How will Brexit impact on cross-border litigation?

The recent news that Milan is seeking to usurp London as the site of the pharmaceutical division of the Unified Patent Court raises the question whether this is the start of a broader challenge to the London litigation market fuelled by Brexit.

The rules of cross-border dispute resolution in England are in large measure contained in European regulations. The government’s announcement that EU laws will, wherever possible, be enacted into domestic law upon Brexit, pending further review, might provide reassurance, at least in the medium term.

The exercise of incorporating these into domestic law is not, however, as straightforward as it might appear, since some initiatives require reciprocity with member states to be effective. There is, for instance, little obvious merit in continuing to enforce judgments from member states, permit requests for evidence for foreign proceedings, or recognise insolvency proceedings if the member states will not do likewise.

That, however, requires the agreement of the member states, and since the ultimate justification for these initiatives was the promotion of the internal market, of which the UK may no longer be a part, it cannot be gainsaid that such instruments will remain in force.

This notwithstanding, there are grounds for optimism. There can be no more fundamental question for litigators than whether Brexit will affect the ability to choose the English courts as the forum for dispute resolution and to choose English law. Presently, both questions are regulated by European regulations.

As to the former, the recast Judgments Regulation offers extensive protection for English jurisdiction clauses in commercial contracts. The English court is typically obliged to accept jurisdiction. As importantly, other member state courts are normally required to decline jurisdiction. Absent an agreement with the member states, however, the regulation will cease to apply, since it requires reciprocity and the mutual enforcement of judgments. The Lugano Convention, however, applies between the member states, Norway, Switzerland, and Iceland, and contains broadly similar rules. Conceivably, an agreement to continue to apply the Lugano Convention will be reached¸ although it will require member states’ consent.

Even without such an arrangement, however, the Hague Choice of Court Convention offers a way forward. The EU has ratified the convention on behalf of its member states (except Denmark). The UK could ratify the convention in its own right post-Brexit. The convention generally requires the enforcement of exclusive jurisdiction clauses in favour of contracting states and, as importantly, other contracting states must decline jurisdiction. Moreover, even without any international arrangement, English courts will typically uphold English jurisdiction clauses, and although the protection for such clauses in member states would be less clear, the English courts could revive the use of anti-suit injunctions to enforce such clauses robustly. Indeed, the English courts may regain powers to control cross-border litigation and enforce jurisdiction agreements.

The position for choices of English law is more straightforward. The Rome I Regulation enshrines the principle of party autonomy for commercial agreements and applies irrespective of the domicile of the parties and of the law chosen. Accordingly, other member states will continue to respect choices of English law upon Brexit. Since the Rome I Regulation does not require reciprocity, it could simply be enacted into English law. Hence, in the vast majority of commercial cases, an English choice of law clause will continue to be effective. The Rome II Regulation introduced a power to choose the governing law for non-contractual obligations. Again, the courts of member states will continue to uphold such a clause post-Brexit, and since the Rome II Regulation does not require reciprocity either, it could be enacted into English law.

This suggests the need to prioritise those litigation instruments that require reciprocity and agreement with the member states in the Brexit negotiations. But the core freedom to choose the English courts, and English law to govern contractual disputes, is likely to be preserved after Brexit. It may, in any event, be possible to overstate the importance of Brexit to the English litigation market. Parties choose the English court for the quality of its procedures and the sophistication, pragmatism, and pre-eminence of English commercial law. It is likely that those reasons will remain largely intact, whatever else may happen in the years ahead.

Professor Jonathan Harris QC (Hon) is a barrister at Serle Court and joint general editor of Dicey, Morris and Collins on the Conflict of Laws

www.serlecourt.co.uk