Brexit: Cross Border Disputes and Jurisdiction – 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 jurisdiction of such disputes.
How will jurisdiction be determined after Brexit?
The rules relating to jurisdiction and the determination of same in civil and commercial disputes are currently set out in:
- the Brussels Regulation (Regulation (EC) No 44/2001) (for proceedings commenced before 10 January 2015) and Brussels Regulation (Regulation (EU) No 1215/2012) (the “Brussels Recast Regulation”) (for proceedings commenced on or after 10 January 2015) for disputes between parties domiciled in EU Member States (together the “Brussels Regime”);
- the Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters 2007 for disputes involving parties domiciled in the EU and Norway, Switzerland and Iceland (being EFTA Member States) (the “Lugano Convention”);
- the Hague Convention on Choice of Court Agreements of 2005 (the “Hague Convention”) for disputes involving parties domiciled in EU Member States, Mexico, Singapore and Montenegro; and
- the common law for all other disputes.
The Brussels Regime and the Lugano Convention set out clear jurisdictional principles to avoid a multiplicity of actions in a number of jurisdictions. For disputes with parties outside of the EU/EFTA, and with parties from states to which the Hague Convention does not apply, there is a possibility of parallel proceedings (which in turn may have implications for enforcement of inconsistent judgments).
If the Withdrawal Agreement and Political Declaration on the future relationship between the UK and the EU (the “Withdrawal Agreement”) applies to Brexit, then the mechanism for determining jurisdiction in the UK during the transition period (ie, to 31 December 2020) will continue to be the Brussels Recast Regulation. Specifically, Article 67 of the Withdrawal Agreement provides that, in respect of legal proceedings instituted before the end of the transition period and in respect of proceedings or actions that are related to such legal proceedings pursuant to Article 29, 30 and 31 of the Brussels Recast Regulation, the provisions as to jurisdiction under the Brussels Recast Regulation shall apply. The Lugano Convention will no longer apply, although the UK Government has signalled an intention that the UK will sign up to it in its own right subsequently. One of the disadvantages of the Lugano Convention is that it provides that the court, in which proceedings are first commenced, determines jurisdiction before proceedings in another contracting state are allowed to proceed, which means that what is commonly referred to as the ‘Italian torpedo’ (which the Brussels Recast Regulation addressed), is a possibility.
In the event of a no-deal Brexit, the Brussels Regime and the Lugano Convention will cease to apply. However, the draft Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019, published by the UK Government in December (the “Exit Regulations”) indicate that the UK courts will generally apply the current rules under the Brussels Regime to proceedings which were commenced pre-Brexit and which have not been concluded by exit day.
The EU’s Notice to Stakeholders, Withdrawal of the United Kingdom and EU rules in the field of Civil Justice and Private International Law, published on 18 January 2019, provides in relation to questions of jurisdiction that, where proceedings involving a UK domiciled defendant are pending with an EU Member State court on exit day, the current rules will apply. (Not so, however, for enforcement of judgments, in which case EU Member State courts will not apply the current rules to UK court judgments unless an exequatur procedure has been completed before exit day, even if the judgment was handed down before exit day or the enforcement proceedings were commenced before exit day.)
If proceedings are commenced in the UK pre-Brexit, and proceedings involving the same cause of action and between the same parties are subsequently commenced in an EU Member State court, the Exit Regulations provide that the UK court may decline jurisdiction after exit day if it would be unjust not to do so – ie to avoid litigants facing parallel proceedings if the EU court is unable or unwilling to stay its proceedings.
Apart from these transitional provisions for proceedings commenced pre-Brexit (and the extent to which the Hague Convention will be relevant – addressed below), the Exit Regulations generally repeal the Brussels Regime so that the common law rules on jurisdiction and the enforcement of judgments will apply in cases that would currently be covered by the Brussels Regime. However, there are a couple of exceptions relating to consumers and employees.
The UK deposited its Instrument of Accession to the Hague Convention on 28 December 2018. The Hague Convention will enter into force on 1 April 2019, two full days after Brexit. To take advantage of its application, parties should therefore try to defer agreeing exclusive UK jurisdiction clauses until 1 April 2019.
The Hague Convention, however, is limited in its scope. The litigants must have entered into an exclusive jurisdiction clause in favour of one of the contracting states which was concluded after the Hague Convention came into force for that state. In addition, certain types of claim, such as contracts for carriage and certain intellectual property claims, are excluded. It does not extend to insolvency, arbitration, consumer, employment, antitrust and insurance matters (and certain other specific matters).
Nevertheless, where the Hague Convention does apply, it should avoid the possibility of parallel proceedings because, save in very limited circumstances, the courts of a contracting state other than the chosen court shall suspend or dismiss proceedings. However, there is a technical argument that Brussels Recast Regulation rules take priority in cases where all parties are domiciled in the EU even if they have chosen UK jurisdiction.
Common Law Principles
Absent express rules for jurisdiction, a UK court will apply common law and its own jurisdictional rules to determine if it has jurisdiction over the dispute or the parties. For example, it may assert jurisdiction if a defendant is domiciled in the UK or has otherwise submitted to the jurisdiction. Alternatively, it will consider whether, as part of any application to serve proceedings out of the jurisdiction (which will, in this scenario, be required vis-à-vis EU Member States), whether the UK courts constitute a forum conveniens. The possibility of parallel proceedings may also arise, which in turn may have implications for (i) enforcement in the UK of any inconsistent judgment from an EU Member State and (ii) the staying of UK proceedings issued subsequent to proceedings in an EU Member State.
Read further updates in our Cross Border Disputes Series: