Brexit: Cross Border Disputes and Governing Law – a Practical Guide
Commercial Litigation and Dispute Resolution
Following on from our guide to Brexit and Contracts here, Julie Murphy O'Connor, Karen Reynolds and Gearóid Carey now turn to look at how Brexit will affect cross-border disputes, in particular the law governing such disputes.
How will the governing law of a dispute be determined after Brexit?
As matters stand, the principles relating to the choice of governing law for EU Member States are detailed in the following Regulations:
- the Rome I Regulation (Regulation (EC) No 593/2008) on the law applicable to contractual claims (“Rome I”); and
- the Rome II Regulation (Regulation (EC) No 864/2007) on the law applicable to non-contractual claims (“Rome II”) (together, the “Rome Regulations”).
Each instrument sets out clear rules for determining the applicable governing law for relevant claims. The position is unlikely to change post Brexit for the reasons set out below.
If the Withdrawal Agreement and Political Declaration on the future relationship between the UK and the EU (the “Withdrawal Agreement”) applies to Brexit, the Rome Regulations will continue to apply in the UK during the transition period to the end of December 2020. Under Article 66 of the Withdrawal Agreement, Rome I shall continue to apply in respect of contracts entered into before the end of the transition period, while Rome II shall continue to apply in respect of events giving rise to damage, where such events occurred before the end of the transition period. Further, the European Union (Withdrawal) Act 2018 (the “EUWA”), provides that both will be adopted into UK law after Brexit – whether at 29 March 2019 or 31 December 2020 – which means that the principles of Rome I and Rome II will continue to determine governing law in the UK post-Brexit.
If there is a no-deal Brexit, the rules applicable to determining governing law will not change by virtue of the EUWA, which will incorporate Rome I and Rome II rules into UK law. Further, the courts of EU Member States will continue to apply the rules set out in Rome I and Rome II to disputes which may have a UK element, as Article 2 of Rome I and Article 3 of Rome II provide that the law specified by either Rome I or Rome II shall be applied, whether or not it is the law of an EU Member State.
Where parties have, in their contracts, expressly chosen a particular governing law, that choice will also be given effect. The courts of the EU Member States are already required to give effect to choice of law clauses, regardless of whether one of the parties is from outside the EU. The UK courts are also expected to continue to give effect to the choice of law of the parties in a no-deal scenario.
Read further updates in our Cross Border Disputes Series: