The implications of Brexit on cross-border dispute resolution since 2021
Legal instruments of the European Union (EU) – uniform rules on applicable law, jurisdiction, recognition and enforcement of judgements etc. – undoubtedly facilitate resolution of cross-border disputes. Until Brexit and during the transitional period set in the Withdrawal Agreement, i.e. until 31 December 2020, these rules were relevant and directly applicable in all commercial and civil disputes with international elements related to the United Kingdom (UK).
While the UK and the EU have recently singed the Trade and Cooperation Agreement (TCA) (applicable from 1 January 2021), the TCA does not provide any new rules aimed at facilitating cross-border dispute resolution.
As such, starting from 1 January 2021 UK-EU dispute resolution is governed by the international conventions, domestic rules and – to certain extent – relevant provisions of the Withdrawal Agreement.
Below we provide relevant factors which stakeholders should consider while cooperating with UK partners and/or while planning to initiate court proceedings with UK-EU element (for example, while entering into a contract with UK-based partner, concluding a choice-of-court agreement in favour of UK courts, planning to enforce a judgement rendered by the UK court in EU-27 and other).
Before 31 December 2020: the rules on jurisdiction applicable to civil and commercial matters were laid down by the Brussels I Recast (Regulation No 1215/2012).
From 1 January 2021: the jurisdiction rules established in the Brussels I Recast will continue to apply in all legal proceedings commenced before courts of both the UK and the EU Member States before 31 December 2020.
Proceedings commenced before the English courts on 1 January 2021 or later will be subject to the common law rules. These rules substantially differ from the EU conflict of laws rules and provide legal instruments unknown in EU dispute resolution regime, for example, (i) the mere temporary presence in the UK as a ground for assuming jurisdiction, (ii) refusal to hear an action brought against a UK-based defendant due to the forum non-conveniens (i. e. doctrine allowing a court to dismiss a civil action even though the court has jurisdiction over the case and the parties) and (iii) anti-suit injunctions (i.e. orders preventing an opposing party from commencing or continuing a proceeding in another jurisdiction or forum).
Proceedings commenced before the courts of EU-27 on 1 January 2021 or later will be governed by domestic rules of each particular Member State. In the absence of one uniform legal instrument, these rules will undoubtedly differ from one Member State to another. As such, it is advisable to seek legal advice on a particular jurisdiction before initiating a case.
The domestic rules on jurisdiction would cease to apply, if the UK became a contracting state to the Lugano Convention. On 8 April 2020, the UK expressed its wish to accede to the Lugano Convention which establishes the rules on international jurisdiction analogous to those established in the Brussels I Recast Regulation. So far, the UK has not acceded to the convention, as its accession requires the unanimous agreement of the contracting parties, namely Denmark, Iceland, Norway, Switzerland and the EU. The EU is yet to give its support to the accession. However, considering that the EU and UK have reached the TCA it is likely that the EU will support UK’s accession to the Lugano Convention, as it would undoubtedly facilitate not only resolution of jurisdiction disputes but also recognition and enforcement of judgements (please see below).
Before 31 December 2020: choice-of-court agreements in favour of courts of the EU, including those of the UK, were regulated by the Brussels I Recast.
From 1 January 2021: the UK acceded to the Hague Convention of 2005 on Choice of Court Agreements, which has been in force in the EU since 1 October 2015. Thus, as of now, the choice-of-court agreements are governed by this Convention. However, the scope of application of this Convention is more limited than that of the Brussels I Recast – only exclusive choice-of-court agreements fall within the scope of the convention, and the convention should not be applied to asymmetric agreements (i.e. where agreements are made in favor of exclusive jurisdiction of several states). In addition, the UK and the EU disagree as to whether the convention should be applied to agreements made after 1 October 2015 (the UK’s position) or after 1 January 2021 (the EU’s position). As such, it is suggested to seek legal advice on enforceability of the concluded choice-of-court agreements as well as legal consultation on drafting new jurisdiction agreements.
Before 31 December 2020: the law applicable to contractual obligations was determined under the Rome I (Regulation No 593/2008), and the law applicable to non-contractual obligations was determined under the Rome II (Regulation No 864/2007).
From 1 January 2021: in accordance with the Withdrawal Agreement, the Rome I will continue to apply in respect of all agreements signed before 31 December 2020, and the Rome II will continue to apply in respect of all harmful events that occurred before 31 December 2020.
The law applicable to contracts signed after 31 December 2020 and harmful events that occurred after this date will be determined under the same rules – the application of the Rome I and Rome II in EU-27 has not change, and the UK has retained rules provided in these regulations.
Consequently, the position on governing law remains unchanged and courts of both the UK and EU-27 will continue to apply the same regime when deciding questions of governing law and continue to respect the parties’ choice of law agreements in favour of English law of law of any EU Member State. However, considering that Rome I and Rome II have been retained by the UK by way of domestic regulation, a possibility of future changes in this regulation should be kept in mind.
RECOGNITION AND ENFORCEMENT OF JUDGEMENTS
Before 31 December 2020: judgements given in both the UK and EU-27 benefited from automatic recognition and enforcement regime provided in the Brussels I Recast. A judgment given in any Member State was enforced in the UK without any prior formal court procedures and vice versa. For example, a judgement rendered by the English court could be enforced in Lithuania by providing certain documents directly to the bailiff; a judgement creditor did not have to initiate proceedings for recognition and declaration of enforceability before the Lithuanian Court of Appeals (as it is required before enforcing a judgement rendered by a court of a third state).
From 1 January 2021: judgements given in civil matters commenced before 31 December 2020 will be automatically recognised and enforced under the rules established in the Brussels I Recast. As such, judgements given in proceedings commenced before 31 December 2020, will benefit from automatic recognition and enforcement despite being rendered in 2021 or later in both the UK and the EU.
Judgements rendered in cases initialed subsequently:
- falling within the scope of the Hague Convention of 2005 on Choice of Court Agreements, will be recognised and enforced under this Convention. The convention does not provide for the automatic recognition and enforcement of judgements, but rather establishes the general simplified procedure for recognition and enforcement;
- not falling within the scope of the Hague Convention of 2005 on Choice of Court Agreements, will be recognised and enforced in the UK under the rules of the common law. Judgements given by UK courts will be recognised and enforced in Lithuania in accordance with rules provided in Lithuanian Civil Procedure Code, i.e. only after the competent court recognises them and declares them enforceable.
In case of the UK acceding to the Lugano Convention, judgements falling outside the scope of the Hague Convention of 2005 on Choice of Court Agreements, would be recognised and authorised for enforcement under the simplified procedure established in the Lugano Convention.
The EU is currently considering possible accession to the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. If the UK and the EU joined the Convention, the judgments in the UK and the EU would be recognised in accordance with the harmonised rules laid down in the Convention.
INTERIM MEASURES / FREEZING ORDERS
Before 31 December 2020: decisions granting interim measures / freezing orders were automatically recognised and enforced in accordance with the Brussels I Recast.
From 1 January 2021: decisions granting interim measures/freezing orders in proceedings commenced before 31 December 2020 will be recognised and enforced under the Brussels I Recast.
Decisions granting interim measures/freezing rendered in cases initiated subsequently will be recognised in accordance with domestic rules of a state in which enforcement is sought.
SERVICE OF DOCUMENTS
Before 31 December 2020: the service of judicial and extrajudicial documents in civil or commercial matters was governed by the Service Regulation (Regulation No. 1393/2007).
From 1 January 2021: service of documents received for the purposes of service before 31 December 2020 will continue to be governed by the Service Regulation.
Service of documents received after 31 December 2020 is possible in accordance with the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
TAKING OF EVIDENCE
Before 31 December 2020: taking of evidence was governed by the Evidence Regulation (Regulation No. 1206/2001).
From 1 January 2021: requests received before 31 December 2020 will continue to be dealt with in accordance with the Evidence Regulation.
Requests received after 31 December 2020 will be dealt in accordance with the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters.