How will the disputes battleground change after Brexit?


Author: Peter Reynolds


Peter Reynolds, Senior Associate, Fladgate LLP (preynolds@fladgate.com)

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As the deadline of 11.00 p.m. on 29 March 2019 creeps up on us, we wait nervously to find out if we will get “no deal”, a “bad deal” or the elusive “good deal”. Whatever the outcome, English law will be in a state of flux after the withdrawal as the English courts and legislature will, for the first time, have the jurisdiction to amend or repeal EU law. This of course means uncertainty, opportunity and risk, which may lead to disputes as parties seek to test the new landscape.

White paper: key points for disputes

On 12 July 2018, the Government published a white paper on the future relationship between the United Kingdom and the European Union, which set out more detail of the Government’s vision.  This white paper follows the UK Government’s “Framework for the UK-EU partnership: Civil judicial cooperation” published on 13 June 2018 in which the Government confirmed its intention to agree a new arrangement with the EU across the full range of civil judicial cooperation.

EU law

The transition period text in the draft withdrawal agreement provides that most EU law will continue to apply to the UK until the end of the transition period on 31 December 2020 (if there is one). As such, the UK can continue to participate in the EU customs union and single market during the transition period.

The EU Withdrawal Act 2018 provides that the courts lower than the Supreme Court will be bound by EU case law that predates the withdrawal. The Supreme Court will not be bound in this way but it must apply the same test as it would in deciding to depart from English case law. The UK courts will not be required to apply post-withdrawal EU case law.

International law

If no other agreement is reached, the UK Government has indicated that it would seek to participate in the 2007 Lugano Convention, which would apply as between the UK and Norway, Switzerland and Iceland and the EU.

The Government has also confirmed its intention to ratify the Hague Convention on Choice of Court Agreements 2005 (Convention). The Convention operates to give effect to exclusive jurisdiction clauses and enforcement of any resulting judgment.

Enforcement

Exit from the EU will mean that key EU legislation regarding jurisdiction and reciprocal enforcement of judgments by member states will no longer apply to the UK. The draft withdrawal agreement between the UK and the EU provides that, during the proposed transition period, jurisdiction and enforcement of judgments would continue to apply under EU legislation where proceedings were commenced before the end of the transition period.

The UK Government said it would seek, after the withdrawal, to reach an agreement with the EU “which reflects closely the substantive principles of cooperation under the current EU framework”. This suggests that they are seeking to agree something similar to the recast Brussels Regulation. It is likely that enforcement will become slower as the holders of judgments will lose the automatic right to enforce judgments throughout the EU.

There is uncertainty about the extent to which relief granted by the English courts would be recognised by the courts of member states, particularly in relation to claims for declarations, specific performance, and injunctions. However, it is likely that enforcement of money judgments will continue in most cases.

Arbitration

Arbitration with a seat in London will not be affected by the exit from the EU because the international arbitration regime is based on the New York Convention, which provides for recognition by national courts of arbitration agreements, and broad international enforcement of arbitration awards. As such, international arbitration and the enforceability of awards are not affected by Brexit.

Choice of law

Post-Brexit, the EU member states will continue to give effect to English governing law clauses in contracts because Rome I requires EU member states to give effect to the governing law chosen by the contracting parties, irrespective of whether it is the law of a member state, or the parties are from outside the EU.

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