Commercial Law Update: Is It Negligent To Have Exclusive UK Jurisdiction Clauses In Contracts With EU Dimensions?

It goes without saying that Brexit outcomes are uncertain. Nonetheless, many Brexit risks are known and reasonably understood. One of the more obvious future risks is in relation to the enforcement of UK judgments in the remaining EU Member States. With that risk in mind, what are the responsibilities of a lawyer advising on contracts with an exclusive jurisdiction clause for some part of the UK, if enforcement is likely to be sought in another EU Member State?

The duty to advise on known risks

A useful general statement of the law regarding a solicitor's duty and risk is contained in the Irish case of ACC Bank Plc v Johnson [2010] 4 IR 605, where Clarke J stated:

"Professionals should not expose their clients to unnecessary risk without, at a minimum, advising their clients of the risk involved and inviting their client's instructions."

In the context of jurisdiction clauses, the recent English decision in Wright v Lewis Silkin [2016] EWCA Civ 1308 is also particularly instructive. In that case, Mr Wright's solicitors failed to include a jurisdiction clause in a contract with an Indian employer. When a dispute ensued, jurisdiction was contested and by the time it had been resolved and judgment rendered, the counterparties appeared to be insolvent. Mr Wright then sought to sue his solicitors. In the High Court, the solicitors' firm was held liable for the costs of various motions contesting jurisdiction and also for the loss of chance of recovery of damages due to the consequent delay in obtaining judgment. On appeal, the first instance finding in respect of loss of chance was reversed on remoteness grounds but the liability for the costs of the jurisdictional challenges was upheld.

So it is clear that a solicitor can be held liable for not drawing a known risk to a client's attention and it is also clear that such a risk can relate to a failure to properly advise regarding jurisdiction clauses in contracts.

The existing enforcement regimes

Absent a political solution, what are the potential enforcement options? It is reasonably clear that the Brussels Recast Regulation will not apply once the United Kingdom leaves the European Union. There is a stateable argument that the Brussels Convention, which has not been formally abrogated and is an international instrument independent of the EU, could then be used to enforce UK judgments in some of the remaining Member States (but not all because not all of the current Member States are parties to...