What would a ‘no deal’ mean for international litigation?
Against a background of political uncertainty, the chance of a ‘no deal’ Brexit remains a very real possibility, with both the UK and EU preparing for this very event as best they can. Our experts in international dispute resolution, David Vaughan and Sneha Nainwal, explore the real implications that such a scenario may present…
A no deal would mean that the UK’s justice system would no longer be part of the EU’s civil judicial cooperation framework. This would have a significant impact on cross-border litigation, particularly in respect of issues relating to the choice of law, choice of jurisdiction, and recognition and enforcement of foreign judgments.
Currently, all international litigation issues are determined in accordance with the rules set out in various International Conventions and EU Regulations, which apply to the UK either because it is a signatory in its own right or by virtue of its EU membership.
However, in the event of a ‘no-deal’ Brexit, the EU Regulations that operate strictly based on reciprocity will cease to apply to the UK. Not only this, but the International Conventions, which currently only apply to the UK because of its EU membership, will also cease to apply until the UK becomes a signatory and re-joins the Convention in its own right.
In this scenario, the four key Regulations and Conventions that assume importance are:
• The Rome I and Rome II Regulations – which deal with the choice of law provisions in international disputes. These regulations will be retained by the UK as they do not rely on reciprocity to operate.
• The Recast Brussels Regulation – which deals with the rules governing jurisdiction and the recognition and enforcement of judgments within the EU. This would be repealed by the UK as it requires reciprocity to operate.
• The Lugano Convention – which forms the basis of the civil judicial relationship with Iceland, Norway and Switzerland. This will no longer apply to the UK as it is not a signatory to the Lugano Convention in its own right but only enjoys the benefit as an EU member. However, the UK could re-join further down the line.
• The 2005 Hague Convention – which governs the choice of court agreements with signatories including the EU member states, Singapore and Mexico. This will cease to apply to the UK following March 2019, as the UK is not a signatory but only enjoys the benefit of the Convention as an EU member. However, the guidance paper states that the Government will ratify the Hague Convention on behalf of the UK from 1 April 2019, making the UK a member in its own right.
There is also a suggestion that the bilateral enforcement treaties, concluded between the UK and various EU member states including France, Germany, Austria, Italy and Netherlands during the period of 1934 to 1969, could potentially be revived to provide an alternative mechanism for recognition and enforcement.
How can parties protect themselves?
• Include clearly structured choice of law and choice of jurisdiction clauses in contracts to provide more certainty.
• Where possible, parties should opt for exclusive jurisdiction clauses, as the 2005 Hague Convention does not apply to jurisdiction agreements that are non-exclusive or asymmetric
• Consider arbitration where possible as an option for resolving disputes and include arbitration clauses in contracts.
• If contracts do not allow for arbitration, then parties are advised to commence proceedings before 29 March 2019.
• Parties with existing or imminent litigation against EU parties may also wish to accelerate any litigation or enforcement of any interim remedies or final judgments, in order to take advantage of the automatic recognition and enforcement mechanism currently available under the Recast Brussels Regulation.
Whilst current uncertainty could make the UK a less desirable forum for litigation in the short term, Brexit is unlikely to detract from the primary reasons commercial parties choose the English courts in the long run: quality, consistency, honesty, transparency and technical knowledge will shine through.