European Union: What Might Brexit Mean For International Disputes?

International supply arrangements give rise to the risk of cross-border disputes. What should British businesses consider when it comes to cross-border disputes? How might Brexit impact this, and what can businesses do now to prepare? We look at governing law, forum and enforcement of judgments.

The international nature of the automotive supply chain means that many UK automotive suppliers are likely to supply cross border, particularly into the EU. 65% of British-built automotive components are exported to the EU, and 79% of imported components originate from the EU1. International supply arrangements give rise to the risk of cross-border disputes. What should British businesses consider when it comes to cross-border disputes? How might Brexit impact this, and what can businesses do now to prepare?

Cross-border disputes - key considerations

When it comes to international contracts, there are three key areas to consider to minimise cross-border disputes risk:

  • Applicable law - which country's law will be applied in determining any dispute?
  • Forum - what forum will the parties use to resolve a dispute, and where? E.g. the courts of England, or arbitration in Paris.
  • Enforcing a judgment - will you be able effectively to enforce any judgment or award in your favour so you do not have a pyrrhic victory?

Currently, EU regulations and conventions set out a framework to determine each of these areas, thus minimising uncertainty in cross-border disputes and promoting trade. However, there is a risk that these EU regulations may disappear or be modified post-Brexit. That could affect levels of risk regarding disputes involving EU counterparties. We look at each of these areas in turn below - what it is, why it matters, how Brexit might impact, and what British businesses should do to prepare.

1. Applicable law

What is it and why does it matter?

The applicable law is the law which will be applied in determining any dispute (e.g. the law of England, Germany or France). Differences between national laws mean that a contract may be interpreted differently applying English law than it would by applying German law. The applicable law will govern matters including the existence, terms and breach of a contract, and the remedies available for any breach, so it could have a substantial impact on the outcome of a dispute. For more information on governing law clauses, see our article The Basics: What to consider when negotiating governing law and jurisdiction clauses.

What is the current position?

At the moment in disputes between EU parties, the applicable law is determined using what are known as the Rome I Convention. This sets out a hierarchy of rules to decide which country's laws govern a contract. Without getting into too much detail, if you expressly choose a governing law for your contract, that choice will be respected. If you don't, then the general fallback position is that the contract will be governed by the law of the seller's country. UK-based parts suppliers supplying into the EU therefore often benefit from English law for their supply contracts, unless they have expressly chosen a different governing law. There are however other exceptions to this rule.

How might Brexit change this?

The Rome I Convention does not require reciprocity, so it is possible for the UK to continue applying these rules itself. The question is whether the EU will also retain these rules after Brexit in relation to disputes with UK parties.

What can I do to prepare?

The prudent advice is (even more than it was before Brexit considerations) for parties to make an express choice of governing law in their contracts. That choice is likely to be respected after Brexit, giving certainty about the law which will apply to any disputes. UK based businesses are likely to prefer that the governing law is English, but of course that may not be commercially possible when dealing with large continental OEMs and suppliers.    

2. Forum

What is it and why does it matter?

Having thought about which country's laws will apply to a contract and dispute, you also have to consider the forum - i.e. who is actually going to hear the dispute and decide the outcome. For example the forum could be litigation in the courts of a particular country (which need not necessarily be the same country as the governing law, though that is usually sensible), or arbitration. Choosing the forum for disputes in advance can avoid expensive satellite disputes about where the claim should be heard and make sure the matter is resolved in a forum with which you are comfortable and with a decision that can be enforced. For more information on available modes of dispute resolution, see our article For more information on available modes of dispute resolution, see our article The Basics: what should a dispute resolution clause say?

What is the current position?

As with governing law, currently EU regulations set out a hierarchy of rules to determine which country's courts have 'jurisdiction' to hear a dispute. That hierarchy first of all respects any choice of forum the parties have already made, meaning it is wise to make a positive choice if at all possible. In the absence of party choice, other provisions then come into play. The default position is that a defendant must be sued in the courts of the EU country where it is domiciled. However, in a contract for the supply of goods or services, a claimant may choose instead to sue in the courts of the country where the goods or services were delivered (or supposed to be delivered). So, in the case of a German supplier supplying faulty goods into UK, it may be possible to sue either in Germany or the UK.

How might Brexit change this?

As with governing law, if the parties have made an express choice of forum through e.g. an arbitration or jurisdiction agreement in their contract, that is likely to be respected. Brexit does however cause some uncertainty about the position where the parties do not make such a choice. In the event of a no-deal Brexit, the regulation which addresses jurisdiction will cease to apply to Britain, meaning there will no longer be this reciprocal arrangement with the EU and uncertainty about whose courts will determine a dispute. It is currently uncertain exactly what arrangement the UK will have with the EU post-Brexit. For more information, see our article Brexit: what will it mean for dispute resolution?

What can I do to prepare?

Again, it remains prudent advice for parties to include an express choice of forum in their contracts, which is likely to be respected by courts even in a no-deal Brexit scenario. UK based suppliers will doubtless prefer for contracts to be subject to the exclusive jurisdiction of the courts of England & Wales, rather than an EU state. If however that is not commercially possible because of the stronger bargaining power of a European counter-party, then you could consider submitting disputes to arbitration instead. The benefits of arbitration include that it is a neutral forum (rather than being in the courts of one or other party's home country), and arbitration awards can often be enforced more easily than judgments from a state court - something which will take on increasing importance post-Brexit as we outline below.

3. Enforcement

What is it and why does it matter?

Enforcement is the process of realising a court judgment or arbitral award in your favour. In most cases it takes the form of obtaining actual payment of any damages and costs which you have been awarded, but it can also apply to other non-monetary remedies. Enforcement is a vital consideration in cross-border disputes, where your opponent (and their assets) are likely to be situated in another jurisdiction. You may therefore need to 'export' a judgment or award obtained in one country and enforce it in another.

What is the current position?

Enforcement of court judgments within the EU is currently regulated by the Brussels Recast Regulation, the same EU instrument which governs jurisdiction. There is a reciprocal arrangement between the current EU member states to simplify the process of enforcing a judgment from the courts of one EU state in another.

How might Brexit change this?

Although the UK and EU have reached political agreement that the current regime will continue through the transitional period, "nothing is agreed until everything is agreed". In the event of a no-deal Brexit therefore, the EU regime governing enforcement will simply fall away. That means there is a risk that, come 30 March 2019, the UK will have no reciprocal arrangement with the EU for enforcement of one another's judgments. Whilst this is a worst case scenario, it creates unwelcome uncertainty and could make enforcement very difficult or sometimes not possible at all.

What can I do to prepare?

Considering enforceability alone, there is one clear alternative which provides British businesses with certainty about their ability to enforce in the EU, and that is to submit disputes to arbitration rather than litigation. The reason for this is that there is an entirely separate regime for the enforcement of awards in international arbitration, under the New York Convention. This regime is independent of the EU and unaffected by Brexit, but all EU member states are signatories to it, meaning that awards can be enforced more easily in arbitration than litigation. Indeed, this is already a key attraction of arbitration, notwithstanding Brexit. Arbitration does differ from litigation in other important ways, which means enforceability alone may not make it suitable forum for disputes, but businesses should consider whether inserting arbitration agreements in their contracts gives both parties certainty.

Footnote

1 Source: SMMT Motor Industry Facts, June 2018 at https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-June-2018.pdf, accessed 24 August 2018

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Shepherd and Wedderburn LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Shepherd and Wedderburn LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions