Brexit: implications for dispute resolution
The UK’s status as a Member State of the EU means it has been included within a framework for deciding jurisdiction in disputes, recognising judgments of other Member States (and having the judgments of its own courts recognised and enforced throughout the EU), service of proceedings and deciding the governing law of contracts and for tortious claims. When the UK leaves the EU, although the UK may not be able to (or choose to) remain part of that framework in its current form, there are a number of alternatives which should mean that UK courts and parties should not become isolated from the mutual recognition and common principles involved in disputes.
In the event of the Withdrawal Agreement being signed and ratified, the UK will effectively continue to be treated as a Member State during the transition period, so the reciprocal arrangements in respect of jurisdiction and recognition of judgments will continue during the transition period. Our Briefing Note “The Withdrawal Agreement: impact on civil jurisdiction and judicial cooperation” highlights those provisions in the draft Agreement which are particularly relevant to the recognition of English choice of law and court clauses, English judgments and the authority of the Court of Justice of the European Union.
In the event that a Withdrawal Agreement is not agreed or the Article 50 process is not extended prior to 29 March 2019 the UK will exit the European Union on 29 March 2019 with “no deal”. A No Deal Brexit will lead to the immediate loss of the reciprocal arrangements under the current regime, so will have an immediate impact upon the rules governing choice of law, the recognition of jurisdiction clauses and the enforcement of English court judgments. We outline the position in the event of a “no deal Brexit” in our Briefing Note “Jurisdiction and Governing Law after a No Deal Brexit – the state of play”. In summary:
- Choice of law clauses: The current position will be largely unaffected by Brexit (including in the event of a No Deal Brexit). Choice of law clauses are currently subject to the Rome I and Rome II Conventions, and these rules will be adopted as UK domestic law in broadly the same form following Brexit by means of the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (EU Exit) Regulations 2018. The principal increased risk post-Brexit is that courts of an EU27 state court may be more likely to apply certain mandatory provisions of local law regardless of the choice of English law, in particular where two or more parties to proceedings are based in the same EU27 state.
- Jurisdiction clauses:
- for the UK Courts, the UK Government has published statutory instruments to address the implications on a No Deal Brexit, the net effect of which is that:
- where there are ongoing proceedings on Exit Day to which Brussels Recast or the Lugano Convention applied immediately prior to Exit Day the relevant instrument will continue to apply to those proceedings
- where an exclusive jurisdiction clause was agreed between 1 October 2015 and Exit Day between parties resident in the EU and Mexico, Singapore or Montenegro the Hague Convention will apply
- where an exclusive jurisdiction clause is agreed at any time after Exit Day between a party resident in the UK and any other Hague Contracting State, the Hague Convention will apply
- otherwise, the UK courts will apply the common law to questions of jurisdiction and the enforcement of foreign judgments pursuant to a jurisdiction clause. This includes contracts containing an exclusive jurisdiction clause which were agreed between 1 October 2015 and Exit Day and to which Brussels Recast or the Lugano Convention applied, as the Hague Convention will not have retrospective effect where the EU regime previously applied.
- For EU27 state courts:
- the EU Commission issued a Notice to Stakeholders on 18 January 2019, setting out the legal repercussions to be considered in the event of a “no deal” Brexit, when the UK would become a “third country” and fall outside EU rules in the field of civil justice and private international law:
- where proceedings involving a UK domiciled party are pending prior to Exit Day in an EU27 state court, the relevant EU rules for international jurisdiction (being in most cases Brussels Recast) will continue to apply
- where proceedings are initiated after Exit Day, jurisdiction will instead be governed by local law in the relevant EU27 state unless the Hague Convention applies
- The Hague Convention will apply to an exclusive jurisdiction clause between a UK domiciled counterparty and an EU domiciled counterparty agreed on or after 1 April 2019.
Simmons & Simmons Disputes Aviator is our tool designed to enable you to understand what Brexit means for English jurisdiction and governing law clauses and the enforceability of English court judgments, and therefore to identify risks in your existing and future contracts, and respond to complex jurisdiction and governing law questions from internal stakeholders.
A key issue in Brexit planning is the extent to which English governing law and jurisdiction clauses will continue to be recognised by the remaining EU member states.
This seminar, Disputes in a Post-Brexit World, looks at the key practical issues and legal considerations that will help clients, and particularly those in the financial services sector, to plan a smooth transition for their organisation. It includes a demonstration of an online product we have developed that enables users to analyse factual scenarios within the framework of currently foreseeable post Brexit legislation to assess where risk may arise, and to identify relevant factors to consider, when advising businesses in relation to the enforceability of English jurisdiction and governing law clauses.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.