Litigation – preparing for a no deal?

Without any agreement with the EU, when the transitional period ends on 31 December 2020 questions of jurisdiction and enforcement in a claim not already pending fall to be determined on a state by state basis unless another convention applies. The UK has taken some steps towards filling the void by applying to accede to the Lugano Convention and acceding to the Hague Convention on Choice of Court Agreements but even that is not without its difficulties.

We discussed the impact of the Withdrawal Agreement on existing and pending litigation earlier this year in Brexit: will the UK maintain and strengthen its role as a world leader in delivering justice across borders on civil matters? In this article, we consider developments since then and offer advice to those preparing for a no deal Brexit.

Lugano Convention

The Lugano Convention currently applies in the UK through our membership of the EU and it bears many similarities with the existing enforcement regime. The UK deposited its application on 8 April 2020 but it requires all other states to agree to accession - support has been given by the EFTA states, but the EU has not yet issued any statement. 

Under the convention, states should give their consent within a year. If not, the convention could still take effect if the accession is accepted on the basis it is not opposed and there are then no objections received within three months of that acceptance. Even if the application is accepted and there are no objections, it still could be July 2021 before the convention comes into effect. This leaves a void of six months where the position is entirely unclear. The Law Society, amongst others, has been lobbying the EU to confirm its agreement to the UK acceding, irrespective of what happens in the trade talks.

Hague Convention

The other fallback plan, more in the UK’s control, has been its accession to the Hague Convention on Choice of Court Agreements. The UK acceded to it on 29 September 2020.

This convention creates certainty on jurisdictional questions and enforcement where the claims arise under contracts that contain an exclusive jurisdiction clause. This convention does apply across the EU as well. However it only applies to contracts entered into after the convention enters force in the “state of the chosen court”. There is a critical difference of opinion between the UK and the EU over whether that means:

  • 1 October 2015, when the EU acceded to the convention and it accordingly first applied to the UK, or
  • 1 January 2021, at the end of the transition period, when the UK stands alone. 

Until that point is tested in another EU Member State, it’s not clear which view will prevail. 

Preparing for a no deal

Those who are drafting contracts and/or are contemplating litigation in a post Brexit world now need to grapple with some difficult issues:

  1. Given we do not know what the landscape will look like on 1 January 2021, the form of jurisdiction clause is now taking on particular significance given the Hague Convention requirements.  For new agreements, the implications of an exclusive jurisdiction clause do need to be fully considered.
  2. Since EU regulations will still apply to proceedings “instituted” before the end of the transition period, even if they conclude after that, consideration should be given to issuing a claim before 1 January 2021 – this is important for claims where a limitation issue might arise within the coming months.  However, given that not all EU member states agree on what “instituting” proceedings means, it may be prudent both to issue and serve the claim.
  3. Arbitration is not affected, and for both litigators and contract lawyers alike, this route demands serious consideration as an established alternative that does provide some certainty around issues such as enforcement. For more information, see our briefing Dispute resolution in a post coronavirus and Brexit world – should you be considering arbitration?

To find out more about navigating multi-jurisdictional legal issues and our expertise in resolving complex international disputes, please visit our Cross-border litigation page.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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