No-deal Brexit: The outlook for dispute resolution

The UK and EU are currently in the midst of intense talks in an attempt to reach a deal on post-Brexit relations. However, a positive outcome cannot be relied upon – and regardless of the culmination of the discussions, professional litigators are facing a departure from the EU’s rules on jurisdiction and enforcement. This change will be effective from the end of the year. But just how much upheaval will it cause?

Brussels Convention of 1968

A set of rules originally deriving from the Brussels Convention of 1968 govern the jurisdictional position when parties to a case originate from different EU Member States (or member states of EFTA). This currently provides a clear point of reference for disputes with a multi-national element. But it is now certain that the United Kingdom will be leaving this agreement – at least temporarily – on December 31st.

Any re-entry into the agreement would likely be via independent accession to the Lugano Convention of 2007, but the process for doing so spelled out in Articles 72 and 73 would probably take a minimum of 3 months – and early indications are that the EU will not be cooperative with a UK application. Therefore, at least in the short-term, it is worth considering the problems that could be caused by the UK’s departure from the Brussels regime.

Short-term issues for litigation in a no-deal Brexit

The principal risk associated with the UK’s exit is the possibility of parallel litigation. This term describes a situation where a case is pursued simultaneously in the UK and in an EU Member State court by the two (or more) concerned parties. In a worst-case scenario, it may become difficult for a party who has won in an English court to enforce that ruling against a party based in a Member State – and vice versa.

This unsatisfactory possibility may be less likely to materialise than would first appear, for a number of reasons. For one, contracting parties have had ample time to appreciate the risks posed by Brexit, including the effect of the Brussels Regime ceasing to apply to the UK.

International Arbitration operates entirely outside the EU’s scope, so this avoids the issue altogether. Both parties need to consent to arbitration, but agreement can take the form of pre-existing contractual arbitration or a mutual decision after the event. International arbitration awards will be upheld in Member States. Arbitration can be more attractive now since the move to imbue arbitrators with greater court-like functionality: ‘early determination’, for example, which is effectively the equivalent of summary judgment, is now possible under the new LCIA rules. There are also nuggets of comfort to be derived from the EU Withdrawal Agreement.

Under Article 67 of the Withdrawal Agreement, UK parties to litigation can continue to rely on the Brussels Regime indefinitely in respect of any particular litigation commenced before the end of the year. This therefore limits any potential issues to cases started in 2021 and beyond.

Interestingly, although perhaps only from a litigation lawyers’ perspective, any UK lawyer on the record in proceedings commenced in an EU Court before 31 December 2020 can continue to do so thereafter in respect of that particular case.

Alternative mechanisms and principles

For post-Brexit litigation, the problems of no longer being under the Brussels regime may not be insurmountable.

Where the parties to a contract have chosen the applicable law and / or jurisdiction, this is likely to be upheld in the Courts of other member states. This means that clauses choosing English law and jurisdiction are likely to be recognised.

This relates to the EU principle known as “universal application”, enshrined in the Treaty of Rome. It requires that where the most relevant law in a dispute is the law of a non-member state, the Member State court remains bound to apply it – there can be no discrimination in favour of the laws of Member States.

Finally, the use of Anti Suit Injunctions by the English Courts will usually be recognised through the national laws of a Member State. These injunctions effectively ban the commencement or continuance of foreign proceedings where the English Courts, or Arbitration seated in England, are properly seized of a matter. Anti Suit Injunctions can therefore potentially limit the use of parallel litigation in that way.

On the whole, then, the UK’s departure from the Brussels Regime is unlikely to cause the wholesale chaos that some may have feared. It is inevitable that the change will cause an element of upheaval for some practitioners – but overall, the range of alternative mechanisms and principles will hopefully be sufficient to ensure that most cases with international dimensions can still be resolved satisfactorily.