The UK remains the jurisdiction of choice
Brexit. Six years on we are still talking about it, perhaps unsurprisingly. There isn’t a domain that hasn’t been affected by it (or perhaps infected by it, depending on your POV) and never has that been truer of cross-border trade, whatever the sector. In this article, we look specifically at Brexit’s effects on one form of cross-border trade, UK legal services.
First, some context setting: the UK legal market generated £41.6bn in revenue in 2021 and is the largest legal services market in Europe second only to the US globally, so it is of huge strategic importance to the UK economy. The export value of English law is attested to by the fact that English is the main choice of governing law for most cross-border transactions globally.
In one sense a lot, in another not very much. Let’s look first at the changes to the legal landscape post-Brexit, by which we really mean the end of the ‘transition period’ provided for under the UK’s withdrawal agreement with the EU, being midnight on 31 December 2020.
The pre-brexit enforcement regime
- Prior to 31 December 2020, the cross-border dispute framework was largely a function of EU law and consisted of the following key pillars:
- The Brussels Regulations, namely the 2001 Brussels Regulation and the Recast Brussels Regulation which in broad terms together regulate the recognition and enforcement of judgments in EU member states.
- The EU Service Regulation which was widely recognised as facilitating the efficient transmission and service of legal documents between member states.
- The 2007 Lugano Convention which largely replicates the position under the Brussels Regulations in relation to the recognition and enforcement of judgments in three EFTA states (Iceland, Norway and Switzerland).
- Rome I and Rome II which determine the law applicable to, respectively, contractual and non-contractual obligations.
- Beyond the jurisdiction of the EU, jurisdiction and enforcement is dependent on either the existence of bilateral arrangements (which exist for many countries with whom the UK has historical ties, see below) or in the absence of reciprocal arrangements the question falls to be determined under the national law of the country in which recognition/enforcement is sought or the question of jurisdiction falls to be considered.
Position post Brexit
- Post 31 December 2020, the Brussels Regulations and Lugano Convention have fallen away. This represents the biggest impact on cross-border disputes with the result that the Hague Convention on Choice of Court Agreements – to which the UK is a party in its own right as of 1 January 2021 – now takes centre stage as the main reference point for conducting cross-border disputes. Note the emphasis on commercial disputes because whereas the Brussels Regulations apply to a broad range of civil disputes, Hague’s principal limiting factor is that it only applies to cross-border disputes where there is an exclusive jurisdiction clause in favour of a contracting state (note asymmetric or optional jurisdiction clauses do not qualify).
- Hague is also a lot narrower in application, excluding from its ambit certain categories of dispute including consumer, insolvency, IP and insurance (among others). Its other major limitation is that it does not extend to interim relief such as freezing orders that could under certain conditions previously be passported in to other EU member states.
- EFTA states are not a party to Hague, meaning the UK’s failure to join Lugano (despite its best efforts) creates a gap between the UK and EFTA states which is mitigated slightly by the fact that Norway and the UK have agreed to continue to apply Lugano; as to the remaining EFTA states, the recognition and enforcement of judgments is a question of the national law of those states.
- The EU Service Regulation has likewise been revoked and has been substituted for the not too dissimilar Hague Service Convention.
- Lastly Rome I and II continue to apply as they form part of the package of EU legal instruments which the UK continues to apply post Brexit as “EU retained law”, which in simple terms incorporated EU law as it stood at the end of the transition period in to English law.
What are the implications?
Having identified the actual differences in the EU landscape, what does this mean in practice? It is true that the new regime at first blush introduces some mechanical impairments in to the process of conducting cross-border litigation. But those differences must be balanced against the following considerations:
- Most commercial agreements contain governing law and exclusive jurisdiction clauses; Hague should extend to most commercial agreements other than those in the specifically excluded categories.
- As to the recognition and enforcement of judgments between the UK and EU member states that fall in between the Hague/Brussels gap, these will be resolved with reference to national laws. A good number of EU members states have evolved and mature legal systems that provide a reciprocal enforcement regime outside the international treaty/convention framework under which UK judgments can be recognised and enforced. The same point applies to inbound judgments; there is a pre-existing framework in UK law in relation to the recognition and enforcement of inbound judgments from the EU and beyond.
- As between the UK and the rest of the world, the UK has bilateral arrangements that deal with the enforcement of judgments with many countries with whom they have historical ties such as Canada, Australia, Cayman Islands, Bermuda, New Zealand, Pakistan, Guernsey, Jersey, BVI, Israel, India (among many others) that remain unchanged.
- The weaker protections under Hague in terms of the recognition and enforcement of exclusive jurisdiction clauses have been mitigated by the empowerment of the English Courts to issue anti-suit injunctions, otherwise prohibited under the Brussels Regulations regime. This should address the (impolitely termed) “Italian torpedo” scenario where proceedings are issued in one jurisdiction in breach of an exclusive jurisdiction clause.
- As to issues of service, there are many similarities between the EU Service Regulation and Hague with any differences being partially mitigated by the fact that from 6 April 2021 it is no longer necessary to obtain the permission of the English Court to serve proceedings out of the jurisdiction where there is an English jurisdiction clause (see CPR 6.33(2B)(b)).
- It is important to bear in mind that a major share of the international dispute resolution market is international arbitration which remains the preferred method of dispute resolution for international litigants. The New York Convention regulating the recognition and enforcement of arbitral awards sits completely outside of the EU framework; if anything arbitration has emerged as a winner (see below).
Some perceive a conspiracy of silence as to the adverse impacts of Brexit on the UK more generally. But there is good reason to believe in the resilience of the UK legal market and that it has largely emerged unscathed; what empirical data there is suggests that Brexit has neither dented English law as a brand nor the Courts of England as the forum of choice for the resolution of disputes.
We do however caution that it is still early days and warn against complacency. The recent Portland Commercial Courts Report indicates that between 2021 and 2022 there has been a dip of 20% in the number of Commercial Court judgments that have been issued (possibly a function of the considerable resource constraints the Commercial Court has been experiencing in terms of judge availability) but the trend since 2016 remains upwards. Moreover, 54% of the litigants in the Commercial Court were international, up from last year’s 50:50 split. Of these non-UK litigants, the number of nationalities represented in the Commercial Courts has also expanded, with (interestingly) the number of EU litigants increasing slightly from 11.5% to 12% over the last year.
Beyond the Commercial Courts, London retains its pre-eminence as the preferred seat for arbitration: the number of referrals to the LCIA has increased in 2021/2022 to 444, representing a doubling of its case load of the last 10 years. The growth in London-seated arbitration is possibly a collateral effect of Brexit in view of the enforcement benefits of the New York Convention.
Lastly, if English law is to be dislodged then there needs to be a viable alternative. It is true that some economies have started to evolve their own body of commercial law creating competitive pressure on English law. However, much of what gives English law its considerable export value remains: the sophistication and depth of its body of contract law, the malleability of the common law and the potency of its precedent value to market participants. In short, there are plenty of reasons to be hopeful that English law will maintain its market dominance and that English Courts, and London in particular, will continue to be the forum of choice for the resolution of cross-border disputes.
Explaining the Points-Based UK Immigration System
This system provides flexible arrangements for UK employers to recruit skilled workers from around the world through a number of different immigration routes.
The UK’s previous immigration scheme required a resident labour market test be carried out on businesses recruiting and sponsoring skilled workers. Whilst the resident labour market test has been abolished, the Skilled Worker and Home Office guidance now details the evidence of recruitment requirements that HR staff and recruiters are expected to follow when sponsoring employees on skilled worker visas.
Skilled Worker Visa – requirements
For a Skilled Worker Visa there must be:
- a certificate of sponsorship for the applicant from an employer (Home Office approved);
- a sufficiently skilled job;
- a job meeting the minimum salary requirement —depending on the type of work; and
- the applicant must satisfy the English language requirement.
A potential hire, meeting the above requirements, independently financial and able to cover the costs of sponsorship is unlikely to encounter barriers to recruitment and is likely to be able to find a role.
Businesses, however, still encounter challenges.
Removal of the Resident Labour Market Test
Businesses wanting to sponsor a skilled worker (under the previous Tier 2 (General) visa) previously had to carry out a resident labour market test (RLMT). The test was prescriptive and added at least 28 days to the recruitment process. Businesses were required to ensure any vacancy advertised could not be carried out by a UK citizen/settled worker and added to the overall cost of the hire. If a UK citizen or settled worker had the skills and requirements listed in the job advert, the business could not offer it to the individual requiring sponsorship — even if the stronger candidate.
Whilst the abolition of the resident labour market test, which occurred on 1 January 2021, was great news for businesses – employees can now be brought on board without the long initial delay adding value sooner, there are still administrative and operational challenges which employers need to watch out for (particularly with costs for recruiting from within EU (rather than relying on the free movement of workers)) and particularly in the field of discrimination. It is always useful to have a recap on this.
With the points-based system in place and the removal of the resident labour market test, applicants must not be rejected on the basis of their immigration status.
Stating that only those with the right to work in the UK will be recruited and/or offered employment may lead to race discrimination claims on the grounds of nationality. To avoid this, we would recommend the following steps to avoid potential race discrimination claims:
Planning and Strategy
- What level of recruitment as a business is being aimed for this year and where are these vacancies within your business – understand where your vacancies could be mapped on the immigration points-based system:
- Is the skilled occupation list an option – does the role you require fall into this list?
- Does the salary offered match the going rate for the role?
Carrying out this exercise will help you prepare and manage your recruitment process. If the role or salary requirements do not meet the immigration points required, then that would be the basis of any rejection — rather than the individual’s immigration status.
Internal Processes and Training
- Make sure everyone is aware that the resident labour market test no longer applies and that applicants should not be rejected based on their immigration status.
- Do not state in any job vacancy or advertisement that you do not have a sponsorship licence.
- Consider applying for a sponsor licence if you are likely to be recruiting a skilled worker — it is currently taking around 8 weeks for the licence to be processed. This prevents a delay later.
- Don’t introduce a recruitment policy confirming you only accept applications subject to immigration status and/or from those who do not require sponsorship.
- Avoid decisions being made based on costs only (further details below).
What if you do not want to be a sponsor?
In a nutshell, if you operate in any way that could place any nationality at a disadvantage, for example, not wanting to incur the costs of sponsoring a worker, or not wanting a sponsor licence, you will have to justify that decision by:
- being clear on what your legitimate aim is — i.e. what is your real business need; and
- ensuring that how you achieve that aim is proportionate — i.e. it is reasonably necessary in order to achieve that aim?
Is the cost of sponsorship the only reason for not offering a role to a potential candidate? If so, then you are not going to be able to successfully defend a race discrimination claim. Rather than saying that “it’s too expensive to sponsor a worker” explore other considerations – to do that you need to know what they are.
For example, it may be that in relation to the administrative, compliance and/or general obligations that go with sponsorship, you just don’t have the resources or expertise to manage that confidently.
The courts recognise and understand that most business decisions have regard to costs, so something cost-driven but not solely cost-based is capable of justification. If not purely cost-based, you do have to be clear on grounds you rely on for not offering the role and be able to demonstrate that your cost-driven approach is proportionate.
Do you have a genuine vacancy?
Though there is no longer a requirement to carry out a resident labour market test, you must still have a genuine vacancy – any role advertised must be genuine, meet the relevant skills threshold and salary requirement.
The best starting point to determine whether an applicant meets the required skills threshold is to consider the vacant role on the Government’s skilled occupation list. The role must not be fake, a sham or created so that an applicant can apply for a visa.
If a vacancy is not capable of being plotted under a relevant job code on the skilled occupation list, there may be a temptation to try and “fit” it under a different job code on the list. If you can genuinely consider, and demonstrate, that the role matches the relevant job code on the list, that should be fine. However, any attempt to make an application for a role that does not fulfil the relevant skill threshold, then you will likely encounter problems with your skilled worker visa/sponsorship application such as:
- the application being rejected;
- the application being accepted in error but later investigated, subject to a compliance visit and/or the application being rejected at a later date;
- the Home Office could consider your application misleading, which could result in:
- a fine
- a downgrading of the sponsor licence
- being on under more scrutiny i.e. on the Home Office radar re all future applications.
You will need to ensure that you understand the requirements of the vacant role and how that may or may not correspond with the relevant job code on the skilled occupation list.
The removal of the resident labour market test gives considerations that need to be factored into the business recruitment and decision-making process, posing real issues for the business which cannot be ignored.
We have seen many changes recently in the world of business immigration law and no doubt will continue to do so, therefore it is essential to ensure you and/or your recruitment team are up to date on the new visas, the points-based system and are clear how to avoid potential discriminatory practices.
If you find you and/or your team isn’t quite as up to speed as you thought, then equality and diversity training and/or training around the visa points-based system may be helpful and we will always be happy to assist.
What is the Skilled Worker Sponsor Licence?
As one of several routes designed to allow UK employers to recruit talent from overseas, it is the main route to long-term employment. Once granted a licence, the organisation is permitted to recruit and sponsor potentially any number of non-UK nationals under the route.
Before applying for the licence, the business must be able to show that:
- It is a legally operating UK organisation;
- There is a genuine need for a Skilled Worker Sponsor Licence; and
- The organisation understands fully its duties and responsibilities as a sponsor with the appropriate HR systems and processes in place.
The organisation must show a real need for a Sponsor Licence by submitting either evidence that there is a genuine vacancy, a potential suitable candidate requiring sponsorship, or evidence of the organisation’s likely future need to recruit individuals to jobs that meet the Skilled Worker criteria.
Under the scheme, sponsorship will be possible as long as the job that they will be doing is sufficiently skilled to Regulated Qualifications Framework (RQF) Level 3 and they are paid a sufficient salary, at least £10.10 per hour, and £20,480 annually (but dependent upon the type of job being carried out).
In addition, the applicant must be able to show that they have a certain level of proficiency in the English Language.
If you are interested in finding out more about the Skilled Worker Sponsor licence, click here to speak to Partner Emma Peacock.
What is the High Potential Individual Visa?
Launched on 30 May 2022, the new High Potential Individual (“HPI”) visa route is one of several other routes of entry opened this year.
Recent graduates of top overseas universities who want to work or look for work in the UK following completion of their degree are encouraged to utilise this visa. It is designed to attract the “brightest and the best” to the UK.
Applicants must have successfully passed a bachelor’s degree or above from a recognised leading university in the last five years. (Separate lists exist for each of the last 5 academic years, enabling applicants to determine whether their university qualified at the time they graduated).
Employers do not need to sponsor the candidate under this route; the individual must make their own visa application which will include supporting themselves financially and the usual English Language requirement.
Successful applicants will be able to come to the UK for two years (with a bachelor’s degree) or three years (with a PhD) and work in any role. Unfortunately, this route cannot be extended and does not lead to settlement, although it may be possible to switch into another visa route, prior to expiry of the term.
If you are interested in finding out more about the High Potential Individual visa, click here to speak to Partner Emma Peacock.
To read other articles in this series, click on the links below:
What is the Global Business Mobility visa?
Introduced in April 2022, this route provides various ways for an overseas business to operate in the UK with 5 categories which include:
- Senior or Specialist Worker – for a senior overseas manager or specialist employee, located outside the UK undertaking temporary work assignments in the UK business linked to their employer overseas. Particularly useful where an applicant cannot meet the English Language requirements for a Skilled Worker application.
- UK Expansion Worker visa – allowing an individual to come to the UK to set up a branch of an overseas business, as either a senior manager or a specialist employee.
- Secondment Worker visa – a new route for overseas workers being seconded to the UK as part of a high value contract (at least £10m per annum and at least £50m overall) by their overseas employer.
- Graduate Trainee visa – (previously the ICT Graduate Trainee visa category) – allowing staff working at a connected group company on a graduate scheme to come to the UK as part of their training/graduate placement, with a view to them taking up a senior management or specialist position outside the UK.
- Service Supplier visa – for overseas workers who are either contractual service suppliers employed by an overseas service provider, or a self-employed independent professional and providing services covered by one of the UK’s international trade agreements.
In all cases, the business needs to apply for the sponsor licence and meet strict compliance and audit responsibilities in the usual way.
None of the routes lead to settlement and if this is being contemplated, then longer term options such as the Skilled Worker sponsor application should be considered.
To find out more about Global Business Mobility visas, click here to speak to Immigration Partner Emma Peacock.
For other articles in the series, click here to read:
Understanding the new Scale-Up Visa
A new Scale-Up Visa route will open to applications on 22 August 2022. A new route to entry, this is aimed at individuals with talent, a high level of qualification and skill.
For employers who are registered sponsors and experiencing rapid growth (needing to “scale up”), this route is designed to make the process of sponsoring visas quicker and easier.
Sponsored Scale-up visa applicants must have a valid Certificate of Sponsorship from an A-rated Scale-up sponsor have the specialist skills required to continued growth of the Scale-Up business and authorised by the Home Office to sponsor the job in question under the Scale-up route.
To qualify as a Scale-up, a sponsor will need to show:
- annualised growth in either turnover or staffing of at least 20% for the previous three-year period and
- a minimum of 10 employees at the start of the period.
Much of the flexibility of this new route is that unlike other immigration routes, a sponsoring employer need only confirm that an applicant is expected to work for them for at least the first six months of their visa.
The job for which the applicant is sponsored must be (amongst other things):
- a minimum skill level of RQF Level 6 (graduate level) (on a list published by the Home Office of jobs with their occupation codes and salary ‘going rates; and
- a salary threshold of at least £33,000 per annum (higher than a Skilled Worker’s £25,600), the ‘going-rate’ for the sponsored job and at least £10.58 per hour; and
- applicants must meet an English language and finance requirement.
Under this flexible immigration route, a second stage exists during which Scale-up Workers no longer require sponsorship. If applying after two years under the Scale-up visa, a worker would need to show that they had sufficient PAYE earnings for at least 12 months during those initial two years, in addition to a Scale-up Worker’s English language and finance requirements which at this stage are likely to be met automatically.
Provided these criteria are met, the visa application process would then be fast-tracked by the Home Office.
This is a route which could lead to settlement after five years, and applicants could bring dependent family-members. However, the individual would only need to be sponsored for the first six months, meaning that a sponsored employee would have more freedom to leave the employer and work elsewhere.
Employers utilising this route may therefore wish to consider other retention mechanisms, such as bonuses, restrictive covenants or repayment of visa fees on leaving.
If you are interested in finding out more about the new Scale-Up visa, click here to speak to Solicitor and Partner, Emma Peacock.
Read the second article in the series, Global Business Mobility visa by clicking here.
And the third, here: What is the High Potential Individual visa?