Brexit: court judgments, arbitration and jurisdiction

In case you hadn’t heard… the UK has left the EU, and the transition period is due to end at 11:00pm on 31 December 2020. What that means for those trading into and out of the UK is uncertain on many levels and the enforceability of legal decisions and certain legal provisions is no exception.

While the post-Brexit landscape is hard to predict, this article answers the broad questions over enforceability of court decisions, arbitration awards and jurisdiction clauses, should the UK leave the EU without any trade deal.

Will I be able to enforce my English court judgment in Europe/will I be able to enforce my court judgment from an EU member state in the UK?

As a member of the EU, the UK was and currently still is subject to the Brussels Recast Regulation (Regulation 1215/2012) which governs the enforcement of court judgments across the EU. By virtue of Article 67 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, this regulation will apply in the UK up to the end of the transition period. This means that any English court judgment, for court claims commenced before 11:00pm on 31 December 2020, can be enforced anywhere in the EU, and court rulings from an EU member state can be enforced in the UK, regardless of when that judgment is published. When the transition period ends, this regulation will cease to apply to the UK.

The UK is also a signatory to the Lugano Convention. The rules of the Lugano Convention mirror those of the Brussels Recast Regulation, however the UK will also cease to be a signatory of that convention come the 31 December 2020.

Until there is an agreement to the contrary, due to the UK no longer being subject to the Brussels Recast Regulation and also withdrawing as a signatory of the Lugano Convention, at present there will be no legal framework to enable English court judgments to be enforced in any EU member state. Equally, EU member state judgments will not automatically be enforceable in the UK.

The UK is attempting to agree its membership to the Lugano Convention, or a similar provision, which would allow the current status quo to continue. Given that it is in both party’s interests to come to such an agreement, one would hope that such a provision will result shortly. However, this is still not a foregone conclusion. As such, we would recommend that, where court action against a party in an EU member state is anticipated, claims should be issued without delay in order to meet the 31 December deadline.

Will my arbitration judgment be enforceable if there is no deal?

The sphere of arbitration sits separate from the courts. Rather than there being a European-led system for the UK, arbitration awards are most commonly enforced under the New York Convention on Enforcement of Arbitral Awards 1958. This convention applies worldwide, with over 150 countries as signatories.

The benefit of this, particularly in the context of Brexit, is that countries around the world apply the same rules. The UK’s withdrawal from the EU will therefore have no effect on the enforceability of English arbitration awards. It is for this reason that, where applicable, we see arbitration as a preferable route to bringing an action over the coming months.

Will English jurisdiction/EU member state jurisdiction clauses be effective once the transition period comes to an end?

Any well drafted contract will contain both a law and jurisdiction clause. In order for clauses which nominate English law and jurisdiction to be enforceable in EU countries, there must be legislation which legitimises such clauses.

EU law currently recognises choice of law and jurisdiction clauses where at least one of the parties to the contract/dispute, is based in an EU member state. Effectively, this has meant that English jurisdiction clauses have been valid whilst the UK has been a member of the EU.

Article 66 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community means that English law and jurisdiction clauses will continue to be recognised by EU member states, after the transition period expires, where the contract in question was signed before the 31 December 2020 deadline. Clearly therefore, parties should be encouraged to conclude contracts within that deadline, where possible.

If no deal is reached between the UK and EU governments, the UK will be withdrawing from the EU legislation which recognises English law and jurisdiction clauses in the EU. Where a contract is agreed after the 31 December deadline therefore, at present the enforceability of English jurisdiction clauses in the EU will become uncertain. Equally, the enforceability of jurisdiction clauses naming an EU member state would become questionable in the UK.

That said, it seems highly unlikely that the EU courts will start to disregard English jurisdiction clauses, and equally unlikely that the English courts will start to disregard EU member state jurisdiction clauses. To do so would go against the prevailing attitudes of UK and member states’ domestic law. Regardless of the results of the trade deal negotiations, we expect to see an alternative legal provision being agreed upon which enables English and EU member state jurisdiction clauses to be mutually enforceable, to continue the status quo. Even so, as we say, swift conclusion of contracts is advised given the present uncertainty.

If you would like to discuss the issues raised in this article, please do get in contact with us as we will be more than happy to advise further.