With press coverage on Brexit ranging from: the impact upon the price of goods in your shopping trolley, to visas for Premier League footballers and the career aspirations (and hairstyles) of the competing political personalities, it can be difficult to focus on what an EU exit may mean in practical terms for you and your business. We set out below the key areas of impact for disputes.
Disputes about existing contracts
A UK exit may impact upon existing contracts particularly those based upon EU legislation. Parties may try to avoid contractual obligations or renegotiate a contract in the event of a UK exit. In existing contracts (that govern relationships beyond the two-year window before the UK would formally leave 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 would happen in the event of a UK exit.
Disputes about English law
A UK exit would mean that some English law may be repealed or amended.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 upon the UK courts' post-exit. These uncertainties are likely to lead to disputes.
Dispute Resolution process
Jurisdiction and enforcement
Unless decided otherwise a UK exit would mean that the Recast Brussels Regulation would not apply to the UK. It may be that the UK and EU would 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 a UK exit would 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 would not apply on a UK exit. If the UK accedes to the 2007 Lugano Convention some protection to 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 a '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 would not apply in UK courts. It may be the government decide to continue with the current rules but with the English courts taking the role of the Court of Justice of the EU (CJEU). 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 that that under Rome II.
The remaining EU Member States would continue to apply Rome I and II.
A UK exit would mean that the EU Service Regulation would not automatically apply and permission to proceedings out of the jurisdiction may be required. This would 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 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 CJEU.
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 CJEU.