The Impact of Brexit on Cross-Border Disputes

For member states litigating cross-border disputes, the EU created rules aimed at facilitating access to justice and improving judicial cooperation.

When Brexit came along, the UK began its attempts to disentangle itself from much of this legislation, with the process seemingly coming to a head after the Withdrawal Agreement.

However, there are still some lasting questions and grey areas surrounding Brexit, including certain disputes with a cross-border element.

We look at five impacts on cross-border disputes as a result of the UK’s withdrawal from the EU:

1. A change in process (or more paperwork) in regards to certain areas of the litigation process

The following areas may require more consideration in regards to disputes with a cross-border element between the UK and one or more EU member states:

• Deciding over which courts will have jurisdiction in the event of a dispute
• The parties’ contractual and non-contractual obligations
• The recognition and enforcement of court judgments
• The service of court documents
• Taking and submitting evidence

However, even if the UK were to opt out of all international agreements with the EU, including the Hague Convention, the UK would be treated as any other non-signatory country.

As such, parties who are well-advised, with contracts that do not permit ambiguity (see point 2) should be unlikely to feel the impacts or find themselves in significant difficulties solely because of Brexit.

Instead, that is where the benefits of hiring a good lawyer, or legal team, with international experience, will ease the process of resolving disputes or enforcing judgments in EU member states.

2. A renewed focus on exclusive jurisdiction clauses

In the EU, the Brussels Recast Regulation provides a way for member state judgments to be enforced and recognised in other member states.

Without it, the issue of which courts are to have jurisdiction in the event of a dispute becomes more complex.

If it is particularly important for one, or both, parties who or which wish to litigate their disputes in the courts of England and Wales, that an exclusive jurisdiction clause in favour of the courts of England and Wales should be included when negotiating any contracts.

With ambiguity in the contract over jurisdiction, parties could potentially risk parallel proceedings or inconsistent judgments arising out of proceedings in different jurisdictions.

3. An alternative to the Lugano Convention, should the UK not accede as a member in its own right

If the UK accedes to the Lugano Convention, most simplified mechanisms for the enforcement of judgments, amongst other jurisdictional concerns, will be covered.

However, whilst some member states have expressed approval, the EU has indicated, in a non-binding communication, that it would not approve of the UK joining the Lugano Convention.

As no permanent alternative to the Lugano Convention has yet been agreed, there is an increased risk of parallel proceedings in English and EU member state courts, with the additional risk of inconsistent judgments.

Some key areas are covered in the Hague Convention 2005. However, the Hague Convention 2019 aims to provide a “single global framework for the free circulation and enforcement of judgments”.

Moreover, given that the Hague Convention 2005 took ten years to come into force (it was concluded in 2005, but only became effective on 1st October 2015), the Hague Convention 2019, perhaps should not be relied upon as an example of immediacy.

4. More cross-border disputes could be resolved through arbitration

Arbitration seated in the UK thrives independently of the UK being in or out of the EU, and so far has been largely unaffected by Brexit.

The benefits of arbitral proceedings could mean that arbitration becomes an even more attractive method of resolving international disputes after Brexit.

Rules governing arbitral proceedings transcend national jurisdictions, including those of EU member states. The enforcement of arbitration awards is governed by the New York Convention, so again, parties looking to enforce an award should not face major complications arising from Brexit.

Arbitration could become considerably more suitable than litigation in disputes which, before Brexit, would have been litigated through the courts. It could also provide greater certainty for parties throughout the resolution process, particularly whilst the UK’s position on the Lugano Convention remains unclear.

5. Anti-suit injunctions could give London seats a competitive edge

An anti-suit injunction can be a powerful weapon in international disputes. The English courts’ willingness to put such injunctions in place might prove attractive to some parties.

Given that EU member states are not permitted to impose anti-suit injunctions on one another, the ability to do so in the English courts could potentially give London seats of arbitration a competitive advantage in certain disputes.

Whether this manifests itself in the long term is yet to be seen, and depends on whether the UK does accede to the Lugano Convention, and/or enacts any legislation of its own that ratifies it in the coming years.

For expert legal advice in regards to resolving a dispute through litigation or arbitration, get in touch with the team at Carlsons Solicitors.