England's vote to leave the EU has sparked a lively discussion on its possible consequences on the popularity of English law and courts in international commercial contracts. In a recent seminar in Washington DC, Lord Goldsmith made a powerful speech in support of the thesis that Brexit will have no effect on London's popularity as a seat of arbitration. This is probably true, due to the fact that recognition and enforcement of international arbitral awards is based on the 1958 New York Convention, which will be unaffected by Brexit.
However, as to forum selection clauses referring to courts in England, the case may be different. In countries like Finland, where the main rule is that foreign court judgments are neither recognized nor enforceable without a treaty providing for recognition and enforceability, what the future holds for UK judgments will depend largely on the terms of the Brexit. As for now, the recognition and enforceability of UK judgments relies on the Brussels regulation, which in turn is linked to membership in the EU.
What about the references to English law as the governing law in international commercial contracts? Brexit is not likely to have any effect on the core areas of contract law. Unlike many continental and the Nordic legal systems, English contract law has a reputation for applying the contract to the letter, rather than seeking to identify a broader common business rationale between the parties. Indeed, in a 2015 decision the English Supreme Court emphasized that "commercial common sense" should not be used to diminish the importance of the actual words used, even if this leads to a surprising result. In the words of Lord Neuberger:
"…while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed."
Brexit is not likely to bring about any change in the principles of English contract interpretation. When submitting a contract to be governed by English law, it is important to understand the possible consequences of such choice and to have the contract language meticulously reviewed by experienced counsel.