Borderless business

The legal market never stands still, and this feels truer today than ever. In February 2024, an article by Legal Futures said the UK legal services market was anticipated to reach a turnover of £53.5bn in 2025. This was based on IRN’s annual UK Legal Services Market Report, and comes as little surprise because it represents the continued upward trajectory of the market over the last few years.

However, just as interesting was Thomson Reuters’ 2024 Report on the State of the UK Legal Market and its comments on spend and anticipated growth from cross-border legal work. It reported that the net spend anticipation for cross-border legal work in 2023 for UK clients was double that of the domestic figure, and that traditionally international spend holds up well against domestic demand.

The report said that most UK-based clients (79%) have international legal needs, and they allocate between 30% and 40% of their legal budget to international work. It also said that international spend was not confined to just one or two countries, with smaller businesses requiring assistance in an average of 13 countries, with this rising to 51 for the largest clients.

In addition, the UK continues to be a global centre for international trade and finance. This is reflected in the amount of cross-border legal work UK-based law firms can expect, both from UK-based clients and those abroad. This was reinforced in the Law Society’s 2024 report, The economic contribution of legal services. It said data from the Office of National Statistics (ONS) showed that in 2021 the UK exported £6.5bn in legal services.

Increasing globalisation and cross-border business activities in the legal market place a spotlight on the regulatory requirements for law firms and individuals when engaging in overseas and cross-border activities.

SRA Overseas and Cross-border Practice Rules

Part A, the SRA Overseas Rules, contains a modified version of the SRA Principles, together with key standards relating to client money and assets, and information and reporting requirements.

In summary, they apply to regulated individuals (as defined in the SRA Glossary) who are established overseas to provide legal services permanently in those jurisdictions. They also apply to the branch offices and subsidiary companies of an authorised body that are established outside of England and Wales, and which provide legal services (although they also apply in several other specific circumstances).

However, the focus of this article is on the less well-known SRA Cross-border Practice Rules (Part B). These are more subtle than the Overseas Rules and can apply regardless of any physical presence in the relevant country.

Who’s affected by the Cross-border Practice Rules?

These rules apply to European cross-border practice from any office by solicitors, authorised bodies and their managers (who are not authorised by an approved regulator (other than the SRA)). They also apply to European cross-border practice from an office in England and Wales by registered European lawyers (RELs), Swiss lawyers registered in the register of Swiss lawyers (RSLs) who are employees of an authorised body, and registered foreign lawyers (RFLs) who are managers or employees of an authorised body.

It’s interesting to note that owners of authorised bodies are not directly caught by the Cross-border Practice Rules, unlike the position in the Overseas Rules. However, and with that said, authorised bodies are required to have in place appropriate systems and controls to ensure that interest holders (that is, owners) do not cause or substantially contribute to a breach of the SRA’s regulatory arrangements by the firm.

The same can be said for employees of authorised bodies who are not solicitors, RELs, RFLs or RSLs. While they are not directly caught by the Cross-border Practice Rules, the firm is required to put in place appropriate systems and controls to ensure its employees do not place it in breach of its regulatory obligations.

It’s also important to remember that the SRA can take enforcement action against employees (whether solicitors or not) who are responsible for a breach of the SRA Code of Conduct for Firms. In the context of employees, if they fail to comply with the Cross-border Practice Rules then they will likely place the firm in breach of paragraph 3.1 of the Firms Code (which requires the firm to follow the law and regulations governing the way it works).

What is European cross-border practice?

European cross-border practice (ECBP) is defined by the SRA as follows:

“a)professional activity regulated by the SRA in a state whose legal profession is a full, an associate or an observer member of the Council of Bars and Law Societies of Europe (CCBE state) other than the UK, whether or not you are physically present in that CCBE state; and

b) any professional contact regulated by the SRA with a lawyer of a CCBE state other than the UK,

excluding professional contacts and professional activities taking place within a firm or in-house legal department.”

The SRA’s definition can be read as suggesting that both (a) and (b) must be met for there to be ECBP. However, it’s more likely that the correct interpretation is that only one of these needs to be met for there to be ECBP. There only needs to be a professional activity regulated by the SRA in a CCBE state, or a professional contact regulated by the SRA with a lawyer of a CCBE state (other than the UK).

Support for this can be found in the Council of the Bars and Law Societies of Europe’s Code of Conduct for European Lawyers (CCBE Code): see tinyurl.com/5bn7bxwr. The corresponding definition of ECBP in the CCBE Code does not contain an “and” at the end of “professional activity” (unlike the SRA’s definition). In addition, the examples of ECBP in the CCBE Code (as set out below) do not suggest that there must be both a professional activity and a professional contact for there to be ECBP:

“The definition of cross-border activities would, for example, include contacts in state A even on a matter of law internal to state A between a lawyer of state A and a lawyer of state B; it would exclude contacts between lawyers of state A in state A of a matter arising in state B, provided that none of their professional activities takes place in state B; it would include any activities of lawyers of state A in state B, even if only in the form of communications sent from state A to state B.”

The 1999 Guide to Professional Conduct also separated out relations with clients (professional activities) and relations between lawyers (being professional contacts) when addressing ECBP.

Meaning of “professional activity” and “professional contact”

In terms of professional activity regulated by the SRA, this includes all legal services that the firm provides and is not limited to reserved work. For multi-disciplinary practices, the Cross-border Practice Rules should only apply to the regulated parts of the business.

Professional contact regulated by the SRA includes emails, letters and phone calls. While the examples in the CCBE Code detail what will amount to ECBP, these do not provide any indication as to the types of “contact” that may fall outside of the Cross-border Practice Rules.

Examples of ECBP may include the following:

• An authorised body advising on an arbitration in Germany under English law.
• A solicitor in the UK instructing an avocat in France to provide legal advice on behalf of their client.
• An RFL providing advice to clients in Belgium, on Belgian law, from an office in England and Wales (if the RFL is a manager or employee of an authorised body).
• A solicitor providing advice on a matter of English law to someone who resides in Malta.
• A professional contact in England and Wales between a solicitor and a Swedish lawyer (an advokat) on a point of law.

It’s important to remember that professional contacts and professional activities taking place within a firm or in-house legal department are excluded. For example, if a solicitor in the UK contacted a colleague in Norway (which is a CCBE state) for legal advice on a matter, then provided they were both part of the same firm, this would not amount to ECBP.

The SRA Glossary does not define “firm”, so there may be practical implications to consider here in terms of whether this exclusion applies where a business provides legal services in different jurisdictions through separately constituted and regulated legal entities.

A list of CCBE states can be found here: tinyurl.com/3b73hc2f.

What are the “applicable provisions”?

If engaged in ECBP, then the SRA requires the firm and (if they are a solicitor, manager, REL, RFL or RSL) the individual to comply with the applicable provisions of the CCBE Code. The Code was first adopted by the CCBE in 1988 and has been amended several times since.

The SRA has not issued any recent guidance on what the “applicable provisions” are. Therefore, and to determine these, it’s necessary to go back to the SRA Cross-border Practice Rules 2011. These earlier rules set out the provisions of the CCBE Code that must be complied with when engaged in ECBP. Subject to any further guidance from the SRA, the “applicable provisions” appear to be those identified in the 2011 Rules.

In this analysis, and by way of example, the applicable provisions include the following.

Payment of referral fees to non-lawyers: the provisions in the CCBE Code about payment of referral fees are much more restrictive than those contained in the SRA Code for Solicitors, RELs, RFLs and RSLs and the SRA Firms Code. Under the SRA codes, it’s possible for referral fees to be paid provided clients are informed, and they do not relate to criminal proceedings. However, if engaged in ECBP, there is a complete prohibition on paying referral fees under the CCBE Code (although this is approached slightly differently in the SRA Cross-border Practice Rules 2011, which limits the restriction on paying referral fees to non-lawyers only). The prohibition on referral fees is therefore much more restrictive when engaged in ECBP.

Incompatible occupations: CCBE states have different rules on the extent to which lawyers are permitted to engage in other occupations, for example in commercial activities. If engaged in legal proceedings or proceedings before public authorities in a CCBE state (other than the UK), then the firm and the relevant solicitor, manager, REL, RFL or RSL (as the case may be) must comply with any rules regarding those incompatible occupations as if they were a lawyer of that state. It’s therefore important that any such restrictions are ascertained before the relevant person engages in ECBP if this consists of legal proceedings or proceedings before public authorities.

Fees of lawyers of other CCBE states: the default position under the CCBE Code is that if a firm or an individual solicitor, manager, REL, RFL or RSL instructs a foreign lawyer (and this is ECBP), then they are bound to pay their fees and costs (irrespective of whether the client puts them in funds to do so). This is the case unless this provision is excluded or limited either at the outset or subsequently. Therefore, as a matter of course, consideration should be given to excluding this when engaging lawyers of other CCBE states.

The SRA Cross-border Practice Rules 2011 state that this provision will not apply in certain situations – for example, if the lawyer instructed is an REL, or is an RFL and is based in England and Wales and is practising in an authorised body. While these rules are no longer in force, they do provide a strong indication of the SRA’s approach to (and interpretation of) the relevant provisions of the CCBE Code. Although the 2011 Rules do not refer to RSLs (as the term didn’t exist at the time), it’s likely that the same approach would apply to them.

Correspondence between lawyers in different CCBE states: if sending correspondence that is to remain confidential or is without prejudice, then additional steps must be taken when engaged in ECBP to ensure that the lawyer can accept the correspondence on this basis and understands what it means.

The CCBE Code contains numerous rules in addition to the “applicable provisions”. However, the general position, according to the SRA, appears to be that provided you comply with the SRA Firms Code and the Code for Solicitors, RELs, RFLs and RSLs, then you will be complying with the requirements of those other rules.

Summary

Given the increasing demand for cross-border legal advice and the market that this represents for the UK legal sector, it’s important that the Cross-border Practice Rules are understood and considered by solicitors, firms and their employees. It’s far too easy to become involved in ECBP without necessarily appreciating the requirements in the CCBE Code that must be complied with.

Firms should therefore ensure that ECBP is appropriately considered and addressed in their policies, including those that deal with appointing external counsel and legal experts and referrals of work. The rules around ECBP should be considered whenever legal services will be provided in a CCBE state and also in the context of secondments (as a firm may be asked to secondee a solicitor to an international client where the work undertaken could amount to ECBP).

For those firms who undertake international work through a network of ‘best friend firms’ then the requirements of these rules should be considered when establishing their arrangements with these firms.

In short, whenever there’s a European element to the work being undertaken, this should trigger consideration of whether the Cross-border Practice Rules may apply.