UK: Cross Border Litigation After Brexit – What To Do Following The Government's Position Paper

The UK government has published a "future partnership paper" on how it proposes to secure a framework for cross-border judicial co-operation after Brexit. Like many in its series of position papers, this is high on ambition and rather light in places on concrete details. Political and media focus has centred on the future role of the Court of Justice of the European Union and the statement that the UK, once a non-member state, will be outside the CJEU's direct jurisdiction. But, for businesses doing cross-border trade, the key issue is whether it is now any easier to predict how future disputes would be dealt with and what steps are possible now to protect their interests when drafting relevant contract clauses.

Governing law clauses

Implications

A contractual choice of English governing law will continue to have the same effect after Brexit and to be upheld to the same extent as currently by courts in the remaining EU 27 states.

This is an area where the position paper is reassuringly clear. The UK government has confirmed it intends to incorporate the terms of Rome I and Rome II into domestic law. These deal (respectively) with the law applicable to contractual and non-contractual obligations. Subject to some specific exclusions, EU courts currently uphold the parties' choice of law regardless of whether the stipulated governing law is that of an EU member state or not. In other words, even when the UK exits the EU, the remaining EU courts should respect a choice of English law in most cases, unless one of the exclusions applies. It always seemed likely that the UK would incorporate Rome I and Rome II into domestic law and this is an area where it can act unilaterally without needing the remaining EU member states to agree.

Jurisdiction clauses and the recognition and enforcement of judgments

Implications

The position paper suggests that the UK will definitely put in place some kind of substitute regime to ensure the ongoing effectiveness of English (or other UK) court jurisdiction clauses and the recognition and enforcement of judgments given under them. A new deal that does indeed closely reflect the current pan-EU arrangements would be ideal but at a minimum the 2005 Hague Convention will apply (as the UK can unilaterally join without EU consent). Until the outcome is clear, it is sensible to draft clauses providing for the jurisdiction of the English/other UK courts as an exclusive jurisdiction provision as the 2005 Hague Convention will cover these.

The Recast Brussels Regulation currently comprises the main set of rules concerning which EU member state courts should have jurisdiction to deal with disputes in civil and commercial matters. Except for some cases of mandatory or special jurisdiction, EU courts will give effect to the parties' choice of court. The Recast Brussels Regulation additionally provides a system of reciprocal recognition and enforcement of judgments within the EU. This provides a relatively straightforward and speedy administrative process to enforce a judgment given by one EU court in the courts of another member state. There are few grounds for refusing enforcement of a qualifying judgment.

The problem for the UK government in replicating these arrangements is their reciprocal nature. It cannot achieve this unilaterally. The position paper states that the UK will seek to agree a framework which "reflects closely" the current position. In theory, other EU states should also be keen to negotiate an agreement upholding jurisdiction clauses in favour of their courts, and safeguarding the recognition and enforcement of judgments given by those courts, in the UK. But this is where the UK's position on the jurisdiction of the CJEU could be a factor. The government apparently wants to secure an agreement that mirrors, as far as possible, the current regime under the Recast Brussels Regulation. However, EU negotiators may well take the view that the CJEU should continue to be the final arbiter of how those principles must operate in practice. 

There are two other international agreements relevant to this area in which the UK currently participates:

• the 2005 Hague Convention on Choice of Court Agreements. This provides a regime for the validity and effectiveness of exclusive only jurisdiction agreements and the reciprocal enforcement of resulting judgments as between contracting states. At present, it is in force between Mexico, Singapore and the EU.
• the 2007 Lugano Convention. This deals with jurisdiction and the recognition and enforcement of judgments between EU member states and the EFTA states of Iceland, Norway and Switzerland. It is based on the predecessor of the Recast Brussels Regulation so its regime, while the same in many respects, omits some key features.

The position paper states the aim will be for the UK to enter both of these arrangements in its own right, after Brexit. Certainly, membership of either – or both – of these conventions would go a considerable way to filling the gap if the UK cannot agree terms with the remaining EU states that fully replicate the Recast Brussels Regulation. The UK can ratify the 2005 Hague Convention without needing EU or other third party approval. But future membership of the Lugano Convention would require unanimous agreement of all contracting parties.

Other practical issues affecting cross-border disputes

Implications

In contracts in relation to which you might need to serve proceedings on a party in an EU member state, include a suitable service of process clause – for example, providing an address for service within the jurisdiction. This can also circumvent the need to seek the court's permission to serve out of the jurisdiction.

The government has confirmed that it intends for the UK to continue to participate, after Brexit, in the current Hague Conventions which promote international civil judicial co-operation on issues such as service abroad of judicial and non-judicial documents and taking evidence abroad. The position paper does not make clear if the government intends to try to reproduce the existing pan-EU arrangements in these areas (the Service Regulation and the Taking of Evidence Regulation).

Conclusions

It is debatable whether the UK negotiation team will secure new arrangements in this area which, as the position paper suggests, can make cross-border litigation involving UK and EU parties "easier, cheaper and more efficient for all involved". But the paper provides some useful indications of the government's intended direction of travel and confirms some previous assumptions about the most appropriate options when drafting dispute resolution provisions in these uncertain times.

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