London is far bigger than other European cities, so more IT workers, office cleaners, lunch stops etc) to the availability of office space, people to fit out office space with technology etc.

“Take US investors. TTIP seems to be dead in the water, at least for the duration of a Trump administration; so US:EU investment terms will likely remain static for at least four years (plus however long it takes to resuscitate TTIP). The potential for an early trade deal with the US, on the other hand, coupled with a devalued pound, mean a soon-to-be post Brexit Britain presents some real growth opportunities for US businesses and the prospect of political needs on the UK side of the pond delivering investor-friendly terms.

“Two years is not a long time. The EU negotiating team will need to throw out its playbook if it has any hope of agreeing a workable interim arrangement and framework for a free trade agreement within that time. Blink and it will be 2018.  So now is the time to start your Brexit risk planning in earnest if you have not already done so. And for non-EU investors looking for a home for capital, buy now before others get the best deals!”

Data issues await

“The Article 50 notice has fired the starting gun,” Bird & Bird partner Graham Smith said. “Will the finishing line be a cliff edge or a smooth transition? For flows of data from the EU to the UK the answer will depend in part on whether the UK’s controversial bulk surveillance and communications data retention laws are deemed to give adequate protection to EU citizens’ personal data. The closer we move towards Brexit Day the larger this issue is likely to loom.”

London may be overtaken at some point by another European city as a Fintech hub, but not any time soon.

Bird & Bird partner Jonathan Emmanuel said: “For now, what is clear is London won’t give up its crown without a fight: it is already building FinTech “bridges” to other regions such as Singapore and South Korea to maintain its position and the FCA’s regulatory sandbox initiative is lauded worldwide which makes it a natural magnet for many FinTech start-ups.”

Insurance

Last year, the uncertainty surrounding Brexit led to some insurers seriously considering a move from London to Dublin. At the time, The Lawyer reported that insurers including QBE, Admiral and Beazley were all considering Dublin as a potential hub for their European businesses.

Clyde & Co European corporate insurance group head Ivor Edwards said: “Insurers haven’t been sat waiting for Article 50 to be triggered since the referendum. Planning for Britain’s exit from the EU is well underway, as insurance carriers believe they need to take concrete steps for all eventualities by setting up carrier companies in the EU’s 27 countries.

“Carrier companies are by far the most popular and realistic solution to allow insurers to carry on writing business in the EU post Brexit. But they require time, money and commitment to set up.  Fronting arrangements can work but are complicated and not a solution for carriers who want to write significant amounts of business.”

Edwards added that UK companies are not the only ones making plans. “There are over 500 general insurance companies headquartered in continental Europe who passport into the UK that are taking steps too,” he said.

The insurance industry will be hoping that the government achieves the freest possible trade in financial services between the UK and EU Member States, Edwards said.

“However, at this point, no-one knows when an agreement might be reached, if at all, nor what provisions in might contain,” he commented. “The industry is watching on with interest, but it’s not waiting with baited breath. It’s acting already.”

Brexit: Supreme Court says UK Parliament must give Article 50 go-ahead

Parliament must vote on whether the government can start the Brexit process, the Supreme Court has ruled.

The judgement means Theresa May cannot begin talks with the EU until MPs and peers give their backing – although this is expected to happen in time for the government’s 31 March deadline.

But the court ruled the Scottish Parliament and Welsh and Northern Ireland assemblies did not need a say.

Brexit Secretary David Davis will make a statement to MPs at 12:30 GMT.

During the Supreme Court hearing, campaigners argued that denying the UK Parliament a vote was undemocratic.

But the government said it already had the powers to trigger Article 50 of the Lisbon Treaty – getting talks under way – without the need for consulting MPs and peers. It wants to do this by the end of March.

Reading out the judgement, Supreme Court President Lord Neuberger said: “By a majority of eight to three, the Supreme Court today rules that the government cannot trigger Article 50 without an act of Parliament authorising it to do so.”

The court also rejected arguments that the Scottish Parliament, Welsh Assembly and Northern Ireland Assembly should get to vote on Article 50 before it is triggered.

Lord Neuberger said: “Relations with the EU are a matter for the UK government.”

Outside the court, Attorney General Jeremy Wright said the government was “disappointed” but would “comply” and do “all that is necessary” to implement the court’s judgement.

 

Baker & Mckenzie predict plunge in M&A activity as Brexit uncertainty continues

Corporate deals in the UK will continue to drop on last year in the wake of Brexit uncertainty, according to one law firm.

Baker McKenzie’s medium-term forecast report on M&A activity predicts that in the event of an “amicable separation Brexit will have only a modest impact on transactions in most of Europe”.

However, the immediate outlook is less positive, with the report arguing that the value of deals this year would plunge by more than 60 per cent compared to last year, resulting in a total of about £102.5 billion.

In the rest of the EU, however, the forecasters expect the value of deals to soar by almost 44 per cent to £376bn.

Tim Gee, a partner at the firm, said: “Given Brexit’s impact on business confidence, we expect M&A values to fall by two thirds in 2017 after numerous large deals in the first half of last year boosted 2016.”

He added M&A activity should stabilise next year “as greater certainty emerges about the UK’s new relationship with the EU and the rest of the world”.