Post-Brexit Disputes: Where are we and what does it mean for your organisation?
An important aspect of the Post-Brexit legal landscape is how to manage cross-border litigation and enforcement involving both UK and EU parties.
Prior to the end of the transitional period, on 31 December 2020, parties involved in cross-border UK/EU civil and commercial disputes could utilise the provisions of the 'Recast Brussels Regulation' which provides harmonised rules around questions of jurisdiction and enforcement of judgments. The Recast Brussels Regulation provided a straightforward procedure for determining which courts of the members states had jurisdiction in particular circumstances, what was to happen if the same or related proceedings were pending in two or more member states and how the courts of Members States should treat exclusive jurisdiction clauses. On enforcement, where you had a judgment from a member state court, there was a common procedure governing enforcement of that judgment elsewhere in the EU.
Current status for UK/EU disputes
As things stand, the position when it comes to cross border disputes involving EU member states is now more complex. In order to claim jurisdiction or seek to enforce a judgment against a debtor in the EU we can look to rely on one of the following:
- The Hague Convention on Choice of Court Agreements: This is applicable if the contract between one party and another has an exclusive jurisdiction clause i.e. stating that the courts of England and Wales have the exclusive jurisdiction to settle any dispute arising out of the agreement. In addition it cannot be an excluded dispute under the Hague Convention as although most commercial agreements should be covered, many other issues including insolvency, tort (i.e. negligence) and some intellectual property matters are not. Where the Hague Convention applies you would not need permission from the court to serve court documents on a party in the EU. Nonetheless, the process can be more complex than that under the Recast Brussels Regulation.
- Any bilateral arrangement in place between the UK and the relevant EU state: It remains to be seen whether we can rely on historic agreements made before the UK joined the EU to resolve issues of jurisdiction and enforcement. Our bilateral agreement with Norway (though not an EU state) has recently been restated so this may be a process that will be followed for EU states depending on whether we re-join the Lugano Convention (see below).
- The common law: This will require the claimant showing, in broad terms, that the case has sufficient merits and that the context of the dispute means that it should be heard in the English Courts.
The Civil Procedure Rules were updated on 6 April 2021 so that permission to serve court documents outside of the UK is not required where the underlying agreement contains an exclusive jurisdiction clause allowing the courts to determine the dispute (even if the Hague Convention does not apply for other reasons). This removal of a procedural hurdle is welcome and should assist claimants who have the benefit of such a clause.
What could make things easier for claimants and judgment creditors?
A way that the process could become more straightforward is if the UK is allowed to join the Lugano Convention. This convention is similar to the Brussels Recast Regulation, but is between the EU, Iceland, Denmark, Switzerland and Norway. The UK previously could rely on this convention in its capacity as a member state of the EU. Since Brexit, the UK must be permitted to join in its own right. The UK does though need unanimous approval of all the other members to the Convention and the EU has not yet agreed. It seems this is a contentious point between the European Commission and the different EU member states. The European Commission has advised against it and the various EU states are negotiating on this between themselves. Ultimately, some member states are keen to allow a streamlined process for their consumers and traders to pursue a UK supplier when a dispute arises.
Another potential path when dealing with an EU party would be to rely on arbitration rather than litigation as the related cross border mechanisms with EU states are unchanged by Brexit. This has pros and cons and you should seek advice on what mechanism would be most appropriate to your context.
In conclusion, what should organisations in the UK be aware of?
Since Brexit, the process to commence or oppose cross border litigation and to enforce judgments with parties or assets based in the EU has become more complex. We have considerable experience in advising claimants and defendants with respect to cross-border litigation and arbitration and can guide you on your options to best protect your rights at the time of contracting, or later through the English courts or in arbitration.