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MAY
30

POST-BREXIT BRITAIN GOVERNED BY ENGLISH LAW

eu post brexit lawSeveral EU initiatives have harmonised the cross-border litigation rules applicable across the European Union. But what will happen to these rules post-Brexit? And how will the UK adapt its own rules to meet a post-Brexit Britain?

CHOOSING THE ENGLISH COURTS

Currently, enacted EU law provides that the choice between parties to litigate in the English courts is valid and effective (Article 25 recast Judgments Regulations). The ability to extend this choice to non-contractual relationships between parties also helps to promote a ‘one stop shop’ for all parties’ litigation needs to be heard by the English courts.

However, this freedom for parties’ to litigation to choose the English courts is currently heavily restricted in relation to consumer, insurance and employment contracts. In respect of such contracts, any judgment obtained in the court of another member state must be upheld even if this is in direct breach of an English jurisdiction clause, specifying that the English courts were to be used. Therefore, initially it appears beneficial post-Brexit for no arrangement to be made of these restrictions, as these restrictions would not necessarily apply if the UK reverted entirely to its pre-EU common law position.

Alternative positions may be considered, below.

ALTERNATIVE ARRANGEMENTS POST-BREXIT

CHOICE OF JURISDICTION CLAUSE

Given the certainty of Article 25 (above), an agreement could be reached with EU Member States to continue to apply these recast Judgments Regulations to relations between the UK and member states.

However, in the alternative an agreement between the UK and EU Member States could also be sought to extend the Lugano Convention (which is applicable to Norway, Switzerland and Iceland as well as EU Member States). The Convention is similar to the Judgments Regulation, save for the court having discretion and first refusal as to whether to accept jurisdiction where neither party is domiciled in the contracting state (i.e. in the UK). Further, if parties opt not to issue litigation in the English courts, the English court cannot intervene or retrain these proceedings and cannot question any jurisdictional clause, deeming it to be ‘null and void’. This would provide parties to litigation with wider autonomy in the event of a dispute, especially when not located in close proximity of the UK.

Further still, in anticipation of Brexit, the UK could ratify the Hague Choice of Court Convention 2005 whereby the English courts must accept jurisdiction in cases where there is an English ‘exclusive jurisdiction clause’ (unless under Article 5 of the 2005 Convention, that clause is in fact null and void under its law). Under the 2005 Convention, courts of other contracting Members States must also give effect to an English exclusive jurisdiction clause and decline their own jurisdiction under Article 6. Beneficially therefore, English court judgments will be enforceable in all Members States.

Again the above alternatives do not apply to consumer or employment contracts and further consideration may be required in respect of these contracts as well as non-exclusive jurisdiction clauses.

NON-EXCLUSIVE JURISDICTION CLAUSES AND ASYMMETRIC CLAUSES

Although the legal basis may be different, there are strong grounds to anticipate that the English courts will also robustly uphold non-exclusive and asymmetric jurisdiction clauses. However, there is more doubt as to whether the courts of Members States will uphold English jurisdiction clauses in the absence of an applicable international instrument post-Brexit. This remains to be seen. 

CONTRACTUAL OBLIGATIONS

The Rome I Regulation currently upholds the parties’ choice of English law to govern their contractual relationship throughout the European Union. However (as above) it also restricts consumer, employment and insurance contracts involvement.

Even if no Brexit agreement is reached to continue to apply Rome I Regulation, arguably the UK could continue to apply it by enacting it into domestic law. This is because the Rome I Regulation is not reciprocal by EU Member States. Thereafter other Member States will continue to apply the Regulation and give effect to an English choice of law clause, regardless of where parties are domiciled. In this event, the pre-Brexit position will effectively remain unchanged. 

BACK TO COMMON LAW

If however the above named Rome I Regulations, the recast Judgments Regulations and/or any other EU instrument currently in place will not apply post-Brexit, English common law rules will revive to determine contractual governing laws and choice of jurisdiction clauses. Common law too permit the parties to choose their governing law (Vita Food Products Inc v Unus Shipping Co), and in fact is far less restrictive as there are no specific restrictions in respect of consumer, employment and insurance contracts at common law.

However, there is real doubt that a clause in respect of non-contractual obligations between parties will be effective in the English courts. For example, in respect of torts, common law (s.11 Private International Law (Misc Provisions) Act 1995, Pt III) would revive and does not allow parties to choose their governing law. Very occasionally a choice of governing law may be displaced if it is substantially more appropriate for determining the issues arising in the litigation, but a direct choice of English law is not generally permissible under the 1995 Act - which may pose a problem post-Brexit.

CONCLUSION

Whilst it is impossible to know exactly what might happen to this area of law after Brexit, there is strong optimism that that exclusive jurisdiction clauses and contractual agreements in favour of the English courts are likely to continue to be effective in England.

The position in respect of non-exclusive and asymmetric jurisdiction clauses is a little less clear however, and together with the position on non-contractual relationships, is yet to be seen!

 

By Annabelle Pantling

Solicior in the Litigation & Commercial Department

 

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