In 2010, in the depths of the economic crisis, Dublin’s standing as a global financial centre had hit the floor. Private groups lobbied the now-defunct Department of the Taoiseach’s IFSC Clearing House Group to appoint a high-profile figure with a contacts book that could open doors to potential global investors.

The role of IFSC czar was born. The former Taoiseach and EU ambassador to the United States, John Bruton, was hired to travel from Hong Kong to the Gulf to find out what policy and legislative changes were needed to put Dublin on the financial services map.

A decade on, Bruton has been asked to do it all over again. Only this time, the crisis is Brexit and he is acting as an envoy of the legal profession. He has been appointed Chair of the private-public Brexit Legal Services Implementation Group, an initiative driven by representative bodies the Law Society of Ireland and the Bar of Ireland.  

A spokesperson for the Law Society told The Currency: “It is being jointly funded by the Law Society of Ireland and the Bar of Ireland on a 2:1 basis, with an expected cost of approximately €67,000 to the Law Society. “

Big blue-chip law firms like Matheson and McCann Fitzgerald have also played a key role in supporting the scheme, which aims to capitalise on the UK’s departure from the European Union by offering Ireland as an alternative venue to write, arbitrate and litigate contracts.

The spoils are potentially huge. The legal services sector in the UK is the second-largest legal market in the world after the United States, employing around 340,000 people and contributing at least £25 billion to the economy annually. It is a great UK success story that is a testament to London’s preeminence as a global trading hub. 

Turbulence and uncertainty

But there has been Brexit turbulence. In 2018, New York stole London’s crown as the world’s top financial centre, according to the twice-yearly index compiled by consultancy Z/Yen.

London is still number two in the global rankings but it is fighting off stiff competition from Paris, Hong Kong and Shanghai.

Cities like Frankfurt, Dublin and Paris have all benefited from the uncertainty as businesses have chosen to locate their European headquarters inside EU member countries for passporting purposes.

Given the symbiotic relationship between finance and professional services, London’s decline has important repercussions for the legal sector. English common law is the preferred choice for international financial contracts, even for parties based in EU countries with civil law systems. With the UK’s withdrawal from the EU, Ireland will be the only remaining common law jurisdiction inside the union while English court decisions would no longer be automatically recognized and enforced across the EU and European Economic Area (EEA). 

The aim is to slice off a substantial piece of the Brexit legal pie by persuading big business that this, and other competitive advantages, make Dublin a prêt-à-porter successor to London. The idea is to play to existing strengths.

Areas of commerce where Ireland is being championed as a viable legal alternative to London include funds and derivatives, corporate bonds, aviation and technology.  For example, 2018 saw the introduction of a new International Swaps and Derivatives Association (ISDA) Irish law master agreement adding to the existing suite of English, New York and Japanese law choices.  This positions Ireland as a player in the trillion-dollar derivatives market. Standardised ISDA agreements underpin most derivatives contracts used by businesses that have to hedge and manage risks.

The US is target number one. And what better time than St Patrick’s Day in America to push the message that Ireland is open for legal business.

The rewards of a Brexit legal dividend are potentially huge. But what Bruton’s group is trying to do is still a big ask and time is of the essence.

While the UK formally left the European Union at the end of January, it remains within the single market and customs union until the end of the year, when the transition phase ends.

Nor is it an open goal. Despite having a continental legal system, Paris is offering a bespoke common law dispute resolution product for banks and businesses post-Brexit.

Welcome to the Four Courts

I met up with Bruton in the Merrion Hotel in Dublin to discuss the challenges ahead.

We started by talking about the Brexit law initiative, which is funded by lawyers but has input from senior officials in the IDA, and the Departments of the Taoiseach; Justice and Equality; Finance and Public Expenditure and Reform; Foreign Affairs and Trade; and Business, Enterprise and Innovation. 

Bruton explained that he was asked to chair the group by Justice Minister Charlie Flanagan, and that the group has met twice since its launch last October. 

John Bruton (JB): I was more than willing to take this on. It seems to me to be a very worthwhile initiative, making a case on behalf of Ireland that would ultimately lead to more economic activity, more services exports from Ireland, in the medium to long term.

Francesca Comyn (FC): The mission has been spoken of in quite grandiose terms of Ireland being a post-Brexit legal hub. Do you think that can really happen?

JB: First of all, the two big advantages that Ireland has, in this respect, are that we are a common law country and a lot of the investors in Europe are people who write contracts, international contracts, write them in London and are interested in doing that sort of business in a common law country. But also, I think they’re interested in having the advantage of being in the European Union because the two legal orders sort of complement one another. 

“My years of political experience teaches me that it’s pointless offering numbers of jobs or anything like that. Those sort of numbers mean next to nothing.”

John Bruton

So being in both the European Union, which is an important economic area, and being in a common-law country, which has the merit of familiarity for people who are used to doing business in the United States, or Canada or Australia (common law jurisdictions), Ireland now is the only place where you can combine those two advantageous characteristics. 

In addition to that, we have developed I think, in the last 10 to 15 years, a very effective Commercial Court. The judges involved have proved their worth in expeditious and well-informed decision-making. So that’s another merit. 

FC: How will you make this come about?

JB: I don’t think it’s going to come about overnight. I think it’s more likely that what will happen will be if we can persuade, for example, the legal counsels of major corporations to consider having original contracts between them and the legal counsels of other corporations written in Ireland or subject to Irish law, there will be some initial benefit from that, but nothing stupendous. What would be very significant, I think, is if this contract had to be arbitrated or was disputed subsequently, it would obviously be disputed in the Irish courts, which would bring business into the Irish courts’ system. And that could be very significant in the medium to long term.

FC: How do you go about getting that message out?

JB: By constant repetition. It’s getting it into the minds of very busy legal counsel in the major corporations, who might not think of Ireland in this context. They might think of Ireland in some literary or musical context rather than as a place in which you might do legal business. It’s about getting them to be aware of the benefits and synergies that Ireland provides. I think it would be principally through attendance at conferences, the making of presentations at conferences. In some instances, perhaps having a stand at conferences where the relevant people are going to gather – lawyers who do international business of any kind, but I think more particularly legal counsel who are themselves lawyers in-house in corporations or indeed those assisting wealthy individuals.

FC: What, realistically, are the growth opportunities involved?

JB: I can’t give you a figure. I mean, I think it’s almost a futile exercise to be putting numbers on things like this when we haven’t really fully researched the market, because the possibility only arose a month ago when Britain definitively left the European Union. 

My years of political experience teaches me that it’s pointless offering numbers of jobs or anything like that. Those sort of numbers mean next to nothing, I think there is a clear case to be made, a good case to be made, on behalf of Ireland as a venue for the writing of contracts and the resolution of legal issues. It’s our job to make the case. And it’s not something that’s adverse to anybody else. It is an opportunity not of our making. But it’s an opportunity nonetheless.

FC: What other countries are you competing against? France was promising a post-Brexit common law court.

JB: I think there are a number of other countries who are competing as well. France is one. Yes, they’re offering that. But I mean, their legal tradition isn’t that of the common law, whereas the Irish legal profession would have a deep history in the common law.

A reforming agenda

FC: Let’s look at some of the disadvantages the Irish system has to face up to. Does Ireland have the legal resources to meet litigation demand, for example, in the Commercial Court where the caseload is getting lighter but the cases appear to be lasting longer? They’re no longer just debt cases, substance wise they’re meatier.

“What I learned from that experience and from my previous experience in political life, is that government in a modern country consists of a whole lot of silos.”

John Bruton

JB: Well, obviously the efficacy of the legal system is critical. And the modernity of Irish legislation as well. Is legislation being kept up to date in areas which could be critical in terms of getting added business, added value created in Ireland? That’s one of the merits of the format of the group which I’m chairing, and that is that it has all of the various departments that could influence the legal climate in Ireland, the Departments of Justice, Business, Enterprise, the ones who are promoting legislation. This creates a forum where everybody is present at the table and if, for instance, one of the branches of the legal profession, or both, are feeling that they’re able to make progress but there are one or two things that need to be sorted out on the legislative side, there’s a venue in this group for that to be discussed and for people to hear one another’s concerns. Nothing of that nature has arisen so far. 

****

It seems likely that issues will arise. Last summer, Attorney General Seamus Woulfe noted that if Dublin was to be offered as an alternative to London as a new forum for international disputes “we have to increase the efficiencies in our own system and we have to put greater resources into the system, including more judges, more back-up resources and, in general, improve and modernise our system.”

Earlier this week, the Bar Council was tweeting comments made by Chief Justice Frank Clarke that Ireland has the lowest number of judges of 47 countries at 3.4 per 100,000 inhabitants, impacting on efficiencies in the system.

Will the implementation group sway policy?

In terms of membership composition and potential impact, Bruton likens the Brexit legal body to the disbanded IFSC Clearing House Group (CHG), the secretive public-private body set up in 1987 to promote financial services in Ireland. 

Early members included financier Dermot Desmond, then managing director of NCB; and Mark Hely Hutchinson, then chief executive of Bank of Ireland.

While the CHG was deemed successful in its remit, documents released in 2013 raised significant concerns about the extent to which private interests in the group were influencing public policy behind closed doors in key areas such as taxation.

However, Bruton sees positives in the format.

JB: There was the Clearing House Group. I wasn’t on the Clearing House Group but the Clearing House Group was there, chaired by the Department of the Taoiseach at the time. This was a way which I think proved to be very effective in ensuring that the IDA was being listened to by the Department of Finance, that each department was listening to one another and that private interests were also getting a hearing to ensure that we succeeded in what we were doing. 

Very substantial numbers of jobs were both created and preserved in Ireland. I think this group, which I chair, will have as a subsidiary advantage, the fact that it will provide a similar forum, but that’s not our principal goal. Our principal goal is in information and promotion.

While Bruton was never a member of the Clearing House Group, he was chair of  IFSC Ireland, a private body aimed at promoting Ireland’s financial services sector. I ask him what he took from that experience

JB: What I learned from that experience, and from my previous experience in political life, is that government in a modern country consists of a whole lot of silos. We frequently don’t talk to one another, don’t hear one another, and don’t have an opportunity to interact. And it’s not until you sort of set yourself a goal and bring all the various silos together, it’s only then that you can make serious progress. And I think that was done with respect to financial services. It has been done in other areas. I hope it’s now being done in respect of legal services.

FC: Do we need more investment in the courts for this push to work? 

JB: I’m not going to take a position on that, at least not in public anyway. I mean, because my role is to act as a chair of the group. Certainly, there’d be legal people saying that.  I’m not going to agree or disagree. However, I will hopefully, provide a forum whereby they can make their case and their case can be heard by those who need to hear it.

FC: Is the IDA playing a crucial role in this?

JB: The IDA are already working in this area. The IDA already have plenty of knowledge of the international legal environment because they’re dealing with these companies and obviously we want to draw on the knowledge of all the legal counsel of companies already residents. 

FC: Tech for example?

JB: Yes. But apart from even the ones that have invested heavily, there are some who have an Irish domicile deliberately for other purposes, all of those people who are familiar with the Irish legal setup can be both advocates of the case we’re wanting to make, but also can be very good advisors of governments and local legal firms on things that could be improved.

Clearly he’s talking about the €3 billion in Irish-domiciled funds, a key target area of the Brexit law initiative. Bruton tells The Currency that he has yet to speak with any general counsel to date on the draws and drawbacks of Ireland as a legal hub. But it is in prospect in the imminent future.

Sticking to the sidelines

FC: What about the effect of the political situation? It looks like it’s going to be a while before we have any government formation. 

JB: I don’t think it will have any effect really, because the courts are going to continue to function. The law is going to remain the law and Ireland is still in the EU and you know the economic situation is good.

FC: Sinn Féin have had a chequered relationship with the EU. Would you have any concerns Sinn Féin in government would have an impact on our relations in Europe?

JB: I don’t think so. Sinn Féin at this stage accepts the EU. I think what’s more likely to be an influencer is the way the Brexit negotiations turn out.

It seems to me that Britain is setting itself up for major conflicts with the European Union, their insistence that very complex negotiations should all be concluded effectively by next October and they’re casting doubt even on their adherence to the withdrawal agreement protocol in respect of Northern Ireland which requires there to be, potentially, border controls ready from the end of this year, between the island of Britain and Northern Ireland. They seem to be resiling from that, which is something that they legally agreed to, legally committed to in an international treaty. 

Those signs suggest that we could be facing a very, very, very turbulent year. My own personal view is that 2020 is going to be a far more difficult year in terms of Ireland, EU, UK relations than any previous year because we’re now getting down to brass tacks. We’re getting down to areas where there could be conflicting economic interests, not just between the EU and the UK, but within the EU. We know France will have different priorities to Spain, Spain will have different priorities to Germany, all of them may have different priorities to Ireland.

FC: And from Ireland’s perspective, who would be the best team?

JB: I’m not going to get into that.

FC: You said before the election we need an experienced team.

JB: My role, in this connection, is to be non-political. 

FC: You spoke for Helen McEntee I mean, it’s on your website. 

The website johnbruton.com has the transcript of a speech he delivered in support of the re-election of McEntee, the Minister for State of European Affairs. The speech, entitled Avoiding a Bad Brexit for Ireland is not a Task for Ministerial Novices, was delivered at the Headfort Arms in Kells, Co Meath on January 30.

JB: Oh yeah. I’m a member of Fine Gael and I canvassed in the election, I’m not denying that. But in my dealings with this issue, I want to be completely neutral with all political parties. 

FC: Do you think a Fine Gael-Fianna Fáil coalition is going to happen?

JB: I’m not going to be drawn. You can try as much as you like.

(Pauses) I think I will say this much, that the members of the Dáil who have been elected have an immensely difficult task. And I think it behoves everybody to be as supportive as we can of all of them and not to be shouting from the sidelines.

FC: You had to make a difficult coalition yourself.

JB: I did.

FC: Is bravery important at this time?

JB: Let the people in Leinster House talk to one another in whatever way and whatever format…

FC: You had to be brave.

JB: No you’re drawing me into territory where I’m really not willing to go.

FDI and the OECD

We move on to the OECD Beps (Base erosion and profit shifting) tax reforms. Profit shifting refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thus “eroding” the “tax base” of the higher-tax jurisdictions.

FC: Would you consider Brexit the biggest risk to Ireland? We’ve obviously loads of other things going on in international terms such as the OECD Beps tax reforms.

JB: We have handled the OECD and the Beps issue very well. We have continued as a country to be very successful in attracting foreign direct investment. Part of the reason for that is Ireland has taken a long-term view about the development of our infrastructure. Project 2040 has impressed a lot of international investors. So here’s a governance system that is looking far ahead and providing for infrastructure. Broadband is obviously part of that. But physical infrastructure is very much part of it, as well as that capacity to take a long-term view, I think is a big strength for the country in attracting and continue to attract foreign direct investment.

While the first phase of Beps benefited Ireland by ending sandy beach tax havens, leading many companies to relocate assets here, I ask him if the current round of OECD reforms focusing on a minimum corporate tax rate and the digital economy will not be more problematic.

JB: I think these are things we have to face up to as they occur. But I think for Ireland, the important thing is to retain our impression of consistency in respect of the rate of corporate tax. We gave long-term commitments and we must adhere to them. The structure of taxation is obviously another matter, it’s not the same as the rate. But I was speaking to some companies that have invested in Ireland and looked at Ireland as a jurisdiction in which to locate entities they own. The reputation for consistency and long-term thinking is what has swayed them in favour of Ireland over and over again. We mustn’t lose that.

“I thought back to Dáil Eireann at that time, which I’d recently been elected to, and you could still see the era of Kevin Boland and Neil Blaney and, you know, there was quite an amount of confrontation on the old traditional 1922 grounds.”

John Bruton

FC: You don’t think things like the Apple tax case has damaged our reputation?

JB: All of that is going to be litigated… What exactly were the circumstances of the understanding that the Revenue gave. All that is going to be examined minutely.

FC: Yes but it’s a big talking point in the meantime. And that’s not always advantageous.

JB: In more than one way it’s a talking point, in a good way, in the sense that people are saying, well, Ireland is in the market for foreign direct investment. Its agencies aim to assist foreign direct investment in Ireland in a consistent way. That’s one way of looking at it.

Globally, he has concerns about developing tensions between the United States and China, in trade and technology and whether we are going to move from having a one-world economy to having two competing world economies – one centred around China and another centred around the United States. He believes the goal is a reinvigorated World Trade Organisation that can forge agreements, curbing China’s intellectual property infringements for example, that will steer the US away from contemplating an all-out trade war.

“Ireland as a member of the European Union has a capacity to influence that in a good way. and the European Union has been able to get agreements on the improvements of the WTO with the United States and with Japan, for example. And that’s – you know, that’s the way to go,” he says.

Bruton is clear that while the work of the implementation group is in the very early stages, US corporates are the Brexit law taskforce’s number one target. He will join the attorney general and an as-yet unnamed member of the Supreme Court for a St Patrick’s Day promotional event in New York. Meetings with legal counsel have been pencilled in.

Separately, judging by its website irelandforlaw.com, the implementation group appears to be targeting an Irish arbitration law event in London on March 27, where the guest speaker is High Court President Peter Kelly, who presided over the Commercial Court list for many years.

I ask Bruton about his five-year stint, from 2004 to 2009, as EU ambassador to Washington, and how that will serve him in his new role as legal services ambassador. 

JB: I suppose I have an inside track. What I was dealing with was mainly trade and regulatory issues on behalf of the European Union. I’m now working on behalf, if you like, of the legal, professional court system in Ireland. There will be some crossover between the two. But I wouldn’t want to exaggerate it. However, I am familiar with the United States. I know to the extent that any non-American can know how the United States works and hopefully that will help me.

Divisions

FC: It’s a different environment, now though, I suppose than when you were in office.

JB: The United States has become much more partisan, where everything is looked at through the prism of your position or your identity. Are you a Democrat? Are you a Republican? Are you liberal or conservative? People seem to only listen to people who fit into their category. There isn’t a sort of dialogue across the categories that there used to be.

I mean, I remember I first visited the United States in 1970, when I was a very, very young politician. And what really amazed me when I was there – I was at a state legislature in Sacramento, I was in Congress in the United States meeting and talking to people – was how little partisanship there was in 1970. The parties cooperated with one another. And I thought back to Dáil Eireann at that time, which I’d recently been elected to, and you could still see the era of Kevin Boland and Neil Blaney and, you know, there was quite an amount of confrontation on the old traditional 1922 grounds. That has now completely disappeared in Ireland.

“I want the negotiation with Britain to be a success but if it goes badly, ironically in the field of legal services that may create more opportunities for Ireland.”

John Bruton

Irish politics has become less partisan, most of the time, whereas in the United States it has become more partisan. There’s a sort of a sense in Ireland of a shared view of the common good. There isn’t a shared view of the common good in the United States.

The conversation winds its way back to divisions in Europe and the next phase of the Brexit negotiations on Britain’s future relationship with the EU, specifically its future economic relationship. (This interview took place before reports that Boris Johnson’s Brexit team were apparently ordered to come up with plans to “get around” the Northern Ireland protocol in the withdrawal agreement, which includes checks on goods and food going from Great Britain to Northern Ireland.)

JB: I think the Brexit negotiation, the trade negotiation, has the potential to be very divisive within the European Union because countries have different relationships and different views about how far the EU should integrate. In the Brexit negotiation, in trade negotiations, these issues are going to cease to be just theoretical, they are going to become very practical, involving hard currency losses and gains and that could be quite divisive in the European Union. I see in some of the things that Britain is doing, they may be trying to be provocative.

For example, casting doubt as to whether they will implement the withdrawal agreement provisions with regard to border controls. That’s suggesting that they’re going to walk back from the withdrawal agreement around the NI protocol creating uncertainty. Also, by setting what they must know is an impossibly tight date for the deadline.

I think the fundamental problem with the Brexit negotiation is that the EU and the UK are looking for very different things. The UK is looking for maximum freedom. The EU is looking for maximum certainty. And those are in incompatible.

The EU wants everything nailed down to know exactly what the base competition is going to be. The EU also is very keen to ensure that no country departing the European Union can get a better deal than a country that’s in the Union. The UK professes not to be interested in that but that’s a real factor. If the UK wants good relations with Europe, it has to understand that the European Union can only have good relations with the UK if the European Union itself stays together and stays strong.

FC: And that’s not necessarily in the UK’s interest?

JB: Well, it is in the UK’s interest, but for the short term, they think there’s an advantage in acting as if it wasn’t.

FC: Going back to your current role, some in the legal sector have expressed the view that London will retain its preeminence as an international law centre and the Brexit dividend may be marginal.

JB: But a lot depends on the negotiation. If the negotiation goes badly and there isn’t the level of cooperation between the EU and the UK and mutual recognition, firms could be forced into making choices. I hope that doesn’t happen because I want the negotiation with Britain to be a success, but if it goes badly, ironically in the field of legal services that may create more opportunities for Ireland. And we must be in a position to avail of those. I’d prefer there was no Brexit, and no need for a body like this, but there is Brexit so there is a need for it.

FC: With the UK due to leave the single market and customs union at the end of 2020, you don’t have loads of time.

JB: No. We want to mark our presence in the market while the issue is still in flux. By the end of the year, we will know exactly what form Brexit is going to take. And we want to ensure that we’ve already left our calling card in as many places as possible before that.