There has been much speculation as to what will happen post Brexit. Will companies have to pay largely inflated prices in order to trade with European Union (‘EU’) companies? Will the financial markets crash? Will it even be worth trading with EU member states after March 29th (‘B-Day’)?
For companies who rely on their European counterparts for their everyday business, it is important to know what you can do if something does go wrong, before and after B-Day.
The Current System
At the moment, there are processes in place which allow a Claimant who is owed €5,000 or less to make a claim and then have the matter enforced in another EU member state - this is going to change. Simply put, there is little guidance on how this will change after B-Day, but one thing that is clear is that it is important to prepare for the worst.
We are advising clients to start reviewing the terms of their contracts now, to ensure that they are as favourable as possible. While the uncertainty may exist, you can be certain that having your contracts reviewed early will be largely beneficial and may help your company avoid losing thousands of pounds.
Each contract is drafted on individual terms; most contracts tend to have a Governing Law clause which will decide which laws and rules will govern the agreement if a legal issue arises.
For many years, the laws and rules of England & Wales have been the preferred choice of substantive law in International Contracts. This may be due to the emphasis judges and courts put on parties trying to reach settlement ahead of the hearing; thus saving time and costs.
Due to the uncertainty surrounding B-Day, it is important to start reviewing your contracts now and -where necessary - enter into variations to ensure that you have the upper hand should there be any need to enter into litigation.
The contracting parties tend to agree on which country will have jurisdiction in case of any dispute. If there is no jurisdiction clause in the contract, then it is often the case that the jurisdiction where the defendant is domiciled will be the relevant place to issue proceedings in the event of a dispute. You may be able to avoid costly litigation procedures abroad by entering into contractual variations now, rather than after B-Day, when it may already be too late.
Further to the release of Government’s framework on ‘Providing a cross-border civil judicial cooperation framework’ the UK will seek to agree arrangements with the Court of Justice of the European Union (‘CJEU’).
The Government have proposed to remove the principle of Supremacy of EU Law. This means that EU law will no longer take precedence over domestic law. Under new proposals, judges will be encouraged to apply domestic laws to cases rather than applying EU Regulations. Ahead of this change, it is important that clients with cross-border contracts have their contracts reviewed to ensure favourable terms, should any complications arise.
While the Government have proposed to incorporate Rome I and II regulations into domestic law (to provide clarity on choice of law and applicable law in contractual and non-contractual matters), there are regulations that will be repealed and may affect the way in which disputes are resolved in your contract, for example:
- Brussels 1a Regulation (1215/2012) – provides rules regarding where a matter should be heard when it raises cross border issues between the UK and the EU;
- The Enforcement Order, Order for Payment and Small Claims Regulations – establishes the procedure for dealing with uncontested claims of €5,000 or less;
- The EU/Denmark 2005 Agreement - provides rules regarding where a matter should be heard when it raises cross border issues between Denmark and the EU; and
- The Lugano Convention – provides the basis of our civil judicial relationship with Norway, Iceland and Switzerland.
What does this mean for your company? Essentially, as a company you should now be taking steps to ensure that your contracts are drafted with terms that are favourable for you. It is unclear how much domestic law will be applied to existing contracts so now is the time to review the terms of your contracts to ensure you are safeguarding your company’s interests.
In the case of The European Medicines Agency (EMA) v Canary Wharf
, a dispute has arisen with regards to the EMA’s obligations to complete the terms of their lease despite their decision to move their headquarters overseas to the Netherlands. While EMA believe that Brexit will frustrate the terms of the lease, Canary Wharf have rebutted to confirm that the lack of an early break clause means EMA’s obligations continue under the agreement. It is still unclear whether the courts will apply EU law or domestic law, but one thing is for sure; this dispute may have been avoided if legal advice was sought earlier.
This case highlights many key issues surrounding Brexit and has litigation lawyers eagerly awaiting a decision which will set precedence for the future.
The Government have not yet confirmed what will happen with ongoing matters; while cases should continue to proceed under current rules there is no guarantee that this will be the case. There has been no confirmation of the Government’s position as to ongoing matters so it is important to seek legal advice on your position and perhaps enter into contractual variations now, if necessary.
Civil Litigation Specialist’s View
In summary, while it is not yet clear whether there will be a hard Brexit or not, it is important to carry out a review of your contracts and ensure that the jurisdiction and governing clauses will cover in the event of a dispute. It may be necessary to seek a variation of existing contract terms and, when entering into a new contract, to ensure that the governing and jurisdiction clauses are drafted in such a way that your interest is protected.
If you require further expert advice or assistance regarding civil litigation post-Brexit or any other civil litigation matter please contact, author of this article, Manpreet Matharu
in our Civil & Commercial Litigation Department on 020 3114 1223
or at email@example.com
Duncan Lewis Civil Litigation Solicitors
Duncan Lewis is one of the leading solicitors in England and Wales offering expert litigation and alternative dispute resolution services offering expertise in ADR & Mediation, Bankruptcy, Banking & Finance, Company & Commercial, Contentious Probate, Defamation, Debt Recovery, Fraud, International, Property and Professional Negligence.
The firm regularly handle claims at the County Court as well as high-value claims at the High Court, the Commercial Court and the Court of Appeal.
If you have a litigation issue which you wish to discuss in confidence, please do not hesitate to call us on 0333 772 0409