European Union: Brexit: What Will It Mean For Dispute Resolution?

Last Updated: 3 September 2018
Article by Tom Price

Following last month's cabinet crisis talks at Chequers and the subsequent cabinet shakeup which saw Dominic Raab appointed as Secretary of State for Exiting the European Union, the UK Government did then publish its new Brexit white paper, "the future relationship between the United Kingdom and the European Union". Here we look at one aspect of that paper - what it has to say about civil judicial cooperation, and what that could mean for cross-border dispute resolution after Brexit.

What do we mean by civil judicial cooperation?

Civil judicial cooperation refers to the agreements and procedures in place between different legal jurisdictions to coordinate legal proceedings in cross-border disputes. It includes matters such as:

  • Applicable law - determining which country's laws are applied in a cross-border dispute;
  • Jurisdiction - determining which country's courts will hear a cross-border dispute;
  • Service - rules governing how proceedings started in one country can be served in another;
  • Evidence - processes for cooperation between the courts of different jurisdictions for obtaining evidence abroad; and
  • Enforcement - arrangements for how a judgment obtained in one country can be recognised and enforced in another.

In the white paper, the Government recognises that civil judicial cooperation gives businesses certainty in the event of disputes, and thus inspires confidence in cross-border trade, to the mutual benefit of the UK and EU.

What impact will Brexit have?

At present, by virtue of its status as an EU member state, the UK enjoys the benefit of a range of regulations and conventions dealing with all aspects of judicial cooperation outlined above. These include for example:

  • Brussels Regulations - which deal with questions of jurisdiction and enforcement;
  • Lugano Conventions - which effectively extends the application of the Brussels Regulations (with some significant differences) to three non-EU countries (see below);
  • Rome Convention and Regulations - which deal with questions of applicable law;
  • Service Regulation - which deals with, and facilitates, issues of service in another EU member state; and
  • Taking of Evidence Regulation - which encourages and facilitates cooperation between the courts of EU member states to obtain evidence for use in civil proceedings (e.g. a French court may request the assistance of an English court in examining a witness resident in England for the purpose of proceedings in France).

The EU and UK have agreed in principle that these provisions will have continuing effect for the transition period between the date of the UK's withdrawal from the EU (29 March 2019) and 31 December 2020. That is however subject to concluding a formal withdrawal agreement. After that time though, absent making an alternative agreement in the meantime, those arrangements will all cease to have effect and the UK will lose the benefit of these instruments.

What are the UK's proposals?

In her foreword to the white paper, the Prime Minister talks about the inevitable tensions between the UK and EU's opening positions in Article 50 negotiations. The white paper, she says, sees the UK evolving its proposals while sticking to its principles. As far as civil judicial cooperation is concerned, the proposals in the white paper are certainly evolutionary rather than revolutionary - they closely mirror those outlined by the Government in August last year in its Future Partnership Paper, "Providing a cross-border civil judicial cooperation framework". The proposals in the latest white paper are:

  1. UK to join the Lugano Convention - the UK government says it will seek to continue to participate in the Lugano Convention after exiting the EU (albeit as a third country, rather than as an EU member). This convention currently provides for a degree of judicial cooperation between the EU and three of the four European Free Trade Association countries (Iceland, Norway and Switzerland). The Lugano Convention alone is however more limited in scope than the wide arrangements that the UK currently benefits from as an EU member state, as it deals only with jurisdiction and enforcement of judgments (i.e. it broadly reflects the Brussels Regulations only). The UK Government is therefore also proposing...
  2. A bilateral agreement between UK and EU - recognising the limited effect of the Lugano Convention (but also that it sets a useful precedent of judicial cooperation agreements between the EU and third countries), the Government has expressed its interest in negotiating a broader agreement which takes account of the UK's unique position as a (former) EU member state - a 'Lugano plus plus' if you will. In the white paper, the Government envisages "a coherent package of rules on jurisdiction, choice of jurisdiction, applicable law, and recognition and enforcement of judgments in civil, commercial, insolvency and family matters."

What is the EU's stance?

The EU has not yet responded to the latest white paper. The EU has previously signalled it is willing to consider the possibility of post-Brexit judicial cooperation in family law, but the UK wants to see this extended across the sphere of civil judicial cooperation.

Where the UK and the EU do agree, as mentioned above, is that the EU law in force as at the date of the UK's withdrawal will continue to apply during the transition period to December 2020. Although this will provide a degree of certainty as to the rules which will apply to cross-border disputes immediately following Brexit, there is still unwelcome uncertainty about how that position will change from 2020 when the transition period comes to an end.

Another difficulty that is going to have to be negotiated is the position of the Court of Justice of the European Union (CJEU). While the government's White Paper is clear that, with Brexit, the CJEU will cease to have the power to make rulings that bind the UK, any future arrangements on civil judicial cooperation will still need to recognise that the CJEU will remain the ultimate arbiter of EU law within the EU.

What next?

As with all things Brexit, it may be some time before we have a definitive picture of how it is likely to impact dispute resolution between UK and EU parties, and how parties should cater for it in their dispute resolution clauses. We will be looking at drafting dispute resolution clauses in international contracts at our next ThinkHouse event in September 2018.

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