Brexit Implications for Disputes - What we know from a UK perspective
PM Theresa May has announced that she intends to trigger Article 50 and begin negotiations to exit the EU by March 2017. What does this mean for ongoing and future disputes?
As part of the process, the Government has confirmed the repeal of the European Communities Act 1972, the legislation which gives EU law supremacy in the UK. Presently, EU legislation (in particular the Recast Brussels Regulation) governs jurisdiction, choice of court and the recognition and enforcement of domestic judgments in the EU. Moving forward, in a post-Brexit world, any number of regimes may apply depending on the decisions of the UK Government, including retaining the Recast Brussels Convention, adopting the Lugano Convention or the Hague Convention or adopting none of the above.
Where a case is heard can have considerable financial and practical implications for the parties. Commercial parties can in most circumstances contractually agree where a dispute between them should be resolved. However, if there is no jurisdiction regime in place, the English Courts are likely to respect such contractual agreements but uncertainty arises because the courts of EU member states may not do so.
The Recast Brussels Regulation currently provides for the mutual (automatic) recognition and straightforward enforcement of court judgments within the EU. In the absence of such a convention post-Brexit, the process will depend on individual countries - this will cause uncertainty, delays and probably increased costs. There is also considerable uncertainty around the recognition of alternative relief, for example, an injunction or specific performance which could restrict a party's options.
Currently, if you wish to commence proceedings and serve a party outside of England and Wales, you should apply for permission to serve out of the jurisdiction. However, if service is to be effected within the EU (and the English Courts have jurisdiction) there is no need to apply for permission. Removal of the Recast Brussels Regulation, with no replacement regime, will mean you will have to seek permission to serve out, likely increasing both time and costs.
If you are in the process of negotiating contracts right now, you may have the luxury of being able to plan ahead - for example, it may be advisable to appoint an agent in the contract for service of process.
But what about existing litigation? If you are looking to issue proceedings soon, jurisdiction will remain as per the status quo for the time being. Nothing will change immediately, but you may consider expediting the issue of proceedings if jurisdiction is likely to cause problems outside of the current regime. Where proceedings are issued, you may also wish to consider seeking to obtain a judgment as soon as possible, before the Brexit uncertainty arises, to take advantage of the existing recognition and enforcement of judgments regime.
Cyriel: In international commercial contracts parties often opt for the London Commercial Court as competent court. Given the aforementioned possible uncertainties and difficulties as a result of the Brexit though it is quite likely that parties will consider other courts in future contracts.
An interesting alternative for English courts may be an arbitral tribunal as the Brexit does not affect the recognition and enforcement of arbitral decisions. However, arbitration is quite expensive which makes it unattractive for smaller companies. There are various arbitral tribunals throughout EU. For example, the Netherlands will introduce the Netherlands Commercial Court (NCC), a special facility for the settlement of international trade conflicts that will be established in the Amsterdam District Court in 2017. The NCC will have judges with the required expertise and experience in international commercial disputes and will offer the opportunity to litigate in English. Therefore the NCC might be a sound and less expensive alternative for the London Commercial Court or arbitral tribunals.
Written by Joanne Saye, Ashfords LLP with comment from Cyriel Heuts, Boels Zanders.
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