No-deal Brexit and commercial disputes
4th June, 2019
With the UK exiting the EU without a deal still a possibility, Commercial Litigation Partner Elaine Chan has some considerations for businesses involved in current or future cross-border disputes.
There is little doubt that resolving such disputes will become more complex and costly in the event of a no-deal Brexit. So what steps might a business take if they are heading for a dispute with a commercial or contracting partner in, or concerning, an EU country?
Practical steps to take:
1. Consider Choice of Law and Jurisdiction clauses
- Within the EU, jurisdiction and the regulation and enforcement of civil judgments is principally governed by the recast Brussels Regulation, and the Lugano Convention, which will no longer apply between the UK and EU27 following Brexit. This raises several jurisdictional issues, such as whether parties in member states’ courts will respect an exclusive jurisdiction clause in favour of the English courts. Where businesses have an exclusive choice of court agreement, the UK has acceded to the Hague Convention on Choice of Court Agreements 2005 in its own right. This is applied in all EU countries except Denmark, and some non-EU states and will enter into force for the UK on 1 November 2019 in the event of a ‘no-deal’ scenario.
- In light of the above, businesses negotiating contracts should think carefully about their Choice of Law and Jurisdiction clauses. Such clauses should be drafted to make clear which courts are to have jurisdiction in the event of a dispute and which law is to govern the contract, and to consider whether an arbitration clause would be more practical.
2. Evaluate current disputes
- Parliament has passed regulations relating to the service of documents and taking of evidence in civil and commercial matters which come into force on exit day. The regulations contain transitional provisions which mean that the EU Service Regulation will continue to apply to outstanding requests for service which were received in the UK before exit day.
- Where proceedings have already been issued, parties should ensure they serve proceedings as soon as possible to make use of the regulations. If further along the process a judgment has been granted, enforcement action should be commenced as soon as possible before 31 October 2019 for the same reason.
- Businesses already engaged in a dispute would be advised to consider urgently whether they wish to commence proceedings bearing uncertainty post-Brexit in mind. However, if they choose to do so, where there is an exclusive choice of court agreement, the Hague Service Convention will continue to remain available for service proceedings between the UK and other contracting states. All other EU member states except Austria are also contracting parties.
3. Consider professional legal advice
- Any party to a cross-border legal dispute, including businesses, consumers and families, need to consider the effect that these changes would have on any existing or future cases involving parties in EU countries. The interaction between the relevant governing rules, which is not entirely clear, and with certain countries not recognising judgments from the UK, businesses and individuals may wish to take professional legal advice on the implications of these changes for your individual circumstance.
Uncertainty remains in terms of the circumstances in which the UK will withdraw from the EU on 31 October 2019. Should you wish us to advise you on how a no-deal Brexit could affect your dispute, please contact Elaine Chan.
We have created a Brexit checklist to assist businesses with the various challenges and opportunities presented by Brexit. Please click here to view.
We also have a weekly round-up of the latest developments on Brexit, please click here for a list of our previous round-ups.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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