Almost a year ago, I wrote about the uncertainty on the horizon in relation to the enforcement of UK judgments abroad in this article. With the end of the transition period in sight, there is now a little more clarity on the impact of Brexit on cross-border litigation disputes.
The main issues around cross-border litigation after Brexit are:
- Choice of law: which country’s laws apply to the dispute?
- Jurisdiction: in which country can court proceedings be brought?
- Enforcement: can the resulting judgment be enforced against a defendant based in a different country?
The rules applied in the UK courts on these issues are contained in various international agreements and EU legislation. These rules will continue to apply in cases where court proceedings have been commenced before the end of the transition period, but what about cases arising after the end of the transition period?
Choice of law: which country’s laws apply to the dispute?
Issues of jurisdiction and choice of law are often dealt with in commercial contracts by the parties expressly nominating the laws and courts of a particular country.
There is some good news in relation to choice of law, because the UK will incorporate into domestic law the existing EU legislation containing the rules on choice of law. The remaining EU Member States will continue to be subject to the EU legislation, which requires them to give effect to choice of law clauses in contracts, including those nominating the laws of England and Wales.
Brexit and cross-border litigation, jurisdiction and enforcement
The position in relation to jurisdiction and enforcement of judgments is not as straightforward.
After the end of the transition period, the current rules contained in EU legislation will cease to apply. These rules are reciprocal between EU Member States and so incorporating them into English domestic law does not provide a solution.
The UK is taking steps to ensure that the UK will be a party to the 2005 Hague Choice of Court Convention after the end of the transition period. This will provide a partial solution, as it gives effect to exclusive jurisdiction clauses entered into after the Convention came into force. However, the Convention provides only limited provisions on enforcement of judgments and there is some uncertainty as to the date when the Convention will be treated as having come into force in the UK.
The UK has also requested to join the Lugano Convention in its own right once the transition period ends. The Lugano Convention gives effect to choice of jurisdiction clauses and replicates most of the benefits of the EU regime relating to enforcement of judgments in civil and commercial matters. However, accession to the Lugano Convention requires the unanimous consent of all signatories and so far the EU has withheld its support for the UK’s proposed accession.
It is important for any businesses contemplating entering into a commercial agreement with a party based abroad to seek advice and ensure that the agreement contains appropriate choice of law and jurisdiction clauses. Well-drafted dispute resolution clauses are also key in light of the uncertainty over the enforcement of English judgments abroad.
What if a business has an ongoing EU dispute?
Businesses with existing disputes involving parties in EU member states should seek advice on the strategy for resolving the dispute. If court proceedings have not yet been issued, a review of the issues around jurisdiction and choice of law, and the impact of the end of the transition period is advisable.
It is also important for any businesses contemplating entering into a commercial agreement with a party based abroad to seek advice and ensure that the agreement contains appropriate choice of law and jurisdiction clauses. Well-drafted dispute resolution clauses are also key in light of the uncertainty over the enforcement of English judgments abroad.
How we can help
This article is for general information purposes only and should not be used as a substitute for legal advice. If you are unsure of your legal obligations in any part of your business management, we can support you through the whole process.
Our expert teams can help you navigate the new rules around immigration, employment contracts, supply chain, data protection, commercial property disputes and any legal matters affecting your business. For more information, our legal advisors have produced a Brexit business guide and series of articles – you can also get in touch if you have any questions.