Brexit

The UK left the EU on 31 January 2020. A transition period, during which EU laws continue to apply in the UK, is due to end on 31 December 2020. The UK/EU Withdrawal Agreement sets out transitional arrangements and negotiations for the future UK/EU relationship are ongoing.

Dispute Resolution

The precise future arrangements between the EU and UK on cross-border civil and judicial cooperation remain unclear.  Navigating this uncertainty remains a central issue for cross-border disputes with an EU dimension and for contracting parties with an EU asset enforcement risk. 

Preservation of existing framework during transition period

The Withdrawal Agreement has largely preserved the existing framework of EU dispute resolution rules during the transition period.  International jurisdiction and enforcement conventions such as the 2007 Lugano Convention (between EU Member States and Iceland, Norway & Lichtenstein) and the 2005 Hague Convention on Choice of Court Agreements (between EU Member States and Mexico, Singapore and Montenegro) also continue to apply to the UK as if it were an EU Member State.   Domestically, the Civil Procedure Rules operate without amendment and EU law is applied in the UK courts, consistently with CJEU decisions.

Potential dispute resolution frameworks after the transition period

As the transition period ends, however, the focus returns to contingency planning for a No Trade Deal scenario.  If there is no agreement between the UK and EU, subject to any savings provisions, the reciprocal arrangements existing under the current regime will cease to apply at the end of the transition period.  For proceedings begun after the transition period (absent any international arrangement applying), establishing the jurisdiction of the English Courts and enforcement of UK judgments in the EU will depend upon the common law and the relevant Member State's domestic rules. This may add uncertainty, time and cost to disputes.  Parties will need to take such risks into account in their litigation strategy and timing, particularly over the next six months.

Notwithstanding the potential for disruption, there are important areas of stability. 

Ongoing proceedings

The Withdrawal Agreement sets out that certain provisions of EU law will apply to ongoing judicial proceedings after the transition period.  Practically, this means in those circumstances, EU Member States will continue to uphold English jurisdiction clauses and to enforce any resulting judgments relating to proceedings issued before the end of the transition period.  In addition, given the universal application of the Rome I and Rome II Regulations (concerning the law applicable to contractual and non-contractual obligations), with limited exceptions, EU Member State courts will continue to respect English governing law clauses in contracts.

UK's participation in international dispute resolution frameworks

There are also some steps towards finalising alternative arrangements.  The UK Government has submitted its application to continue to participate in the Lugano Convention, and will accede to the Hague Convention as an independent contracting party.  Whilst Hague will provide a similar enforcement mechanism for English judgments in the EU (and vice versa) to the current regime, it will only apply where there is an exclusive jurisdiction clause in scope and in favour of the relevant court concluded after Hague entered into force and proceedings began after its entry into force in the relevant state.  There are areas of uncertainty, including as to whether Hague applies during the period the UK was not an independent contracting party, and where the relevant exclusive jurisdiction clause was agreed before the end of the transition period.

Dispute resolution clauses

The well-rehearsed benefits of English law and the English court system should not be affected by Brexit and enforcement risk can be excluded, without foregoing English law, by considering arbitration.  Arbitration is regulated by a different system to English litigation, and is unaffected by the UK's exit from the EU. 

Reputation Protection

For those seeking to protect their reputation against potentially defamatory statements, it may be harder to bring claims in this jurisdiction:

  • Where the defendant is domiciled in the EU or a Lugano Convention country (Iceland, Norway or Switzerland), a claimant can currently sue i) in the place of the defendant's domicile for the harm caused worldwide; ii) in the place where the claimant has their "centre of interests" (normally their habitual residence), again for global harm; or iii) separately, in each jurisdiction where publication occurred, but in each case only for the harm caused in that jurisdiction (the "mosaic" approach).
  • However, where the words complained of have been published online, the claimant must choose a single EU Member State/Lugano Convention country in which to sue for worldwide harm: either the defendant's place of domicile or the claimant's centre of interests.
  • At present, all other countries are caught by s.9 Defamation Act 2013, which prevents our courts from accepting jurisdiction for a defamation action against a person not domiciled in the UK or another EU Member State/Lugano Convention country unless the claimant can satisfy the court that, of all the places in which the statement complained of has been published, England and Wales is "clearly the most appropriate place". This envisages a single, most appropriate jurisdiction and obviously makes it more difficult to pursue a defendant outside the EU/Lugano Convention area, even for domestic claimants.
  • Currently, if there is no trade deal before the end of the transition period, specifically if we fail to come to an arrangement that retains the key features of the Brussels Recast Regulation and 2007 Lugano Convention, the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 (SI 2019/479) will come into force on 1 January 2021 and amend s.9 so that it applies to all foreign defendants, not just those outside the EU/Lugano Convention area. In other words, the reach of s.9 may soon increase significantly.

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