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Dispute Resolution Post-Brexit Transition Period

For the duration of the Brexit transition period, the UK/EU Withdrawal Agreement provided for EU law to continue to apply to the UK. The transition period concluded on 31 December 2020 and, as widely anticipated, the UK and the EU did not agree any ongoing regime for cross-border cooperation on choice of law, courts and enforcement of court judgments, notwithstanding the successful conclusion of the UK/EU Withdrawal Agreement. The UK has, however, taken unilateral steps to limit the impact of the end of the transition period on issues regarding conflicts of law.

In summary, the position as of 1 January 2021 is as follows.

 

Governing Law

The UK has already incorporated the EU regulations on applicable law in contractual and non-contractual matters (Rome I1and Rome II2) into domestic law by way of statutory instruments.3 Consequently, the position on governing law remains unchanged after the conclusion of the Brexit transition period. The English courts will continue to apply the Rome I and Rome II regime when deciding questions of governing law.

Rome I and Rome II apply irrespective of whether the applicable law is that of an EU member state, so the courts in EU member states will, like the UK courts, continue to give effect to the parties' choice of English law as the governing law of their contract.

 

Jurisdiction and Enforcement of Judgments

With the UK's departure from the EU, the main EU instruments on jurisdiction and enforcement of judgments – namely the Recast Brussels Regulation4 and the Lugano Convention5 – no longer apply to civil and commercial cases commenced in the UK on or after 1 January 2021.6

The Hague Convention

For matters of jurisdiction in civil and commercial matters, the 2005 Hague Convention on Choice of Court Agreements (the "Hague Convention") is relevant. The Hague Convention has been in force in the UK since 1 October 2015, when the EU acceded to it. However, following Brexit, the UK has acceded to the Hague Convention in its own right (effective from 1 January 2021) such that it now has the force of law in the UK.7 While accession to the Hague Convention preserves the status quo between the UK and the EU in many respects as to matters of jurisdiction and enforcement, there are some key differences:

  • The Hague Convention does not apply to non-exclusive clauses. For these purposes, asymmetric exclusive jurisdiction clauses seem unlikely to be considered "exclusive" (and so the Hague Convention is unlikely to apply to them), although this has yet to be finally determined.8
  • Pursuant to the Hague Convention, a judgment given by an English court (designated in an exclusive jurisdiction agreement within the meaning of the Hague Convention) shall be recognised and enforced in the EU in accordance with the provisions of the Convention and vice-versa. However, the Hague Convention does not provide for reciprocal recognition and enforcement of interim measures of protection, such as freezing orders and injunctions.

There is also some uncertainty about whether courts of EU member states will consider the UK as being a "Contracting State" under the Hague Convention when considering exclusive jurisdiction clauses agreed between 1 October 2015 and 1 January 2021. UK legislation has provided that the Hague Convention will apply to exclusive jurisdiction clauses concluded during that period.9 However, courts of EU member states may not adopt the same approach, and indications to date from the European Commission suggest that the Commission at least considers that the Hague Convention will not apply to proceedings brought under such agreements.10

A pragmatic solution for parties with contracts containing exclusive jurisdiction clauses concluded over the period in question (October 2015 to the end of 2020) may well be to re-state the jurisdiction clause, so as to benefit from the UK's accession to the Hague Convention in its own right.

The Lugano Convention

The EU is party to the 2007 Lugano Convention – a treaty which resembles the Recast Brussels Regulation in most respects.11 The UK has submitted an application to accede to the Lugano Convention in its own right with effect from 1 January 2021, but the unanimous approval of the Contracting States (including the EU) is required and is still pending. The status of the UK's application was not addressed in the UK/EU Withdrawal Agreement, and so the EU's position on the UK's application remains unclear.

If the UK's accession to the Lugano Convention is approved, there will be little change to the pre-existing regime on jurisdiction and enforcement under the Recast Brussels Regulation.

Unless and until the UK is able to accede to the Lugano Convention, and if proceedings fall outside the scope of the Hague Convention, then UK and EU member state courts will have recourse to their own domestic laws and conflict of law rules to determine questions of jurisdiction and enforceability of judgments. Commercial parties may therefore need to seek local law advice to confirm: (i) the enforceability of English court judgments in EU member states and vice-versa; and (ii) whether any amendments to existing contracts might be required.

 

Judicial Cooperation in Civil Litigation

The end of the transition period also brings to an end the applicability of other EU regulations which promoted cooperation between courts in the UK and EU member states on matters such as service of legal process12 and the taking of evidence in civil and commercial matters.13 These regulations in many instances simplified processes and enabled quicker timelines, for example, on matters such as service. The UK and EU have not yet reached any agreement to replace these regulations and so, for now, civil litigants will have to rely on domestic laws or other international conventions (if applicable). From the UK courts' perspective, it will still be possible to serve proceedings out of the jurisdiction on defendants domiciled in EU member states, albeit using the mechanisms for service of process under the Hague Service Convention.14

 

Arbitration

The position on London-seated arbitration remains unchanged. London-seated arbitration clauses will remain effective and arbitral awards will continue to be enforceable. The New York Convention, to which the UK and EU member states are signatories, continues to govern the recognition and enforcement of arbitral awards.

 

Concluding Remarks

While commercial parties may take comfort in the preservation of the status quo for choice of governing law clauses and the UK's accession to the Hague Convention on Choice of Court Agreements, limitations and uncertainties have been introduced into matters of jurisdiction and enforcement of judgments in the EU. It remains to be seen whether the UK is able to accede to the Lugano Convention and resolve these issues. Even if the issues cannot be addressed in this way, it remains the case that the changes that have taken place are not so fundamental as to call into question the many advantages offered by the UK courts as a forum to resolve cross-border disputes. Nevertheless, parties may wish to take the opportunity to consider whether the dispute resolution provisions in their contracts (present and future) are optimised for transactions involving EU parties.

 

1 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I).
2 Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II).
3 The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (UK Exit) Regulations 2019 (SI 2019/834) (Regulations).
4 Regulation (EU) 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast).
5 2007 Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters applicable between the European Community, Iceland, Denmark, Norway and Switzerland.
6 For civil proceedings commenced on or before 31 December 2020, the Recast Brussels Regulation will continue to apply.
7 Private International Law (Implementation of Agreements) Act 2020, section 1(2).
8 Etihad Airways PJSC v Lucas Flother [2020] EWCA Civ 1707, paragraph 85.
9 See section 4 of the Civil Jurisdiction and Judgments (Hague Convention on Choice of Court Agreements 2005) (EU Exit) Regulations 2018.
10 European Commission, Notice to Stakeholders regarding the withdrawal of the United Kingdom and EU Rules in the field of civil justice and private international law dated 27 August 2020, paragraph 3.3. https://ec.europa.eu/info/sites/info/files/brexit_files/info_site/civil_justice_en.pdf
11 The deficiencies of Brussels Regulation (44/2001) (Brussels I), which were resolved in the Recast Brussels Regulation, persist in the Lugano Convention. In particular, the Lugano Convention fails to prevent so-called "torpedo actions" (where a party brings parallel proceedings in a different court to that specified in a jurisdiction agreement). Brussels Recast and the Hague Convention minimise torpedo actions, by requiring the non-chosen court to suspend proceedings until the chosen court has confirmed whether or not it has jurisdiction. Conversely, the Lugano Convention gives priority to the first court in which proceedings are submitted.
12 Regulation (EC) No. 1393/2007 of the European Parliament and of the Council of 13 November 2007 on the service in the member states of judicial and extrajudicial documents in civil or commercial matters (service of documents).
13 Council Regulation (EC) No. 1206/2001 of 28 May 2001 on cooperation between the courts of the member states in the taking of evidence in civil or commercial matters is an EU regulation in the field of judicial cooperation.
14 Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

 

Leonie Amarasekara (White & Case, Associate, London) contributed to the development of this publication.

 

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