28th May 2019
As the UK is currently an EU member state, there is a framework of EU legislation and rules which determines which court has jurisdiction, which law will apply, and the steps to be taken to enforce the judgment if there is a dispute with an EU entity.
While many will argue the current framework is far from perfect, it has operated for some time, and has, in general, worked well in practice. The framework is broadly set out in the 2001 Brussels Regulation, the Recast Brussels Regulation, the Rome Convention, and the Lugano Convention. In particular, a regime for the enforcement of judgments within EU member states or members of the European Free Trade Association (EFTA) is still in place.
In the event of a no-deal Brexit, the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 will come into force. These regulations will revoke certain EU regulations and amend our domestic legislation.
If this is the outcome of the UK’s domestic ‘negotiations’, the result is likely to be a more complex, time-consuming and expensive process for conducting cross-border disputes. But while your business could be dragged into litigation in foreign courts, there are things you can do to manage this risk.
How to manage the risk of cross-border litigation, post-Brexit
One obvious step is to avoid proceedings and resolve the dispute. In general, any written commercial agreement should include provisions giving parties certainty as to how any dispute will be resolved. In particular, terms requiring the parties to attempt, in good faith, to resolve the dispute through some form of alternative dispute resolution (ADR), a governing law clause and jurisdiction clause, or an arbitration agreement.
Even if existing contracts do not expressly require the parties to enter into some form of ADR (including mediation), you should consider it during the preliminary stages of a dispute. However, if ADR is unsuccessful, you will need legal advice and to engage overseas lawyers to identify the jurisdictional and legal issues.
Arbitration agreements in a no-deal Brexit scenario
Another practical step to consider is including an arbitration agreement in your contractual documents, which would make provision for which arbitral tribunal will have jurisdiction, as well as a governing law clause. This should help avoid the uncertainties of a no-deal Brexit.
As to enforcement, the New York Convention requires courts of contracting states to recognise and enforce arbitration awards. Brexit will have no impact on the convention. An arbitral award may well be easier to enforce than a judgment from an English court.
Since the current draft withdrawal agreement includes transitional provisions, most EU law will be maintained until the end of the transition period. However, the draft political declaration does not contain any provisions dealing specifically with civil justice.
A no-deal Brexit would mean that the current framework will fall away, potentially leading to huge uncertainty. Accordingly, now is the time to review commercial agreements with foreign businesses, and to give some thought to the addition of ADR and arbitration provisions to existing and new contracts.