Beyond Brexit: What’s next for dispute resolution?

With the end of the Brexit transition period coming up fast, question marks still remain over many areas, including how UK and European law will interact in future.

With London being a leading global centre for resolving complex disputes, lawyers and businesses are waiting to see what the future holds, particularly whether the UK signs up to the 2007 Lugano Convention. So, what could the effects of these changes be for UK businesses and what steps should they be taking ahead of 31 December 2020?

No-deal Brexit and cross-border judgments: UK businesses would face additional legal burdens

In the absence of any applicable agreed treaty between the UK and the EU member states, the recognition and enforcement of cross-border judgments will vary widely after Brexit, depending on local laws. This would place an additional burden on UK businesses, requiring them to seek legal advice in the jurisdiction where a UK judgment is to be enforced. In any of the EU member states, local law on the enforcement of foreign judgments may be complex and uncodified – and therefore unclear. For organisations already facing tough market conditions, these factors could result in lengthy delays, additional costs and uncertainty when looking to enforce a judgment of, for example, an English court in an EU member state.

2007 Lugano Convention: a potential solution

A potential solution which would almost maintain the status quo for businesses trading internationally is if the UK accedes to the 2007 Lugano Convention, an international treaty negotiated by the EU on behalf of its member states with Denmark, Iceland, Norway and Switzerland. This convention provides for the (almost) automatic mutual recognition of court judgments, subject to compliance with certain procedural formalities.Now that the UK has left the EU, it has applied to accede to the 2007 Lugano Convention as an independent member, which would require the agreement of all signatories. Denmark, Iceland, Norway, and Switzerland have formally supported the UK’s accession, but the EU has not as yet provided its support. It’s worth bearing in mind that the UK’s accession is by no means guaranteed, with the convention seeming to have taken on significance as a bargaining chip in the ongoing Brexit negotiations.

Limitations of the Hague Convention

The UK has also deposited an Instrument of Accession to re-join the 2005 Hague Convention on Choice of Court Agreements in its own right, once the Brexit transition period comes to an end. The Hague Convention requires signatory states to recognise one another’s judgments where exclusive jurisdiction clauses in contracts provide for disputes to be litigated in the courts, and under the laws, of another signatory state. The Hague Convention currently binds the EU, Mexico, Singapore, and Montenegro.The Hague Convention’s usefulness has its limits. For example, it doesn’t apply to contracts where one party is a ‘consumer’ or to contracts containing asymmetrical jurisdiction clauses. An asymmetrical jurisdiction clause is one where only one of the parties is subject to the exclusive jurisdiction of a particular country’s court, with the other party retaining a choice over the jurisdiction in which they may bring a dispute.
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London could lose its position as a leading global centre for resolving commercial disputes

London has long been recognised as a leading global centre for resolving commercial disputes. This is due in part to English law’s reputation for being transparent, fair, and providing a degree of certainty, as well as the judiciary’s impartiality and the adversarial nature of the system. However, its position could slip in the event that any UK/EU deal fails to prioritise the strong judicial cooperation that has previously existed. As highlighted by the recent launch of a new commercial court in Paris, other jurisdictions are keen to win more legal sector business and take London’s crown as the top global litigation centre.With UK companies becoming increasingly globalised and doing increasing amounts of trade in the EU, the inability to enforce judgments in the EU would be a costly headache for many business leaders, increasing the expense of litigating with EU-based businesses.

Dispute resolution process: now and post 31 December 2020

The steps that businesses should take ahead of the Brexit transition deadline will depend on where they’re at in the dispute resolution process. If they have already secured a judgment against an organisation in the EU, they should aim to take advantage of the current transitional regime (whereby UK judgments are automatically recognised in the EU) before it comes to an end. If UK court proceedings were issued before 10 January 2015, businesses will need to have their judgment formally recognised by the courts of the EU member state in which it is to be enforced, first. This must happen before 31 December 2020.Businesses that are yet to issue court proceedings, or which are partway through them, should consider seeking advice now from a lawyer in the state of intended enforcement. Local laws on enforcement in various EU state have the potential to impact on the management of the court proceedings in the UK.
With the end of the Brexit transition period drawing ever-closer, UK business leaders should keep their ears to the ground regarding the outcome of the UK’s intended accession to the 2007 Lugano Convention, and take advice as to whether their contracts fall within the remit of the Hague Convention. However, for those that already have a judgment, it makes sense to avoid uncertainty altogether by making the most of the existing regime and taking immediate enforcement action.George Fahey is a solicitor in the commercial disputes team at law firm, Shakespeare Martineau

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