As a current Member State of the EU, the UK participates in the comprehensive system of private international law that applies to all Member States. The leading instruments are:
1. Recast Brussels Regulation6 on jurisdiction and recognition and enforcement of judgments in civil and commercial matters (the “Recast Brussels Regulation”).
2. Rome I Regulation7 on the applicable law to contractual obligations (“Rome I Regulation”).
3. Rome II Regulation8 on the applicable law to non-contractual obligations (“Rome II Regulation”).
4. Service Regulation9 on the service in Member States of judicial and extrajudicial documents in civil or commercial matters (“Service Regulation”).
5. Taking of Evidence Regulation10 on the cooperation between the courts of the Members States on the taking of evidence in civil and commercial matters (“Taking of Evidence Regulation”).
Post-Brexit, the above EU rules will no longer apply to the UK. So what takes their place?
That is the million-dollar question. At the time of writing, there is no agreed Brexit deal and it is questionable as to whether there will be one. The UK Government has presented three draft withdrawal agreements to Parliament for approval, all of which have been rejected. We do not, therefore, speculate as to what a final deal may look like (although in the event of a deal, the current proposal is that there will be a transition period during which the present position will remain until the end of 2020). The current Prime Minister, however, appears to be prepared for a ‘no deal’ Brexit. The general consensus from the business community is that a ‘no deal’ Brexit is the worst possible outcome. So, let’s analyse this – it is always good to hope for the best but prepare for the worst.
In the event of a ‘no deal’ Brexit, the European Union (Withdrawal) Act 2018 (“EUWA”) will convert all existing direct EU legislation into UK law upon what is referred to as ‘exit day’ (currently 31 October 2019). The UK government can then decide which of those laws it wants to keep, change or remove; indeed, it has already begun to do this (see below). As for the case law of the Court of Justice of the EU (“CJEU”), the EUWA provides that on or after ‘exit day’, the UK will not be bound by any principles or decisions of the CJEU and cannot refer any matter to the CJEU, but can have regard to anything done by the CJEU insofar as it is relevant (subject to certain limitations).
In terms of jurisdiction, the UK cannot continue to use the Recast Brussels Regulation because it requires reciprocity. The government has, therefore, drawn up the draft Civil Jurisdiction and Judgment Regulations (Amendment) (EU Exit) Regulation 2019 (“CJJR”). Pursuant to the CJJR, the Recast Brussels Regulation will be repealed. For proceedings pending before a UK or EU Member State court on ‘exit day’, the EU rules on jurisdiction will continue to apply. For proceedings commenced in the UK or an EU Member State on or after ‘exit day’, jurisdiction is expected to be determined by the national law of the UK or the EU Member State seized. In the UK, the courts will fall back upon the common law regime where jurisdiction over foreign defendants is based upon the court granting permission to serve initiating process outside of the jurisdiction. This requires the court to consider what the connecting factors to the jurisdiction are and exercise a discretion based on forum conveniens (the most appropriate forum) considerations. The usual concerns as to forum non conveniens arguments and the risk of parallel proceedings arise here, but one would hope that comity will continue to play its traditional part in resolving such issues. The common law regime is also one that has long been in existence and already applies in respect of litigation between UK and non-EU parties, such that it may present no particular difficulty for those global players who are already familiar with it.
As to recognition and enforcement, on or after ‘exit day’, handed down judgments and pending enforcement proceedings will no longer be mutually respected. The exception is where a UK judgment has been exequatured in an EU Member State before ‘exit day’. Businesses should, therefore, consider whether it is in their interests and, if so, possible to secure the automatic recognition and enforcement of a judgment under the Recast Brussels Regulation before Brexit takes effect. Post ‘exit day’, recognition and enforcement will be determined by reference to the national law of the UK or EU Member State in which recognition and enforcement is sought.
More likely than not, however, the UK will accede to the Hague Convention on Choice of Court Agreements 2005 (the “Hague Convention on Choice of Court Agreements”) or the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2007 (the “Lugano Convention”). Both Conventions provide a stable basis upon which to determine jurisdiction, recognition and enforcement between the contracting states.
The UK currently participates in the Hague Convention on Choice of Court Agreements by virtue of it presently being a Member of the EU, but upon ‘exit day’ it intends to re-join this Convention in its own right. It does not need the EU Member States’ consent to do so. In preparation, on 28 December 2018 the UK deposited an Instrument of Accession to the Hague Convention with the Netherlands’ Ministry of Foreign Affairs. Accession is presently suspended until 1 November 2019; being the day after the current scheduled ‘exit day’. It should be noted, however, that by comparison to the Recast Brussels Regulation, there are limitations to this Convention including:
1. It applies only to exclusive choice of court agreements in civil and commercial matters and recognition of judgments based on such agreements.
2. It does not apply to certain types of matters i.e. contracts of employment, the carriage of passengers and goods, certain maritime claims, etc.
3. It does not provide for the recognition and enforcement of interim measures of protection.
4. It applies only to exclusive choice of court agreements entered into after the Convention’s entry into force for the State of the chosen court. The Convention entered into force in the EU (including the UK, as a Member State of the EU) on 1 October 2015, such that it does not apply to exclusive jurisdiction agreements entered into before this date. It is currently unclear whether the UK’s accession will start the clock running again from the date of the Convention’s entry into force independently for the UK.
The alternative is to adopt the Lugano Convention, which the government also accepts is more limited in scope than the Recast Brussels Regulation. This would require the agreement of its existing signatories, however, which includes the EU Member States and so this option may prove more difficult to achieve.
Whichever option prevails (and it is more likely to be the Hague Convention on Choice of Court Agreements in the first instance), businesses should remember that should the UK not accede to the Hague Convention on Choice of Court Agreements or the Lugano Convention, or they do not apply, the national laws of the UK and the EU Member States on jurisdiction and recognition and enforcement apply. Again, those laws are the same laws that already apply to determining jurisdiction and the recognition and enforcement of judgments and interim measures in respect of nonEU (including UK) countries.
As to the applicable law, on and after ‘exit day’, Rome I and Rome II (subject to minor amendment) should be retained in UK law by virtue of the draft Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2018 (“LACONCO”). This is achievable because these regulations do not require reciprocity. One will have to wait to see whether and, if so, how far the interpretation and application of these rules will differ between the UK and EU Member State courts going forward.
In respect of service and evidence, on or after ‘exit day’, the Service Regulation and the Taking of Evidence Regulation will be revoked pursuant to The Service of Documents and Taking of Evidence in Civil and Commercial Matters (Revocation and Saving Provisions) (EU Exit) Regulations 2018. Parties to litigation will instead look to the Hague Service Convention and the Hague Convention on the Taking of Evidence Abroad. These Conventions provide slightly more cumbersome processes than the Service Regulation and the Taking of Evidence Regulation, but they do provide adequate alternative arrangements. A quick fix in terms of service would be to include in your contracts a clause stipulating an agent for service of process, where this is practical and achievable.
So, what does the above mean for businesses in a ‘no deal’ scenario? At a minimum, make sure that you put exclusive jurisdiction clauses into your contracts and take advice on the position as to jurisdiction, recognition and enforcement (whether for interim measures or judgments) under the national law of the jurisdiction in which recognition or enforcement is sought. From ‘exit day’, the process for recognition and enforcement is expected to become more difficult, time-consuming and costly. The position as to the applicable law, service and the taking of evidence is not expected to change much, but businesses would be best advised to insert a clause providing for an agent for service of process when possible.