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Frequently Asked Questions After Brexit – Dispute Resolution

Hunters’ Dispute Resolution Department is a team of leading Dispute Resolution lawyers based in central London. Lawyers in the dispute resolution law team provide an efficient, solution-focused service for a wide range of both private and commercial disputes. Much of our work concerns complex, high-value cross-border and multi-jurisdictional disputes for UK and overseas clients. Where appropriate, we act as lead or co-ordinating counsel in co-operation with an extensive international network of trusted legal and other professional advisers. Our team has achieved outstanding results for our clients, not only in the UK, but also throughout Europe and other international jurisdictions.

 

At present, London is one of the leading centres for international litigation and arbitration due to the following:

None of this has changed following Brexit. However, potential barriers to entry to EU markets and the freedom of movement for people may make our jurisdiction less popular for international litigation in the future.

At present, we are in a state of flux. The British Government is yet to invoke the Article 50 procedure that will trigger a two-year time window for the UK and EU to negotiate our exit.  The reality is that, for the time being at least, Brexit will have no immediate effect on a party’s ongoing litigation matters and this will remain the case until the UK has formally left the EU. Nobody knows for certain what this will mean for the country but we have a fair idea how Brexit will affect dispute resolution in the UK and, in particular, cross-border disputes involving other member states of the EU and EEA.

In due course however, the following issues will need be addressed: –

 

Q       Service of proceedings in Europe?

A       Today, a great many high court disputes involve an international element, be that where a party is located or where performance of a contract is to take place. Although, there are separate rules and procedures for dealing with service outside of the EU, the rules and procedures for jurisdiction and service within the EU (and when the English Courts can hear such proceedings) are enshrined in the Recast Brussels Regulation and the 2001 Brussels Regulation (together the “Brussels Regulations“) both of which are to be considered in conjunction with the EU Service Regulations (Regulation (EC) 1393/2007). The practical effect of these European procedural rules is the streamlining of the procedure for commencing proceedings in civil and commercial matters within the EU by the creation of a unified procedure without the need to seek the permission of the Court where the claim is first issued.

Although not an immediate issue, were the UK to formally exit Europe without agreeing to still be bound by the Regulations, the Regulations would no longer apply in relation to the UK, resulting in the process of service outside of the jurisdiction becoming a more costly and time consuming exercise with the permission of the English courts being required on each and every occasion.  Further, were the UK government forced to negotiate new service agreements with all of its EU neighbours this could, as a worst case scenario, result in us having different service rules for different countries thereby making these procedures even more complex and therefore more time consuming and costly.

Given that the courts generally have a zero tolerance policy regarding defaults in complying with the rules for service, claims can collapse before they have begun and therefore it is vitally important that such rules are clear and easy to follow. Accordingly, one hopes that our government will take a pragmatic approach to the Regulations failing which parties may need to specifically address this issue in their contracts (see below).

 

Q       Enforcement of judgments in Europe?

A       As with the service of proceedings, the Regulations also govern the enforcement of a judgment originating from one member state in another, which makes the procedure for enforcement within the EU a simple process. Again, if the Regulations cease to apply to the UK upon our formal exit from Europe, this would leave the position of enforceability of judgments by our courts in other EU member states uncertain.

This could lead to a drop in litigation in England and Wales if litigants are then confronted with lengthy and expensive satellite litigation against opponents based in other EU member states regarding the enforcement of English judgments. One would expect the Government to take action to protect the interests of litigants in the English courts by championing the continued application of the Regulations in relation to the UK, failing which parties may need to specifically address this issue in their contracts (see below).

 

Q       What about appealing a judgment?

A       At present, the European Court of Justice (otherwise known as the ECJ) is the highest court in the EU on matters of European law. As such, it is tasked with interpreting EU law and ensuring its equal application across all EU member states. However, the ECJ has no remit on national law and it is therefore not possible to appeal a decision of a national court to the ECJ unless the national court itself refers an issue of EU law to the ECJ.

Therefore, although the ECJ will cease this function upon our formal exit from Europe, the reality is that this change will have virtually no impact on parties involved in commercial disputes in the English courts who will still be able to appeal a high court decision in the normal manner, firstly to the Court of Appeal and then, if necessary, to the Supreme Court.

 

Q       What should I be doing now to protect my position?

A       Given the comments above, the inevitable question is whether parties should be looking to amend their contracts on the issues of governing law and jurisdiction?

The Rome I and Rome II Regulations (the “Rome Regulations“) provide a uniform set of rules that the courts of each Member State apply when determining which law applies to a dispute. These require the courts to respect party autonomy on the choice of law meaning that they will generally uphold English governing law clauses subject to a few limited exceptions.  Although the Rome Regulations will cease to be applied by the English courts upon our formal exit from Europe, the English courts have always historically respected party autonomy over the choice of law governing commercial contracts and one cannot see any reason for this changing. Further, the Rome Regulations will continue to be applied by the rest of the EU on the issue of choice of law irrespective of our status within the EU meaning that nothing in reality will change.

That does not mean however that parties who continue to choose English law to govern their commercial contracts should continue to contract in precisely the same form post Brexit. Commercial contracts can refer to EU legislation on issues of service or enforcement should the parties wish to and such additions might well be worth considering once the formal exist process commences and we know what EU law our government is committed to remain bound by.

In relation to jurisdiction clauses, the Recast Brussels Regulation EU 1215/2012 (the “Recast Regulation“) makes it clear that where the parties have contractually agreed a jurisdiction of a particular Member State court, that Member state will have jurisdiction over the proceedings and the courts of other Member States will respect the contractual arrangement and decline to hear the same proceedings. Upon our formal exit from Europe it is entirely plausible that the UK and EU will agree that the Recast Regulation should continue to apply. However, even if one were to assume a degree of cooperation between the UK and EU, such agreement will not be quick and the reality of the situation is that there is growing competition within the EU to attract litigation due to the increase revenue streams this entails.

The reality of the situation however is that most if not all Member States will continue to respect English jurisdiction clauses, even where there is no reciprocal arrangement in place as the English courts may otherwise revert to the practice of granting anti-suit injunctions preventing other Member States from exercising jurisdiction contrary to an exclusive jurisdiction clause in favour of the English courts. Accordingly the only real changes that a party may wish to consider making to their contract on this issue would be (a) to ensure that the English courts had exclusive jurisdiction or (b) consider opting for arbitration as arbitral awards are enforced through the New York Convention, which falls outside of the EU framework and would therefore not be affected by Brexit.

 

Conclusion

The prospects of a UK government revoking each and every EU law upon our formal exit from Europe is unfeasible given the strong trading links between the UK and Europe and the real need and desire for there to be some measure of consistency and reciprocity between our respective legal systems.

Although EU law has had a dramatic effect on certain aspects of English law, such as employment, free movement of workers, consumers and commercial agency, English Law remains one of the most popular choices of law for parties entering into cross-border commercial contracts and is seen as the market-standard choice for most commercial parties.

Accordingly, where parties envisage resolving their disputes in the English courts, English Law and the exclusive jurisdiction of the English courts will remain the sensible choice.

 

Jamie Lester [1] – Partner

Jamie specialises in complex, high value matters in the areas of professional negligence, corporate/commercial, risk management, insolvency, insurance, intellectual property, group actions, trusts, wills, probate, property and employment law.

Contact Jamie here [2].

 

This information is based on the law in force as at 26 July 2016. Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice. Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances. 

If you have any further questions, please do not hesitate to contact our Solicitors [3], who will be able to assist you further.