Litigation Trending: Brexit FAQs
26 October 2023
A fortnight into the New Year and the Brexit queries have been coming in thick and fast. We thought we'd share the answers to our top 5 questions.
Has the position on governing law changed?
No. The EU Regulations that cover governing law (Rome I and Rome II) have been incorporated into domestic law with minor modifications. Similarly, the rest of the EU should continue to give effect to English governing law clauses, as Rome I applies irrespective of whether the chosen law is that of a Member State, or whether the parties are from outside the EU. We may see a divergence in approach over time. But for the foreseeable – no change.
Was any agreement reached on civil judicial cooperation?
Unfortunately not. We are in a "no deal" situation as far as jurisdiction and reciprocal enforcement of judgments is concerned. We have therefore lost the recast Brussels Regulation and Lugano Convention, the EU instruments that govern jurisdiction and enforcement between the EU and the Lugano Convention States (Norway, Switzerland and Iceland).
We are still hopeful that agreement can be reached on the UK re-joining the Lugano Convention. The UK applied to re-accede to Lugano in April 2020 but all parties to the Convention, including the EU, have to agree to that. The Lugano States have approved our re-joining but the EU has not yet responded. A response is required from the EU by April 2021, but even if approved, it could still take months before Lugano takes effect.
Where does that leave us?
We have the Hague Convention on choice of court agreements which came into force on 1 October 2015. However, that only applies to exclusive jurisdiction agreements and any resultant judgments. It does not cover non-exclusive clauses or, arguably, asymmetric clauses (and the Court of Appeal seemed to share that opinion in a recent decision although it did not make a formal decision on the point). There is also an issue with timing. The UK will apply Hague to jurisdiction agreements agreed from 1 October 2015 (which is when EU ratification took effect). The EU Commission has said, however, that it thinks Hague only applies to the UK from the date of the UK's independent ratification, so 1 January 2021. Nothing further has been said on that post deal. The Lugano States have also not yet signed up to Hague.
Otherwise, on jurisdiction arguments the common law will apply in the UK and the EU courts will continue to apply the EU regime. This means an increased risk of parallel proceedings and we may see a resurgence of the race to issue proceedings. But the approach towards upholding jurisdiction clauses in the English courts is unlikely to change.
The greater potential impact is on enforceability of English judgments as we have lost the automatic right to enforce judgments that we enjoyed under the European regime. Instead, unless proceedings were started before 1 January 2021 or judgments can be enforced under the Hague Convention/a bilateral arrangement (as has been agreed with Norway), the national law of each Member State and Lugano State will determine the enforceability of English judgments. Enforcement risk will vary across the area: in some jurisdictions this will be pretty straightforward, but in others it will be more difficult. Another factor to consider when drafting your disputes clause.
Is exclusive jurisdiction the better option going forward?
If enforcement risk is high and you want the English courts to determine your dispute then exclusive jurisdiction currently offers the least problematic option. However, there may well be other factors to consider: contracting parties may prefer to have flexibility or wish to retain the stronger position an asymmetric clause gives them. Or arbitration may be the better option. We look at the pros and cons of these options in more detail in this briefing.
Do I now need to use an agent for service for EU counterparties?
Those who relied previously on the EU Service Regulation when contracting with EU counterparties should think whether they now need to provide for appointment of a process agent or secure an address for service in England and Wales (the EU Service Regulation no longer applies in the UK). We would always recommend including service provisions if your counterparty is outside the jurisdiction, regardless of Brexit.
Read our previous Litigation Trending Insight here.
