Disputes about existing contracts
The UK exit may impact on existing contracts, particularly those based on EU legislation. Parties may try to avoid contractual obligations or renegotiate a contract. With regard to existing contracts (that govern relationships beyond the two-year window before the UK formally leaves the EU), parties should review relevant clauses such as force majeure and material adverse change. Parties may consider including a 'Brexit' clause in any new contracts so that the parties agree in advance what will happen on the UK exit.
Disputes about English law
A UK exit will mean that some English law may be repealed or amended. This may lead to a period of uncertainty over both UK legislation and how pre-exit EU case law impacts on the UK courts post-exit. These uncertainties are likely to lead to disputes.
Jurisdiction and enforcement
Unless decided otherwise, the UK exit will mean that the Recast Brussels Regulation will not apply to the UK. It may be that the UK and EU enter into a parallel arrangement on the same/similar terms as the Recast Brussels Regulation. Alternatively some or a combination of the following regimes may apply:
- English domestic rules on jurisdiction and enforcement of judgment.
- The Brussels Convention.
- The Lugano Convention (subject to UK accession).
- The Hague Convention (subject to UK accession).
Unless an agreement is reached, the UK exit will mean that there will be no automatic enforcement of judgments between the UK and EU. Without such agreement, enforcement between the UK and remaining EU member states is likely to take longer, cost more and generally be more difficult.
The current protection against EU parallel proceedings will not apply on the UK exit. If the UK accedes to the 2007 Lugano Convention, some protection against EU parallel proceedings will apply, however not the recent changes introduced by the Recast Brussels Regulation giving precedence to the courts of the country that the parties have agreed have exclusive jurisdiction (blocking the tactic known as an 'Italian torpedo').
Parties with an English jurisdiction clause concerned about enforcement within member states would be advised to make sure that they have an exclusive English jurisdiction clause.
On exit the conflict of law rules currently set out in the Rome I (contractual obligations) and Rome II (non-contractual obligations) Regulations will not apply in the UK courts. It may be that the Government decides to continue with the current rules but with the English courts taking the role of the ECJ. Alternatively they could revert to the pre-Rome I and II rules contained in the Rome Convention (contractual obligations) and the Private International Law (Miscellaneous Provisions) Act 1995 (non-contractual obligations). The Rome Convention is very similar to Rome I and most commercial contracts contain an express choice of law clause in any event. However, the old rules governing non-contractual obligations do not allow parties to choose the law that applies to non-contractual relations, which may lead to a different conclusion than that under Rome II.
The remaining EU member states will continue to apply Rome I and II.
The UK exit will mean that the EU Service Regulation will not automatically apply and permission to serve proceedings out of the jurisdiction may be required. This will increase the time and cost of service out of the jurisdiction. Parties doing business with non-English parties should make sure they appoint an agent for service in England where they have agreed to the jurisdiction of the English courts.
The English courts may issue an anti-suit injunction if the court of a remaining member state fails to recognise an English jurisdiction clause. Since 2004 these injunctions have not been allowed by the ECJ.
The UK will remain a party to the New York Convention. The English courts may decide that they can issue anti-suit injunctions to protect a London arbitration, as the West Tankers case (which prevented anti-suit injunctions in support of arbitration) was a decision of the ECJ.