Brexit - Implications for commercial litigation
Disputes often have at their core a commercial contract, entered into between two or more parties, for the supply of goods or services. Many of the provisions of such contracts will be affected by the monumental decision reached on the 23 June 2016, by the United Kingdom; that is to leave the European Union.
Those ancillary parts of the contractual documentation, often considered to be of lesser importance, will now be front and centre of a number of commercial disputes. Businesses should take steps immediately to consider the same and how far their operations are likely to be effected.
For example, the Recast Brussels Regulation governs the issue of jurisdiction and provides clarity for parties regarding this thorny issue. If a specific EU Member State court is named in a contract then once that court has decided it has jurisdiction, any proceedings issued in another court are stayed. Similarly, if the contract is silent and proceedings are issued in a Member State court, proceedings issued in another court will be stayed. If the UK leaves the EU, these provisions may cease to apply. It is currently unknown what legislation the UK will replace these provisions with. One possibility is an accession to the Lugano Convention 2007 however, this convention does not achieve the certainty found in the Recast Brussels Regulation.
The Recast Brussels Regulation also governs the mutual recognition and enforcement of judgments among EU Member State courts. If you have a judgment that needs to be enforced in another EU state, you should take advantage of this procedure whilst it is still available.
In terms of the actual litigation process, the EU Service Regulation sets out the existing rules regarding the service of proceedings and associated documents. Again, this may cease to have effect and the new process may take longer and cost more if permission from the applicable Member State court is required.
No doubt, queries will arise on how to interpret existing contracts. If the territory referred to in the contract is the European Union, this will at some point cease to include the UK. Variations to contracts may be required but what if these cannot be agreed upon? It is likely that disputes will arise regarding the interpretation of contracts and parties may seek to claim that contracts are frustrated.
The exit of the UK from the EU may affect the profitability of some contracts and no doubt parties will seek to depart from their obligations. Will the Brexit be considered a force majeure event? This argument will depend on the facts, but success cannot be ruled out.
In terms of the choice of law, English law has long been a popular choice for companies negotiating contracts based on international trade. It offers certainty and stability and our courts have a reputation for commerciality. Will such choice of law clauses be upheld?
The departure from the EU is unlikely to cause much concern here. Little of English contractual law is derived from EU legislation and it is widely believed the English courts will uphold an English law clause contractually agreed upon. The other Member States would be bound by the EU legislation still.
We will likely have a two year period to negotiate the withdrawal of the UK from the EU, however, these issues will become live very soon.
For further information please contact Tammy Evans at email@example.com.