On 24 December 2020 at 14:44, the EU and the United Kingdom of Great Britain and Northern Ireland (UK) reached an agreement on trade and cooperation. Previously, the UK had already left the European Union on 01 February 2020. The withdrawal agreement of 17 October 2019 governed a number of important points, above all the continued application of EU law in the UK until the end of the transitional phase on 31 December 2020. What would happen after that was still unanswered for a long time and many feared a “Hard Brexit”, i.e. a Brexit without a final withdrawal agreement.
The area of judicial cooperation was also on the line. Would it still be possible to enforce judgments? Could one continue to rely on agreements on jurisdiction? Would courts on both sides of the Channel interpret choice of law clauses in the same way?
The Brexit Trade and Cooperation Agreement: Disappointment in terms of Litigation
And then the EU-UK Trade and Cooperation Agreement. 1246 pages with detailed explanations on many areas, but for the area of judicial cooperation the result is sobering. Even after thorough review of the document, there are no provisions on jurisdiction and court proceedings in general (e.g. double lis pendens), the all-important mutual recognition and enforcement of judgments and the applicable law in court proceedings. However, this result, which at first seems unreal, is also confirmed by other lawyers.
And ultimately, then, it remains with the results of the previous three episodes of the Brexit Reloaded series, without my wishing for it. The only thing that remains is the minimal protection of confidence offered by the first agreement, the Withdrawal Agreement from October 2019, here again at a glance:
Brexit Reloaded and Updated (1): Impact on Court Proceedings
The findings of the first part of the Brexit Reloaded series on the effects on court proceedings remain valid. In principle, proceedings initiated before the end of the year still benefit from protection of legitimate expectations. They continue to be governed by the rules of the still applicable EU law. The only really safe way for court proceedings was to initiate them before the end of the year. In future, an arbitration clause should be carefully considered in dispute resolution clauses.
Brexit Reloaded and Updated (2): Impact on the Enforcement of Judgments
The second part of the Brexit Reloaded series (impact on the enforcement of judgments) unfortunately does not change as a result of the trade agreement. Regrettably, there is no provision in the entire document for the recognition and enforcement of judgments from the other “country” (EU for UK and vice versa). This is extremely misfortunate because this is one of the most important points in legal certainty in the judicial sphere. The agreement omits this point or leaves it to national regulations (how exactly can be read in the second part).
Brexit Reloaded and Updated (3): Impact on the applicable Law in Court Proceedings
The agreement is also silent on the determination of the applicable law, i.e. the so-called conflict of laws rules or IPR. We dealt with these in the third part of the series. Although the UK has converted the EU conflict-of-law rules into national UK law and intends to retain them, this can change and thus creates further legal uncertainty. After all, contracts concluded before 31 December 2020, including their choice of law clauses, will continue to be governed by EU law. This is determined by the Withdrawal Agreement.
The Trade and Cooperation Agreement is certainly a great success and so close to an “effective” and possibly Hard Brexit. Unfortunately, it is a disappointment for the areas of judicial cooperation, as it does not contain any rules on court proceedings, enforcement and conflict of laws. Companies will therefore have to continue to live with a certain degree of uncertainty. It may no longer be practical to start proceedings before the end of the year, but it would have been the safer choice. From 2021, companies should choose and draft their choice of law and dispute resolution clauses carefully in the UK context. Perhaps an arbitration clause is advisable, perhaps a choice of forum agreement (but then worded all the more clearly). Perhaps UN sales law should be chosen instead of national sales law (a good idea anyway). Seeking for advice does not hurt in this uncertain environment.
Johannes Brand, lawyer and bar approved specialist in international business law, will help with questions regarding Brexit.