As parties assess changes in the legal, economic and regulatory landscape caused by the UK exit, and the costs and other implications on their contractual relationships, they are more likely to consider the scope for avoiding contractual obligations, such as seeking to rely on a force majeure clause or a material adverse change clause, or arguing that a contract is frustrated. Businesses will wish to consider carefully the contractual mechanisms on which they (or their counter-parties) may seek to rely to avoid contractual obligations in the context of any negotiation about contractual performance.
The fact that there may be uncertainty as to the content of English law after a withdrawal could in itself lead to disputes, as parties seek to test the position. In its White Paper the UK Government has stated that, by way of the Great Repeal Bill, it will preserve existing EU law pending any decision by Parliament to amend or repeal it. However, it also recognises that changes will have to be made to the extent that existing laws would not function sensibly once we have left the EU, and no doubt more significant changes are likely to follow as Parliament makes decisions on the way forward for the UK outside the EU.
The Government has also said that, in general, it believes that the preserved EU law should continue to be interpreted in the same way as it is at the moment. This seems to express a policy intention that UK courts will apply EU rules of interpretation to these laws and, at least, have regard to CJEU judgments.
With regard to dispute resolution procedures, exit from the EU will mean that key EU legislation regarding jurisdiction and reciprocal enforcement of judgments (namely the recast Brussels Regulation) would no longer apply to the UK. It is likely that the UK would seek to reach an agreement with the EU on such matters, or seek to join existing conventions such as the 2007 Lugano Convention or 2005 Hague Convention on Choice of Court Agreements.
The EU (including the UK) has acceded to the Hague Convention and the UK could easily accede as an independent state. If that happens, judgments will be enforced under the Convention where judgment was given pursuant to an exclusive jurisdiction clause in favour of a UK court or the courts of another contracting state. In its White Paper the UK Government recognises, in the chapter on free trade with European markets, that “an effective system of civil judicial cooperation will provide certainty and protection for citizens and businesses of a stronger global UK” which may indicate that it will seek to achieve a closer agreement with the EU on civil justice than the Hague Convention will provide.
Even in default of any agreement or convention on these matters, it is likely that EU Member State courts will continue to respect exclusive English jurisdiction clauses, and the English courts will do likewise where there is an exclusive choice of an EU Member State court.
At the enforcement stage, the enforcement of English judgments in the EU, or of EU judgments in England, may be more cumbersome, although it is likely that enforcement of money judgments will continue in most cases. It will obviously be important for parties with contracts containing English court dispute resolution clauses to monitor the arrangements negotiated between the UK and EU.
Overall, although there may be some instability and uncertainty, it seems unlikely that Brexit would substantially damage the UK’s position as a premier dispute resolution centre. Arbitration with a seat in London should not be affected by the exit from the EU because it is not regulated by EU law, and because the UK will remain a party to the New York Convention 1958, along with all the remaining EU Member States.
Public and administrative law disputes
Rights of UK businesses trading in the EU to bring disputes with regulators and public bodies in the EU (as well as “horizontal” disputes with private bodies about the application of administrative or public law rules) will continue to be governed by the laws of the relevant EU Member State including EU law. In the continuing EU Member States, questions on the application and interpretation of EU law will still be able to be taken to the CJEU as the final court.
EU and UK businesses operating in the UK will still have recourse to UK courts, but the UK Supreme Court will be the final decision taker, including on EU laws incorporated into UK law. The Government’s policy is that the preserved law should continue to be interpreted in the same way as it is now. This suggests that the UK courts should apply EU rules of interpretation to these laws (for example considering aids to interpretation such as underlying Directives) and may, at least, have regard to CJEU judgments.
The White Paper indicates that the resolution of most or all disputes in relation to any new agreements between the UK and the EU will be at State to State level (with the possible exception of any investment provisions creating private rights directly enforceable against the State). This will leave business with only indirect enforcement rights where the relevant provisions are only contained in a Treaty and are not translated into directly effective provisions of EU or EU Member State or UK law. This may be a distinct loss for business. For example, where a business faces trade barriers not permitted by the Treaty arrangements, persuading the Government or the EU to take up the cause may be difficult, with considerations of cost and practical factors potentially acting as an impediment. There may also be limited circumstances where such a Treaty may be referred to in English courts, for example in order to aid interpretation of UK law.
Where agreements between the UK and the EU are given effect in domestic legislation, there may be more scope for recourse to the UK courts, for example by way of judicial review.