The Role of the English Courts Post Brexit: Emerging Challengers? | White & Case LLP International Law Firm, Global Law Practice
The Role of the English Courts Post Brexit – Emerging Challengers?

The Role of the English Courts Post Brexit: Emerging Challengers?

BREXIT COUNTDOWN ›
Our Brexit countdown illustrates the key dates and milestones on the road to Brexit. Discover more.

London has long been a hub for cross-border commercial litigation. The prevalence of English law, the size of the London legal market, the calibre of the English judiciary, and even London's geography, amongst many other factors, have contributed to that status. The UK's membership in the EU, and the resulting close cooperation between the UK and other EU Member States in judicial matters, has contributed to the popularity of the English courts.

Brexit, and the potential impact it may have on the relationship between the UK and EU Member State court systems, has been a catalyst for the emergence of new English law and language international commercial courts and tribunals in EU jurisdictions. Will these pose a threat to London?

 

Introduction

London has a longstanding and well-established reputation as a "go-to" destination for cross-border commercial litigation. The reason for its popularity is attributed to the strength and breadth of expertise of its commercial judiciary, access to the English Courts' appellate system, the ability to apply common law directly (including, where necessary, to push for the development of the common law), as well as many other factors, not least the prevalence of English as the lingua franca in international commerce.

Currently, two-thirds of cases fought in London's Commercial Court involve non-UK litigants. According to the Commercial Courts Report 2018, the number of commercial cases heard in London, which involved one or more international parties, rose by 7% in the year to April 2018. The number of international litigants increased by 22%, with 656 parties from 69 different countries represented in 158 cases in London.1 Significantly, the most important region for growth was Europe, with the number of litigants growing from 340 in 2016-2017 to 423 in 2017-2018.

As with most other topics, the structure of judicial cooperation post-Brexit remains unclear at this stage. The existing framework for jurisdiction and mutual recognition of judgments is found in the Recast Brussels Regulation.2 As matters currently stand, the Recast Brussels Regulation will not apply between the UK and EU post-Brexit. The UK Government has announced its intention to agree a successor regime aimed at replicating the Recast Brussels Regulation; however, if that is not possible, at a minimum, the UK will accede – in its own right – to the 2005 Hague Convention on Choice of Court Agreements (the "Hague Convention").

The uncertainty over whether or not an effective successor regime will be agreed presents a challenge currently to the English courts. Several EU Member States are positioning themselves to capitalise on any reduction in the appeal of the English Courts by offering their own alternatives.

Specialised commercial courts and tribunals have been emerging (or are being heralded) in several other European jurisdictions. To varying degrees, these tribunals offer to conduct English language proceedings, with specialist judges presiding over cases, and in one case, even to apply English common law. These developments follow in the path of other nascent international commercial courts in centres outside the EU, such as Dubai (which opened the Dubai International Financial Centre Court in 2004), Qatar (the Qatar International Commercial Court in 2009), Singapore (the Singapore International Commercial Court in 2015) and Kazakhstan (Astana International Financial Centre earlier this year). Will these offer a credible alternative to London as venue for litigants to resolve their international commercial disputes?

Potential solutions for recognition and enforcement of English judgments post-Brexit

These new European courts and have been designed, at least in part, on the assumption that English judgments will not be recognised and enforced throughout the EU post-Brexit as easily as they are currently under the Recast Brussels Regulation. However, on 13 September 2018, the UK Government announced that in the event of a "no deal Brexit", the UK would take the necessary steps to rejoin the Hague Convention in its own right (and that the Convention would come into force on by 1 April 2019).3 The UK is already a member of the Hague Convention by virtue of its membership of the EU (as the EU is a signatory). The Convention ensures the effectiveness of exclusive jurisdiction agreements and provides for the recognition and enforcement of judgments which emanate from such exclusive jurisdiction agreements.

In the event of a no-deal Brexit, the Convention would apply as between the UK and the other contracting states (i.e. the EU, Mexico, Montenegro and Singapore) where there is an exclusive jurisdiction clause in favour of one of the contracting states.

However, there remains uncertainty over non-exclusive jurisdiction clauses. Furthermore, it is unclear whether the Convention would apply to jurisdiction agreements concluded before it enters into force for the UK in its own right, as opposed to by virtue of EU membership.

There are many solutions which the UK Government could adopt before Brexit (note the English Bar Council Brexit Working Group has recommended4 that the Government implement all the below):

(i)The UK could endeavour to replicate the Recast Brussels Regulation as closely as possible via a separate agreement with the EU, similar to the jurisdiction agreement between the European Community and Denmark.5

(ii)The UK could sign and ratify the Lugano Convention6 alongside Norway, Switzerland, Iceland and the EC. This might not be ideal, as the Lugano Convention has not been updated to reflect the Recast Brussels Regulation.7

It is worth bearing in mind, however, that even if these solutions were not to be adopted, one would still expect English court judgments to be enforceable by EU Member State courts according to their domestic regimes, in the same way that they will already enforce non-EU judgments, such as those emanating from the US.

 

Developments

France

As of March of this year, the international division of the Paris Commercial Court (International Chamber of the Paris Commercial Court)8 and the Paris Court of Appeal (International Chamber of the Paris Court of Appeal)9 have been open to hear international business law disputes.10 Minister of Justice Nicole Belloubet has stated that "[b]ilingual judges who are familiar with the principles of common law" will render judgments that "will circulate freely and be enforceable throughout the EU" (playing on one of the key areas of uncertainty regarding the automatic enforceability of English court judgments post-Brexit).

The courts will have jurisdiction (i) over disputes which are of an economic and commercial nature, with an international dimension (in particular in disputes where a foreign law applies); and (ii) if the parties elect to give jurisdiction to the Paris Commercial Courts by way of contractual clause.

The courts are composed of experienced English-speaking judges with commercial experience and English common law capabilities. In an apparent distinction from the other initiatives considered in this piece, the proposed French courts could apply French law, or any other rules of foreign law applicable to the merits of the case (including English common law). Other changes to the (previously) conservative French courts include the use of oral hearings (potentially including cross-examination of witnesses and experts), and a potential for more reasoned judgments, all in the model of English litigation.

A particular stumbling block in setting up this court was the constitutional requirement under French law for court proceedings to be conducted in French.11 To meet this requirement, all procedural documents (e.g. procedural applications, submissions and orders) will have to be submitted in French (although exhibits can be submitted in English without translation). Further, the default language for the conduct of oral pleadings will be French, with an option for foreign parties, witnesses, experts and counsel to use English if they wish to). There will also be an option for simultaneous translation. Decisions will be published in French, together with an English translation. Non-French lawyers will be granted rights of audience to appear before the International Chamber, as long as they are accompanied by a member of the Paris Bar.

Belgium

On 27 October 2017, the Belgian Minister of Justice announced the approval by the Federal Government of a new English-speaking court named the "Brussels International Business Court" (the "BIBC"). The BIBC will be able to assume jurisdiction over (i) international disputes (i.e. with a cross-border elements, such as if one of the parties has its seat in a foreign jurisdiction, performance of the contract takes place in different states, or the applicability of foreign law), (ii) between enterprises, i.e., any legal or natural person pursuing an economic purpose, (iii) which have agreed to the BIBC's jurisdiction.

The draft bill was introduced on 15 May 2018 before the Chamber of Representatives, and is currently being reviewed by the Justice Commission. Given the parliamentary agenda, the final vote by the Chamber of Representative is only expected to take place this Autumn, with the government's expectation being that the BIBC will be up and running no later than 1 January 2020.

The terms of the draft bill set out the BIBC as a hybrid, combining the features of a regular national court with those of an arbitral tribunal. While the BIBC will be a Belgian state court with its seat in Brussels, it will not form part of any existing Belgian court division (in contrast with the equivalent proposals in Paris and Amsterdam). The BIBC will have specific procedural rules:

(i)The UNCITRAL Arbitration rules have been incorporated into the draft bill, and will, in principle, apply to proceedings before the BIBC. However, where explicitly stipulated, Belgian general procedural rules will apply, such as those regarding electronic communication with courts;

(ii)Recourse against decisions of the BIBC will be limited: appeals will only be possible on points of law to the Belgian Supreme Court (which can be done in English);

(iii)The proceedings will be conducted in English;

(iv)The panel of judges will be made up of professional judges from the Court of Appeal of Brussels and lay judges (including lawyers) from both domestic and foreign jurisdictions, who are specialised in international trade law.

The stated goal of the BIBC is to capitalise upon Brexit and establish Belgium as a new hub for international commercial disputes. The BIBC aims to be an alternative to arbitration, with the advantage of being less costly than arbitration, whilst the resolution of claims is intended to be quicker and more cost-effective than national court proceedings due to the limited circumstances in which a decision may be appealed. That said, confirmation of the real costs of the proceedings will come only at a later stage, by Royal Decree. Since the BIBC will be self-funding, court fees will likely be higher than the usual standard fees applicable in Belgian proceedings, which are comparatively low (the maximum amount in the BIBC being EUR 36,000).

Germany

On 30 March 2017, the Minister of Justice of the Federal State of Hessen presented the Justice Initiative Frankfurt. As part of that Initiative, the Chamber for International Commercial Disputes was established as a specialist division of the Regional Court of Frankfurt on 1 January 2018.12 The stated aim is to strengthen the existing specialisation of the Frankfurt courts in areas of financial and banking disputes, in anticipation of the relocation of financial institutions' centres from London to Frankfurt and other European cities. It also aims to strengthen arbitration in Frankfurt in parallel through the creation of a Centre for International Dispute Resolution.

The new Chamber will be composed of judges who are experienced in business law, have good English language skills, and who will work in consultation with experts from the fields of finance and banking, international commercial matters, and auditing.

The Chamber hears international commercial disputes on application of the parties, if the lawsuit has a bearing upon an international matter and the parties declare before the end of the deadline for the statement of defence that they would like to plead in the oral hearings in English and waive the right to have an interpreter. Importantly, this includes allowing documents in the proceedings to be filed in English, allowing witnesses to be heard in English and the speedy translation of judgments into foreign languages.

The Netherlands

A Netherlands Commercial Court ("NCC") is expected to launch in the beginning of 2019 (with the draft bill having passed through the House of Representatives, and currently being discussed by the Senate). It is intended to be a specialised court in hearing complex international commercial cases, with specialised commercial judges and the option of proceedings being conducted in English. The NCC (which comprises of both a court of first instance and a court of appeal) will be part of the Amsterdam Court, and will be located within the modern Amsterdam Court of Appeal building.

The NCC will have jurisdiction if (i) the dispute is international in nature (which we understand will be given a wide interpretation to include, for example, disputes regarding an English language contract), and (ii) the parties have explicitly agreed to it (or if both parties are domiciled in the Netherlands). Appeals will be allowed to the Supreme Court; however, they will have to be conducted in Dutch at that level. A potential stumbling block for this initiative is that Dutch civil procedural law, which is known to be complex and prone to delays, will apply to the proceedings.

Ireland

Like the UK, Ireland is a common law jurisdiction, which uses the English language, specialist lawyers and has an established commercial court that has the ability to fast track business cases. In 2018, it was announced that the Irish bar entered into talks with the solicitors' professional body and large solicitor firms in Dublin in order to decide how best to market the Irish legal system abroad, following the courts in Belgium, France, Germany and the Netherlands in trying to seize the opportunity to capture market share from the English Courts.

 

Party Choice

A crucial factor in the success of these emerging commercial courts will be parties' willingness to choose to submit their disputes to the forum (whether at the contract negotiation stage, or after a dispute has arisen). Given how new the courts are, the extent to which contracting parties will do so remains to be seen. In this regard, the courts will be competing not only against the English Courts, but also international arbitration and other court systems generally.

The choice will turn upon the criteria, upon which, counterparties place the greatest emphasis. For example, if parties place a greater emphasis on the ability to enforce a decision in as many jurisdictions as possible, they will be attracted by the potential for universal enforcement offered by the New York Convention. However, enforcement – while of obvious importance – is not the sole factor dictating the choice of forum. For example, if the parties prioritise the possibility of having access to the appellate courts, currently only the Paris proposal would offer a route of appeal (although, self-evidently, not one that would ultimately give access to the UK Supreme Court).

Offering proceedings conducted entirely in English may well be a powerful enough factor to attract litigants to these new European courts. As matters stand, however, the language capability is the only "stand out" (and common) benefit. Of course, in offering English language capability, these courts are coming up to the same level as the English Court. However, they do not (and arguably cannot) offer certain of the other key advantages of the English legal system.

 

Conclusion

The emergence of new alternatives to the English Courts highlights the challenges the UK and its judiciary may face in a post-Brexit landscape. Beyond this, however, it would be premature to draw firm conclusions as to the extent of their success, or indeed the demise of the English Courts; the most developed of these initiatives (in Paris) remains very much in its infancy.

From the European perspective, Brexit undoubtedly presents a real opportunity for the EU's commercial centres, and by extension, their competing commercial courts.

However, the English Courts' position as a leading venue for complex cross-border dispute resolution is not solely attributable to the UK's adherence to EU regulations promoting judicial cooperation between Member States. (Had it been, all EU commercial courts would have enjoyed the same success in recent times.) Many other factors are at play. The English Courts have developed in parallel with the UK's role as a commercial centre. Even in a "no-deal" scenario, there is nothing so material as immediately to transform that status quo.

 

1 See: https://portland-communications.com/pdf/Portland-commercial-courts-report-2018.pdf
2 Recast Brussels Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels Recast Regulation).
3 See: https://www.gov.uk/government/publications/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal
4 See: https://www.barcouncil.org.uk/media/574617/brexit_paper_4_-_civil_jurisidiction_and_judgements.pdf
5 [2005] OJ L/299/62.
6 L339/3.
7 1215/2012.
8 For procedural rules, see: http://www.avocatparis.org/system/files/editos/protocoles_signes_creation_juridiction_commerciale_internationale_2.pdf
9 For procedural rules, see: http://www.avocatparis.org/system/files/editos/protocoles_signes_creation_juridiction_commerciale_internationale_1.pdf
10 To date, no decision has been issued by this tribunal. Hearings are expected to begin as of September 2018.
11 This rule is provided for by the Villers-Cotterêt Order of 25 August 1539 (Art. 111) which is still applied by the French Cour de cassation (See for instance Cour de cassation, Civil Division, 22 September 2016, No. 15-21.176). This requirement is also provided in Art. 2 of the French Constitution ("The language of the Republic is French").
12 See: https://ordentliche-gerichtsbarkeit.hessen.de/ordentliche-gerichte/lgb-frankfurt-am-main/lg-frankfurt-am-main/chamber-international

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2018 White & Case LLP