Following on from our first instalment of ‘What Brexit may mean for Dispute Resolution’, we now look to examine the impact that Brexit may have on jurisdiction and enforcement, and the potential fallout that this may have on arbitration proceedings.
Jurisdiction and Enforcement
Currently, a piece of EU legislation entitled ‘Recast Brussels Regulation’ governs what court would have jurisdiction in a cross-border EU dispute. This regulation applies to disputes that began on or before 10 January 2015, and provides a comprehensive regime on jurisdiction; mainly to avoid parallel proceedings running in EU courts (which could result in conflicting judgments). Permission is not required to serve an English and Welsh claim abroad under these regulations.
This is especially important to consider in light of Brexit. Even if you do not necessarily have customers in the EU, it may be the case that some of your suppliers are. A thorough review of your supply chain will reveal any international suppliers in the EU and whether any of your contracts require amendment to be certain what law governs the contract and where any dispute with respect to it should be heard. It is best practice to include a jurisdiction and governing law clause into contracts to clarify the law that relates to the contract and what legislation govern its progression to court.
A joint statement by the UK and EU negotiators confirms that in principle the current EU rules on jurisdiction and enforcement of judgments will continue to apply to disputes where proceedings were commenced before the transition period (29 March 2019 to 31 December 2019). This will mean that, so long as a transitional period is agreed, if the parties have included an English jurisdiction clause in the contract, the EU courts must defer to the English court if the clause is exclusive, or if it is non-exclusive and the English proceedings were commenced first.
However, this is reliant on it being discussed in a withdrawal agreement. In the event of a no-deal Brexit, there would be no automatic judicial cooperation between the UK and EU. The Recast Brussels Regulations would no longer apply, nor would the Lugano Convention, which currently covers jurisdiction and enforcement within EFTA countries, such as Switzerland and Norway.
It is currently unclear what will happen to enforcement and jurisdiction and which framework (if any) will be adopted. For example, if a no-deal Brexit is agreed, there would likely be an end to UK/EU judicial cooperation.
In any event, it is important that contracts contain an express jurisdiction clause for certainty. Agreeing law and jurisdiction upfront in contracts would help to eliminate any potential problems, as it is likely that express jurisdiction clauses will continue to be respected and upheld post Brexit.
In light of the above uncertainty in relation to enforcement of court judgments, we expect to see a rise in arbitration clauses in light of Brexit.
Arbitration is a form of Alternative Dispute Resolution. Like a judgment, the decision of an arbitration tribunal is final and binding. Arbitration is instead governed by the Arbitration Act 1996 and most often the London Court of International Arbitration and New York Convention rules.
As a result, a contractual agreement to arbitrate in, for example, London and any resultant arbitral award will continue to be enforceable across 156 jurisdictions (including all EU Member States) after 29 March 2019.
With the certainty that an arbitration clause brings, it may be advisable for parties to incorporate one into the existing contracts and/or include one in future contracts until the rules on enforcement become clearer.
For further information, help or advice in relation to what Brexit means for your business, please contact our Dispute Resolution team.