A No-Deal Brexit: The Implications For Disputes

As we approach the deadline of 31 October, it is difficult to predict what will happen. But the prospect of a no-deal Brexit - either then or at some later date - remains a very real possibility. In this blog post we consider the implications of such an outcome for commercial litigation involving the English courts. For these purposes, we assume an exit date of 31 October, but the same issues will arise if there is an extension to the current deadline followed by a no-deal Brexit at a later date.

We have also recorded a webinar which explores the issues in more detail, as part of our series of webinars exploring the implications for business of a no-deal Brexit. The series can be accessed here.

Applicable law

When it comes to the law which applies to determine a dispute, very little will change. Currently, in determining applicable law, all EU courts, including the English court, will apply the Rome I or Rome II regulation, depending on whether they are dealing with a question of the law to govern contractual or non-contractual obligations. The starting point under those regulations is that the parties' choice of law will generally be given effect. It does not matter whether or not the law chosen by the parties, or the law indicated by the rules in the absence of choice, is the law of an EU member state. After Brexit:

EU27 courts will continue to apply Rome I and Rome II, and will continue to give effect to a choice of English law to the same extent as currently. The UK government has legislated to incorporate Rome I and Rome II into English law after Brexit, and so the English court will apply the same rules as currently to determine applicable law. And of course the rules that non-EU courts and arbitration tribunals apply to determine applicable law are not affected by Brexit, so again nothing should change. Jurisdiction clauses and enforcement of judgments

After Brexit, the key EU legislation governing jurisdiction and reciprocal enforcement of judgments, in particular the recast Brussels Regulation, will no longer apply to the UK. Questions of jurisdiction and enforcement as between the UK and the EU27 will then depend, to some extent, on whether the situation falls within the Hague Convention on Choice of Court Agreements 2005.

Before addressing the Hague Convention, however, it is worth pointing out that arbitration with a seat in London will not be affected by Brexit. Arbitration is not regulated by EU law, and the UK and all EU27 states are signatories to the New York Convention 1958. Arbitration clauses will remain effective and arbitral awards will continue to be enforceable in the same circumstances as currently.

Returning to the subject of court jurisdiction and the Hague Convention, the UK is currently party to the Convention by virtue of its EU membership. That will cease if the UK leaves the EU without a deal on 31 October, but in those circumstances the UK will re-join the Convention as a separate party with effect from 1 November 2019. The Convention will then apply to questions of jurisdiction and the enforcement of judgments as between the UK and the EU27 if there is an exclusive jurisdiction clause in favour of either a UK court or the courts of an EU27 state - Hague does not apply to non-exclusive or one-way jurisdiction clauses.

English jurisdiction clauses and judgments:

In general terms, where there's an exclusive English jurisdiction clause falling within Hague, an EU27 court will defer to the English...