Brexit and Its Implications on Governing Law, Jurisdiction, and Enforcement
January 18, 2019
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The UK is due to leave the European Union (EU) on 29 March 2019.

The UK and the EU published a draft Withdrawal Agreement in November 2018. The draft Withdrawal Agreement, if concluded, would provide for a transition period ending on 31 December 2020 during which EU law would continue to apply in the UK.

The UK Parliament has, however, rejected the Withdrawal Agreement in its current form.

In the absence of any further action by the UK or the EU, the UK will leave the EU at midnight (CET) on 29 March 2019 (the “Brexit Day”).

Implications of Brexit on EU Instruments on Governing Law, Jurisdiction, and Enforcement

Should the UK leave the EU on 29 March 2019 without a negotiated agreement, all EU-wide instruments on governing law, jurisdiction, and recognition of judgments will cease to apply in the UK. These instruments include the Rome I and II Regulations on choice of law in a contractual and non-contractual context, and the recast Brussels Regulation that governs jurisdiction and enforcement of judgments between EU Member States.

This necessarily means some uncertainty for Nordic companies with interests in and dealings with the UK. While the implications on cross-border legal disputes may be manifold, the following general points are good to keep in mind.

  • Any choice of applicable law will be upheld within the EU and also by UK courts.[1]
  • Under Article 25 of the Brussels Regulation, if the parties have agreed that a court of an EU Member State has jurisdiction over a dispute, such agreement will continue to be upheld within the European Union regardless of whether the parties are domiciled in the EU.
  • On 28 December 2018, the UK acceded to the 2005 Hague Convention on Choice of Court Agreements (the “Convention”), which provides rules for the jurisdiction and enforcement of judgments where there is an exclusive jurisdiction clause in favour of a contracting state. The limitation with the Convention is, however, that it only applies to contracts that were entered into after the Convention came into force in the contracting state. While the EU is already a signatory to the Convention, the UK has acceded the Convention in December 2018 in an attempt to ensure that the Convention will continue to apply even if there is no deal over Brexit. What remains uncertain, however, is whether the Convention would only apply to agreements entered into after the Convention entered into force in the UK or also to those contracts entered into following the entry into force of the Convention for the EU. If the Convention applies, then choices of jurisdiction are likely to be upheld also in relation to the UK.
  • Arbitration agreements remain unaffected by Brexit. Arbitration agreements and arbitral awards are recognised and enforced in accordance with the New York Convention in its current 159 contracting states, including all European Member States and the United Kingdom.

In the light of the above, for existing contracts, parties may want to evaluate what risks a no-deal Brexit potentially poses from a dispute resolution perspective. For future contracts, parties should also consider whether an arbitration agreement is an option to settle potential disputes.

Hannes Snellman Assists with Any Jurisdictional Brexit-Related Questions

The Hannes Snellman Dispute Resolution Teams in Helsinki and Stockholm are available to discuss any questions or concerns that you may have in relation to Brexit or contracting with parties from the UK.

 

David Ackebo
Partner at Hannes Snellman

 

Pontus Ewerlöf
Partner at Hannes Snellman

 

 

Anna-Maria Tamminen
Partner at Hannes Snellman

 

[1] The UK government has announced that all parts of the UK would retain the Rome I and Rome II rules on applicable law in contractual and non-contractual matters, which generally do not rely on reciprocity to operate. See https://www.gov.uk/government/publications/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal/handling-civil-legal-cases-that-involve-eu-countries-if-theres-no-brexit-deal#after-march-2019-if-theres-no-deal