The UK Government has now published, as part of its second batch of technical notes, guidance covering applicable law, jurisdiction and the enforceability of court judgments where an EU element exits post a “no-deal” Brexit.

The current EU wide arrangements, under the Rome I and II and Recast Brussels Regulations, coupled with the Lugano Convention (dealing with jurisdiction and enforcement between the EU and Iceland, Norway and Switzerland) are favourable, promoting mutual recognition and respect for decisions of the courts of other member states. The expressed intention of the Government remains to negotiate a comprehensive reciprocal system, which replicates the current arrangements. The guidance note sets out the Government’s view in the event that no deal can b reached.

The UK would retain the Rome I and Rome II rules on applicable law, which determine which country’s law applies. These rules do not require reciprocity to operate.

However, the rules governing jurisdiction (which country’s courts hear a dispute) and the enforcement of court judgments between EU member states (contained in the Recast Brussels Regulation, the basis of which is reciprocity) would no longer apply, nor would the Lugano Convention, which currently governs jurisdiction and enforcement between the EU and Iceland, Norway and Switzerland.  In these areas, the UK would revert to the domestic rules currently applicable to the rest of the world. When such matters fell before the courts of other EU states, they would be determined under their own local rules. The  guidance note (helpfully) continues:

 “Businesses, individuals and legal practitioners would need to consider how these rules interact with the domestic rules of relevant EU countries to determine how jurisdiction in cross-border disputes should be established and whether any judgments should be recognised and enforced. In certain cases, the interaction between these rules may not be clear and certain countries may not recognise judgments from UK courts. Businesses and individuals may wish to take legal advice about how these changes may affect your individual circumstances.”

The Government’s intention (in the event that a deal which replicates the current Recast Brussels Regulation regime cannot be done) is that the UK will continue to apply the 2005 Hague Convention on Choice of Court Agreements (which current governs jurisdiction and the enforcement of judgments between the EU, Mexico, Singapore and Montenegro). However, the UK will cease to be a party to the Hague Convention when we leave the EU (as our membership of that convention comes from being part of the EU) and we can only re-join in our own right with the unanimous consent of all of the other signatories, including the EU. Further, in relation to a “new” joiner, the Hague Convention comes into force on the first day of the month following three months after ratification. The  Government’s intention would be for this to take effect from 1 April 2019 (assuming all of the other parties do consent). So, even on that scenario, it is not clear what would happen for any jurisdiction agreements entered into between 29 March and 1 April 2019. To avoid any April’s Fools nightmare scenarios, the safest bet is to avoid any standard form exclusive jurisdiction clauses if you are concluding contracts on the 30th or 31st March!

Remember also that the Hague Convention only protects exclusive (and not non-exclusive) jurisdiction clauses and it does not cover asymmetric clauses. Nor does it preclude challenges to jurisdiction on all of the grounds currently precluded by the Recast Brussels Regulation, so the Hague Convention would not entirely replicate, or be as favourable as, the current regime.

It is unclear whether EU member state courts, when asked to consider matters of jurisdiction, would continue to apply the Recast Brussels Regulation to give effect to English jurisdiction clauses, as the Recast Brussels Regulation is silent on the position in relation to non-member states. There may be divergence between the conduct of courts in differing member states here.

There are, however, two key areas which will remain unchanged on Brexit. Firstly, substantive English contract law will be largely unaffected by Brexit. Secondly, for arbitration, the position remains unchanged. Enforcement of arbitral awards internationally is governed by the 1958 New York Convention, to which each of the EU member states, including the UK, is an individual signatory in their own right. The UK will remain a party independent of its position vis-a-vis the EU. For those wishing to avoid the potential uncertainties around the recognition and enforcement of court judgments in the post-Brexit world, the use of arbitration agreements remains a sensible precaution in appropriate contracts.

Lindsey specialises in complex cross-border disputes, international and domestic arbitration, aviation, commercial and finance disputes. She regularly advises clients on strategies to mitigate the potential impact of Brexit in their contractual relationships.