Lexpert Magazine

June 2018

Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.

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50 LEXPERT MAGAZINE | JUNE 2018 | BREXIT | done as a member of the EU. Hard exit or so? "At the moment, I think it's too close to call," says Peter Kir- by of Fasken Martineau DuMoulin LLP. Whether March 30, 2019, or Dec. 31, 2021, what happens to Canada the day the trade deal expires is the £64,0000 question. The EU is Canada's second largest trade and investment partner so the question is a serious one. A significant number of Cana- dian companies use the UK as their gate- way to the EU, some have UK divisions, operations or even hard assets there, or use a UK company in their supply chain for goods being sold in the EU. ey all stand to be affected by the what happen across the Atlantic. While Canada exports large amounts of minerals and metals to the UK, Brook- field Asset Management, for example, has an investment in London's Canary Wharf. CAE Inc., which makes simulators, has a UK division, Bombardier Inc. has Bombar- dier Aerospace, Belfast — with a European supply chain of 900 approved suppliers. Most of Canada's financial services com- panies have offices in London, some have separate UK units. e Canada Pension Plan Investment Board has infrastructure investments across the UK. Kirby sees some Canadian sectors be- ing much more affected than others. Fi- EU without tariffs, giving Canadian businesses access to the market of half a billion customers with a GDP of $22 trillion. While the EU will be smaller without the UK, Boscariol acknowl- edges, it will still consist of 27 countries and regardless of what happens with Brexit, Canadian businesses can still access them. But those that have been using the UK as their portal may need to change their strategy. "ey should be looking carefully at how they would access the EU mar- kets directly from Canada," he says. "e timing of CETA was wonderful in this instance because we've got the free trade agreement with the EU, but they still have to have a contingency plan in place. I think we can all hope that reasonable minds prevail here and it's not going to be the hard break every- one talks about. But I think companies have to be prepared in case it is." Boscariol and others have heard that Canadian and British trade officials have already been talking informally, laying the groundwork for an eventual bilateral deal. It has been reported that UK officials are also talking trade with the US. Britain's top export markets are Swit- zerland, Japan, Canada, Singapore and South Korea and, post-Brexit, the UK will want to ink deals that are easiest to seal "to show their other trading part- ners outside the EU that it's possible." ey have probably the closest relation- ship with Canada, he says, pointing to the shared history, culture and common law. "ey may want to do the same with the United States, which is a much bigger trad- ing partner for them, but with President Trump in power that could still be tricky. So I think Canada will be an attractive tar- get for the UK. We're a tenth of the size of the US and smaller than Japan and other EU countries. It's more of a symbolic thing, I think. e groundwork is there, there is the historical and cultural relationship and because we've had CETA negotiated, the connections are already very tight." But that doesn't mean a potential Can- ada-UK trade deal could be inked within a month or two of Britain exiting the EU. Boscariol sees it taking between one and three years of formal negotiations, best case nancial services, in particular, he says is a significant sector to worry about "because we don't know how important London is going to remain as a financial-services cen- tre. Should we be looking at Europe rather than the UK for access? at's one that will be very dependent on what the final rela- tionship with the EU looks like." Most if not all major Canadian financial institutions have a UK office. ose with- out a European office as well have already started looking at opening one, he says. "It would be negligent for any bank to be sit- ting in London and not making arrange- ments for the various possibilities. … We don't have armoured trucks going off to Europe yet but the banks are all definitely all talking about relocating staff." What's not clear, he says, is how large the displace- ment will be. As for manufacturers, he expects pos- sible "hiccups" for Canadian companies with UK suppliers who sell into the UK but predicts there will be workarounds, with the real issues being tariff negotiations slowing things down. Many trade lawyers agree workarounds all be agreed on. But the feeling is Cana- dian companies should be preparing now, and with the developments on the North American Free Trade Agreement sucking the air out of the room not everyone is giv- ing Brexit the attention they should. John Boscariol, head of the Internation- al Trade & Investment group at McCarthy Tétrault LLP, says his firm is pointing cli- ents who use the UK as a gateway into the EU to the Canada-European Union Com- prehensive Economic and Trade Agree- ment, or CETA, which was provisionally applied in September 2017. e Canada-EU trade deal allows over 98 per cent of Canadian goods to enter the JOHN BOSCARIOL > MCCARTHY TÉTRAULT LLP "They should be looking carefully at how they would access the EU markets directly from Canada. The timing of CETA was won- derful in this instance because we've got the free trade agreement with the EU, but they still have to have a contingency plan in place. I think we can all hope that reasonable minds prevail here and it's not going to be the hard break everyone talks about. But I think companies have to be prepared in case it is."

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