The UK last week voted in a referendum to withdraw from the European Union (EU), a move that sent shock waves and reverberated across the globe. Over 30 million people in the world’s fifth-biggest economy trooped to the polls, resulting in 52 percent choosing to Leave while 48 percent opting to Remain.

However, for the UK to exit the EU – dubbed “Brexit” – it first has to invoke an agreement called Article 50 of the Lisbon Treaty to start the formal legal process and grant the UK two years to negotiate its departure. However, Prime Minister David Cameron, who has announced that he will step down from his post in October, has so far refused to trigger Article 50, so it is unclear what the UK’s next steps are.  

All this turmoil has rocked international financial markets, causing global stocks to plunge in their largest decline in almost five years. In Asia, the markets were volatile in the immediate aftermath of Brexit, but a Reuters report noted that “Asian assets are likely to prove more resilient than others given the region's limited dependence on Europe.”

Amid all this uncertainty and instability, what is the legal industry in Asia doing to prepare itself and its clients for Brexit’s fallout? ALB speaks to lawyers to gain insights into what Brexit could mean for Asia’s businesses, economy and deal-flow. 

ALB: What is your firm’s immediate reaction to the Brexit vote announcement? What advice are you providing to clients at present? 

Jacky Scanlan-Dyas, corporate and commercial partner, Hogan Lovells: We have sent a note to all our clients explaining the journey that the UK is about to undertake and helping them to unravel the uncertainty that they are now facing.  We have held also a live webinar for clients to explain the issues and help them develop a positive strategy going forward. We also plan to have country- specific seminars in our offices so that we can tailor our advice to the needs of particular jurisdictions. 

Paul Landless, finance partner, Clifford Chance: We believe this outcome has serious implications for the City of London and many of our clients' businesses with exposure to the UK and the EU. We are working alongside our clients to help them as they anticipate, plan for, and manage the challenges the coming political and trade negotiations will bring. 

We have established a dedicated 24-hour rapid response unit. Led from London, our EU Referendum Operations Room connects a core team to specialist advice in the firm's offices in major financial centres across Europe, Asia Pacific and the Americas. The facility has been staffed since the opening of the polls and will be open for as long as necessary to ensure that we can quickly and effectively respond to the needs of our clients, wherever they are based. 

James Coiley, finance partner, Ashurst: The vote in favour of Brexit will have a profound effect on the City, the UK, the EU and the wider world for many years to come, and will undoubtedly give organisations cause to reconsider their business strategies, both in the UK and the EU. The uncertainty as to what a post-Brexit world would look like means that assessment of key legal and risk implications and forward planning for businesses may be challenging. The key priorities of organisations now will be dealing with volatile markets and addressing the immediate concerns of internal and external stakeholders.

In the longer term, Brexit has the potential to affect the strategy and footprint of many firms. Firms will need to fight their corner with legislators and regulators in a bid to ensure that they can continue to access markets in their current form. But failing that, they need to be prepared from now on to respond to events as they unfold through the political process. Our message to businesses is not to panic as the vote is only the first step to resolving the uncertainties relating to Brexit. There will be time for issues to be considered and resolved, and businesses to adapt to this new era. 

ALB: How do you think this will affect Asian corporates doing business in the UK and/or the EU?

Landless: Immediate uncertainty will make it difficult for Asian businesses – whether they are financial services firms or corporate – to figure out how best to operate or distribute their products and services in Europe and the UK. Some may be contemplating altering their business plans in some way, and we will be working closely with our clients to help them as they anticipate, plan and manage the challenges the coming political and trade negotiations will bring. 

Coiley: In terms of access to the UK, it would be inconsistent with the logic of the Brexit position to raise trade barriers with the rest of the world, including the EU. The position is less clear for any business which currently uses the UK as a point of access to European markets in reliance on an EU passport. Whilst we remain optimistic that a relationship will allow that access to continue, that position will be become clearer over time. 

Scanlan-Dyas: There is a great deal of concern amongst Asian corporates with interests in the UK as well as concerns that other countries will put up their EU membership for discussion in coming weeks and months. This will have an inevitable impact on how Asian corporates view doing business in the EU. The aftermath of this vote and its impact on Asian markets over the coming days remains to be seen, but we are already seeing a sharp market reaction and increased volatility, especially in Japan. From a legal perspective, it is important to stress that on Brexit occurring (which will not happen immediately), all existing UK trading arrangements with EU, European Free Trade Association (EFTA) and rest of world will lapse, unless replacements are agreed. So decisions will need to be made on which new trading arrangements to prioritise. We will help our Asia-based clients engage in this process early to ensure their priorities are heard. Needless to say, from an M&A perspective, deal activity is likely to be depressed as this uncertainty continues. 

ALB: What kind of long-term impact do you expect it to have on the Asian economy and the resulting deal-flow?

Coiley: Any market dislocation of this nature generates both challenges and opportunities for all concerned. That is true of law firms as well as other businesses. Winner and losers will become clear over time. 

Landless: It is too soon to say what the long-term impact will be because both the outcome of future political and trade negotiations and broader business response to them will not be known for some time.  

Scanlan-Dyas: In the long term, we expect M&A activity in Asia to increase. Asia is already an attractive destination for foreign investment, and increased instability in the UK and Europe is likely to have a positive effect on Asian inbound deal flows and the opposite effect in the UK and Europe.