Brexit ‟breaks” the European harmonization of justice and home affairs

The impact of Brexit on jurisdiction, applicable law and services of judicial deeds in civil and commercial matters

In the past months I could not help but wonder if the English supporters of the divorce from Europe had a clear idea of the practical impact that this decision would have on their daily lives. Had they thought of the impact on the commercial relationships of companies in the United Kingdom with European entities?

I don’t think they had.

It is not a coincidence that just couple of days ago, the High Court of London stated that the Parliament has a final ‟say” before the government can start the withdrawal process in conformity with the European Treaty.

This judgment is subject to appeal. We can only wait and see what the final position of the English judges will be, before Brexit can actually happen.

But let’s try to imagine what would happen if Brexit really happened.

In civil and commercial disputes, Brexit would actually have an impact on at least four major areas on which the European harmonization has better expressed itself: the allocation of jurisdiction for civil and commercial disputes, the applicable law to contractual and non-contractual obligations, the recognition and enforcement of judgements, the services of judicial and extrajudicial deeds within other Member States.

Brexit would indeed impact many other fields that have benefit along the years from the European harmonization process, such as insolvency and family law issues.

In this post, I will focus on the impact of Brexit on civil and commercial matters.

The allocation of jurisdiction in international commercial disputes

As to ordinary litigation, one of the main consequences of Brexit will be the loss of the criteria set forth in the Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Such Regulation was aimed at limiting forum shopping and parallel proceedings (artt. 29 and following). Now, judges of EU Member States “may” (but are not obliged to) stay proceedings in favour of a non-EU jurisdiction first-seized (art. 33).

A possible consequence could be the proliferation of disputes started before UK Courts, as first-seized jurisdiction.

This may lead to another set of consequences such as the possibility to apply for anti-suit injunctions before UK Courts. This kind of procedural remedies – typical of common law jurisdictions – are aimed at preventing parties from starting foreign proceedings in breach of a jurisdiction agreement. The European Court of Justice has prohibited these injunctions as they would jeopardize the principle of comity between the Member States (Cfr. Gregory Paul Turner v Felix Fareed Ismail Grovit, Harada Ltd and Changepoint SA, Case C-159/02 [2004]).

Following the loss of Recast Brussels Regulation, in a dispute involving a UK based company, how will the jurisdiction be allocated? The odds are that UK may fall back on the preceding Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, or either on the bilateral conventions the UK entered into with each of the Member States prior to the UK accession to the EU(if existing and if negotiations with each Member States will lead to the revitalization of such conventions), or on other multilateral conventions that the UK may consider to sign, such as the 2007 Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (which only covers exclusive jurisdiction clauses) or the Convention On Choice Of Court Agreements.

Applicable law to contractual and non-contractual obligations

As a consequence of Brexit, both the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I, concerning the choice of law applicable to contracts) and the Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II, concerning the choice of law applicable to non-contractual matters) will be lost.

This means that the law applicable to contractual obligations shall be identified based on the 1980 Rome Convention on the law applicable to contractual obligations. Despite similar (or for some authors identical) to the Rome I Regulation, the Rome Convention of 1980 has some differences that may affect the resolution of up-to-date commercial disputes. For example, in Rome I Rregulation:

  • the parties’ autonomy is more widely recognized (parties can opt for the application of the lex mercatoria and/or non-governmental laws);
  • absent any choice of law by the parties, the applicable law is identified in conformity of different criteria than those established by the Rome Convention 1980. The latter, for example, has no reference to establish the applicable law for certain types of financial contracts as defined by MiFID;
  • in relation to insurance policies, conflict of laws are specifically addressed;
  • transportation agreements are regulated by a specific provision;
  • within the context of consumer contracts, the category of consumers is wider.

In relation to non-contractual obligations, the loss of Rome II Regulation will lead to the application of the UK Private International Law Act of 1995.

Recognition and enforcement of judgements within the EU

With reference to ordinary litigation, Brexit will break the harmonized and simplified procedure of enforcement of judgments within the EU.

Recast Brussels Regulation established the principle that all judgements rendered in a Member State have to be considered valid by other Member States and can be easily enforced within the territory of each Member State without an exequatur procedure.

This great advantage will be lost. It is likely that the UK would consider the Lugano Convention. However, this international treaty does not bypass the need for the applicant to request a declaration of recognition and enforceability of the judgement in the Member State where the enforcement is sought. This may impact the timing of the enforcement.

In relation to arbitration proceedings and the enforcement of arbitration awards, Brexit shall have no impact at all. The UK has signed and will continue to be a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is not connected to the EU.

Services of judicial deeds

Regulation (EC) No 1393/2007 of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters concerning the service and communication of judicial and extra-judicial deeds in civil and commercial matters shall also fall as a consequence of Brexit.

This means that it is likely that services of judicial deeds from/to the UK shall be regulated by the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters and/or by any other bilateral/multilateral conventions the UK has entered into with each of the Member States.

The Hague Convention provides for service procedure that pivots around central authorities that shall be appointed by each of the signatory states. Direct services are allowed under certain circumstances and unless the relevant signatory states have not raised objections to it.

Again, even in this respect, the service procedure would be slowed down and it is likely that legal uncertainties may arise in relation to the validity of the services from one country to the other.

Conclusions

It is unclear what the position of UK vis-à-vis all the aspects mentioned above is.

Should Brexit happen for real, UK should start intensified negotiations with the European Union with the aim of preserving – if at all possible – some fragments of the harmonization in the justice and home affairs that would certainly be lost. Alternatively, UK should opt for other multilateral conventions that, however, in my opinion will never reach the same level of uniformity that the EU has strenuously and successfully fought for.

Should Brexit happen for real, we will need to start thinking how to deal with a level of legal uncertainties even higher than the one we face today in relation to commercial disputes resolution.

 

 

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