Brexit: Impact on dispute resolution

By:

Following the UK's vote to leave the European Union, we consider the potential implications for dispute resolution.

Key issues 

Currently the UK is part of a harmonised EU legal system that includes cross-border frameworks dealing with issues of jurisdiction, governing law and enforcement. This is likely to change post-Brexit. A number of areas are likely to be affected. 

Enforcement of judgments: Enforceability of English court judgments in the EU could become less straightforward (and vice versa). In the absence of agreement, the courts of Member States will apply their own laws when determining questions of enforcement, and local law advice will be required. 

Jurisdiction: English courts are likely to continue to uphold the parties' choice of jurisdiction, but lack of enforcement reciprocity and other uncertainties could discourage parties from choosing England as a forum for disputes. 

Governing law: There will be uncertainty over the application of conflicts of law rules if EU rules on the law applicable to contractual obligations and non-contractual obligations fall away. An English court is still likely to give effect to the parties' choice of law when it comes to contracts, but the position is less clear when it comes to non-contractual obligations. 

Substantive English law: There may be uncertainty about the boundaries between English and European law where they overlap, pending re-definition of the UK's political and legal relationship with the EU. The unwind process is going to be complex. 

Arbitration: This may become more attractive where the enforcement of court judgments is a concern. 

Delaying tactics: We may see the return of 'Italian Torpedo' (parallel proceedings) risk. This lengthy delay tactic, which can stall disputes for years, recently became less of a risk with the introduction of Regulation EU No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (known as the Brussels Regulation (recast)). 

Service: Service of legal documents may become more difficult. 

Disputes likely: Some parties may seek to terminate contracts. Over time, we could see a range of complex and creative Brexit-related arguments. 

Privilege: It is unclear whether English qualified lawyers will still be able to assert privilege over their advice in front of EU courts (e.g. the CJEU). This has led to a number of UK competition lawyers seeking to register as Irish-qualified lawyers. 

Potential impact 

Much turns on the outcome of exit negotiations. It is in the interests of both the EU and the UK to agree effective replacements to the existing regime, through either a continuation of existing legislation or agreeing substitutes which make sense in a post-Brexit environment. Even if this does not happen, the English courts - known for their independence, commercial sophistication and efficiency - and English governing law - well-established over centuries - will continue to have appeal in a global market. 

Actions  

  • Ensure that all contracts contain a well-drafted choice of governing law and jurisdiction clause. Include Brexit waivers where appropriate, whereby the parties expressly waive any objection to the choice of English jurisdiction or English governing law on the grounds of a Brexit or a Brexit-related issue. Waivers of any objection to enforcement of an English judgment should also be included. These basic steps will mitigate, although not extinguish, the risk. 
  • Include a process agent service clause, so that if England loses the benefit of EU rules on service of judicial documents, this has no impact on the mechanics for service.  
  • If you are already holding or expecting an English judgment which will need to be enforced in the EU, act quickly to avoid future uncertainty.  
  • Consider arbitration, rather than court proceedings (although this will not be appropriate in every case).
For a more detailed analysis of the issues, please contact the authors or your usual DLA Piper contact.