Brexit – Brief Implications for Dispute Resolution

On 23 June 2016, the UK voted to leave through a Referendum the European Union (EU).  The actual withdrawal of the UK from the EU is a procedure which is likely to take a number of years to conclude and is of course subject to the exercise of Article 50.  However, and until details of the UK’s exit have been resolved, the legal implications for dealing with cross border disputes and litigation in the UK remain unclear.

As a member of the EU, the UK has adopted various EU legislation and directives which sets out the rules that the Courts in EU member states have to apply when determining any claim in contract or in tort.  The UK’s exit from the EU will have a direct impact on a number of aspects of dispute resolution, including:

  • Jurisdiction – the EU rules used to determine jurisdiction of Courts in member states create a unified approach to the validity and effect of jurisdiction agreements and to the question of which Court will have jurisdiction to consider a matter in the absence of a jurisdiction agreement between the parties. Once the UK leaves the EU, and if no replacement agreement is reached between the UK and the EU, then there will be uncertainty as to which Court has jurisdiction.  Therefore and in order to reduce any uncertainty it is important that parties negotiating contracts ensure that they include clear jurisdiction clauses in those contracts.
  • Governing Law – currently, a UK Court dealing with proceedings will apply EU legislation when determining which law applies to a contract in the absence of a “governing law” agreement between the parties. When the UK leaves the EU this legislation will no longer be applied.  Replacement legislation will therefore have to be put into place by the UK Government.  To avoid uncertainty it would be appropriate for parties negotiating contracts to include clear “governing law” clauses in those contracts.
  • Service of English proceedings in the EU – as the law currently stands, there is generally no necessity to obtain permission from an English Court to serve proceedings on a Defendant domiciled in another EU member state. However, once the UK leaves the EU, and unless arrangements are put in place to continue with this framework, Claimants wishing to serve English proceedings in the EU will have to apply for permission from the Court to do so.
  • Enforcement of judgments in the EU – EU regulations set out a very simplified mechanism for the recognition and enforcement of judgments across EU member states. However, this mechanism will no longer apply when the UK leaves the EU unless a similar system is negotiated between the UK and the EU.

There are also other consequences for dispute resolution which will follow as a result of leaving the EU and which are still to be agreed and/or resolved, and only time will tell how these are going to be dealt with.