Brexit Deal: A Checklist for Cross-Border Civil Litigation
On 30 December 2020 and after four years of negotiations, the UK and the EU (the Parties) signed the long awaited Trade and Cooperation Agreement (the Agreement). The Agreement represents the first and fundamental step towards a new chapter for the relationship between the UK and the EU.
The Agreement, running over 2,000 pages, sets a framework for the legal cooperation between the Parties. Whilst the trade deal contains extensive and comprehensive provisions dealing with trade in goods and services, movement of people and so on, it does not address future cooperation on cross border civil litigation. A separate deal in this respect may follow but nothing has been intimated so far.
The result is that Brexit creates uncertainty around the rules governing disputes between one party who is based in the UK and another in the EU. It is important for businesses to beware of some fundamental points while waiting for more clarity on the matter.
The European rules governing applicable law – set out in the Rome Convention, the Rome I Regulation and the Rome II Regulation – have been incorporated into UK domestic law. This effectively preserves the status quo, whereby priority is given to parties’ choice of governing law, subject to certain safeguards, and mechanisms for determining the applicable law in the absence of choice.
For cases commenced prior to 1 January 2021, the existing framework under the Recast Brussels Regulation and its predecessors will continue to apply both as to matters of jurisdiction and enforcement.
The UK has also stated that it will continue to apply the Lugano Convention to these cases, but the terms of the Withdrawal Agreement are silent on the position of the Lugano states (Iceland, Norway and Switzerland). However, the UK and Norway have resurrected Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters 1961 to cover both existing and new cases, while it is understood that Switzerland will continue to apply the Lugano Convention for existing cases and will use domestic legislation similar in nature to the Lugano Convention for new cases.
For cases commenced at the end of the transition period (i.e. from 1 January 2021), the starting point is to consider whether the parties’ agreement contains an exclusive jurisdiction provision. If the clause is present and the chosen court is a contracting party to the 2005 Hague Convention (which includes all EU member states), for civil and commercial matters the Convention’s rules apply in the determination of which jurisdiction’s courts will take the dispute forward. The UK has stated that this will apply to any such agreements entered into from 1 October 2015 onwards. The EU’s position is less clear.
The uncertainty created by the current framework will be mitigated if the UK accedes to the Lugano Convention, which governs reciprocal enforcement of judgments originating in jurisdictions which are signatories to the Convention. The UK was previously a member to the Convention by virtue of its European membership, therefore ending with Brexit. On 8 April 2020, the UK Government applied to accede to the Convention as an independent contracting state. This has received support from the Lugano states but the EU is yet to state its position.
Practical Considerations for Businesses
Key points to note and steps to take to be safe in the current and uncertain framework are:
- Note that only matters with a UK/EU angle are affected. Contracts or disputes concerned with jurisdiction and enforcement involving a non-European state are largely unaffected by Brexit.
- Consider ongoing proceedings: disputes commenced before the end of the transition period will largely benefit from the European regime.
- Review jurisdiction clauses in current contracts with European counterparties (whether they be suppliers, distributors, or end purchasers). Ensure that they still operate as desired, taking into account which courts it is desired should take jurisdiction and where any enforcement action may be necessary. In order to bring a matter within scope of the Hague Convention’s framework for jurisdiction and enforcement, there will need to be an exclusive jurisdiction agreement entered into between the parties and consideration should be given to having any such existing agreement restated now to ensure it is in scope given the uncertainty outlined above.
- Review service provisions in current contracts with European counterparties. From a UK perspective, Brexit has resulted in more cases requiring the permission of the English courts to serve out of the jurisdiction. The presence of a clause specifying an agent for service of process in the jurisdiction will avoid this.
- When entering into new contracts, give similar consideration to jurisdiction clauses and service provisions. Bear in mind that, despite the changes and uncertainty occasioned by Brexit, many of the reasons for selecting the English courts remain unaffected: for example, the quality of the judiciary, the existence of specialist courts, robust procedural rules, expertise in dealing with complex cross-border disputes, and the certainty provided by common law and precedent.
- Note that governing law provisions remain unaffected and a choice of English law, for example, will be respected by both European and English courts.
For more information, please contact Giulia Brunello.