Further detail is awaited on future arrangements for civil justice cooperation between the UK and the EU. In the meantime care is needed over contractual dispute resolution clauses.

In brief

  • 2018 will see further detail emerge on the level of future cooperation between the UK and the EU on civil justice matters.
  • There is broad agreement on the treatment of jurisdiction and governing law for agreements and non-contractual events preceding Brexit, but details of transition arrangements are not yet confirmed.
  • Novel dispute resolution clauses attempting to limit the uncertainty of Brexit will be seen, requiring careful thought and drafting.

Some common ground

In the middle of 2017, both the EU and the UK published position papers on the issue of civil judicial cooperation post-Brexit. The EU paper dealt only with transition issues, but there was almost total unanimity with the UK. The existing EU rules governing jurisdiction would continue to apply to all proceedings instituted before the withdrawal date and to choices of court made before the withdrawal date. The EU rules governing the applicable law for contractual and non-contractual obligations would continue to apply to contracts concluded before withdrawal and, in respect of non-contractual liability, to events giving rise to damage which occurred before withdrawal. The rules on the recognition and enforcement of judgments would continue to apply to decisions made before withdrawal.

The UK also set out its stall as to the long-term position. The UK paper said that the UK would seek to participate in the 2007 Lugano Convention (which effectively mirrors the old Brussels Regulation), and would replicate domestically the Rome I and II Regulations on choice of law. It also stated the UK’s intention to sign up in its own right to the Hague Convention on Choice of Court Agreements, to which the EU is presently a party on behalf of all Member States (including the UK).

This encouraging start was then followed by the EU publishing a very downbeat Notice to Stakeholders on 21 November 2017 pointing out that the EU provisions on cross-border jurisdiction and on the recognition and enforcement of judgments would cease to apply on the withdrawal date, whatever transitional arrangements might be made.

But the position changed again on 08 December 2017 when a “breakthrough” deal was agreed between the UK and the EU. The accompanying EU paper contained a paragraph on “cooperation in civil and commercial matters” effectively confirming the position on transition issues set out previously. There was also a cryptic reference to the need for “agreement to provide legal certainty as to the circumstances under which Union law on jurisdiction, recognition and enforcement of judgments will continue to apply, and that judicial cooperation procedures should be finalised.”

What it means for you

So where does this leave us on the issue of jurisdiction and choice of law clauses? Some contracting parties are already trying to manage the uncertainties with novel clauses, for example choosing the courts of England but with a provision that if the enforceability of an English judgment in the EU is significantly reduced following Brexit then the jurisdiction is switched to the courts of an EU Member State, such as Ireland. In general, such clauses are inadvisable. Any jurisdiction clause that introduces potential uncertainty may create satellite litigation before the substantive dispute can be addressed. Any jurisdiction clause which is “switchable” in this way could also be argued to be non-exclusive and therefore fall outside the provisions of the Hague Convention, accession to which is the only option for UK judgments to remain enforceable across the EU that does not require other states’ approval.

On jurisdiction, if a party wants the English Court to have jurisdiction, then an exclusive choice would be best. If the UK does accede to the Hague Convention, as seems certain, such a clause should be recognised and judgments enforced throughout the EU. On the other hand, if, as seems possible, the EU and the UK reach agreement on conflicts of laws issues, then it is very likely that an English exclusive choice of Court agreement would continue to be recognised and enforced in the EU as is the position now.

As to choice of law, the position post-Brexit will probably not change significantly. Either the Rome Regulations will continue to be applicable or these will be enacted domestically in the UK.

There is perhaps some reason for cautious optimism as we enter 2018….