Whilst the attraction of having English law to govern a contract will remain substantially the same post Brexit, the three key questions are:
(1) Will European Courts continue to recognise choice of law clauses in contracts;
(2) Will European Courts continue to enforce English judgements; and
(3) What impact will this have on whether the parties decide to litigate in England?
Choice of law clauses
With respect to recognition of choice of law clauses in contracts, at present the European statute Rome I requires all domestic courts within the EU to uphold parties’ choice of law contractual clauses. Post Brexit this may cease to apply. If that is the case the simplest situation would be for the UK to revert to the position before Rome I, this means applying the Rome Convention which has similar terms as Rome I particularly with respect to parties’ choice of law. It is also highly likely that after Brexit domestic courts within EU countries will continue to uphold an English jurisdiction clause because Rome I still applies to them. So far so good.
Enforcement of judgements
The next and more concerning area of interest is the mutual enforcement of judgements in Member States of the European Union and this is where things get a little more uncertain. Depending on the outcome of the Brexit negotiations, the Recast Brussels Regulation (Brussels I Regulation (recast) EU/1215/2012) which regulates the recognition of judgments in civil and commercial matters may cease to apply with the effect that the procedures adopted for UK judgments to be recognised and enforced in Europe and vice versa will no longer be available. Unlike recognition of choice of law there is no default position which means that should the Recast Brussels Regulation no longer apply it will be up to each European country to decide if and how it will enforce a judgment of the English Courts’ and not the harmonised approach that there currently is.
There are potentially a number of ways to deal with this including providing for non-exclusive jurisdiction to the English Courts and naming an EU member state court as an alternative thereby allowing for a choice to be made of which country’s court to litigate in depending on where enforcement will take place. A bolder approach is to give sole jurisdiction to a court of an EU member state though the attractiveness of this will understandably vary depending on the country’s judicial system. Either approach though entails relying on a different judicial system and not litigating in an internationally renowned forum which may not be attractive to any of the parties.
Arbitration and international enforcement of awards
Arbitration is a private dispute resolution procedure that is often quicker than litigating through the courts (see our earlier article on disclosure in arbitration). It is not adjudicated by judges but by arbitrators who can often be chosen by the parties and have experience in the area concerning the dispute. Another often key motivator for parties putting an agreement to arbitrate in their contracts is the ability to successfully enforce an award internationally.
The New York Convention (Convention on Recognition and Enforcement of Foreign Arbitral Awards) allows for the enforcement of an award made in one signatory country against assets located in another signatory country. Indeed it is an obligation that signatory countries must enforce arbitral awards in accordance with their own rules but without imposing substantially more onerous conditions or higher fees than would be the case for domestic awards.
Accordingly, whilst there is uncertainty as to what the legal landscape will look like and how UK judgments will be enforced in Europe in a post Brexit environment, arbitration will remain as attractive as ever.
Forums for litigating post Brexit
Whilst there is an argument that parties may decide not to go to the English courts to resolve their disputes due to issues of enforcement of a judgment a situation can also be foreseen where arbitration using English law and with London as the seat will become more popular than ever due to the fact that parties whatever their nationalities prefer litigating in London with its rich tradition of providing high quality legal services.
For more information on the above, please contact a member of our litigation and dispute resolution team.