Brexit: Implications for Dispute Resolution
Brexit has now well and truly arrived and brings with it changes to a number of important areas concerning cross-border litigation between the United Kingdom (UK) and the European Union (EU). Below is a brief summary of some of those changes, primarily from an English law perspective and with a focus on commercial contractual matters. For further information, please see the Feb. 2, 2021, Holland & Knight Alert, Brexit: Implications for Dispute Resolution.
- If English law was suitable to govern a transaction prior to Brexit, there is no good reason to depart from that view now. For all intents and purposes, it will be applied in the same way as before Brexit – by the same judges in the same courts.
- A choice of English law to govern contractual and non-contractual obligations will generally continue to be respected in the English courts and in the courts of EU Member States.
- The position regarding jurisdictional matters is more complex. Under the pre-Brexit rules, with very few exceptions, a choice of court agreement in favour of an English court was respected by the courts of EU Member States (and vice versa), and a judgment of an English court was enforceable in the EU (and vice versa).
- For choice of court agreements, the position now depends on whether or not it concerns an exclusive choice of court agreement. For exclusive agreements entered into after Dec. 31, 2020, the Hague Convention on Choice of Court Agreements of 2005 (Hague 2005) will apply, in which case the position regarding the recognition of the choice of court agreement should essentially be the same as it was prior to Brexit. For non-exclusive jurisdiction agreements (and, for the time being, it is safest to assume that asymmetric jurisdiction agreements will be treated in the same way), the position will depend on the relevant national laws. That could mean an increased likelihood of parallel proceedings and applications for anti-suit injunctions.
- The enforcement of judgments will be governed by the relevant national laws on the enforcement of judgments made in third countries and, if it applies, Hague 2005 (see above). The type of judgment that can be enforced will be narrower in scope, and the procedure is likely to be different and will take longer, in each case, particularly where Hague 2005 does not apply. Having said that, England and most EU countries have well-established rules for the enforcement of at least certain types of judgment made in third countries.
If the UK is allowed to join the Lugano Convention 2007 in its own right (having previously been party to it when it was in the EU), the position set out above will revert, to a reasonably large extent, to what it was prior to Brexit. However, for that to happen, the consent is required of all of the remaining members of the EU and the three European Free Trade Association (EFTA) states – Iceland, Norway and Switzerland – to which the Convention applies. So far, only the EFTA states have indicated a willingness to allow the UK to join.
- The rules on service of documents have changed, so that the previous reasonably efficient procedure for the service of documents within the EU no longer applies. The new procedures are likely to be more cumbersome, lengthy and costly than the pre-Brexit position. The practical way around the issue is to ensure that a contract has agent for service of process provisions.
- Arbitration is unaffected by Brexit and the changes outlined above. It remains to be seen if it becomes a more popular choice of dispute resolution. It does not necessarily follow that arbitration will be a better option just because of the changes, and parties should weigh the pros and cons of arbitration and litigation on a case-by-case basis.
Take home point
The changes brought about by Brexit in this area reinforce the need for parties involved in transactions with UK and EU elements to pay the same level of attention to the dispute resolution provisions of their contracts as when dealing with non-EU situations. As always, the importance of giving careful consideration to these issues at the outset – and on a multijurisdictional level – cannot be overstated.