- Applicable law uncertain if a case is brought before an English court
- Jurisdiction clause in general terms and conditions may be insufficient
- Consumer law may require attention where diverging future regulations are concerned
Applicable law uncertain if a case is brought before the English courts
Should parties not have included a choice of law in their agreement, then EU-courts determine which law applies based on the Rome I Convention. Currently, the courts of the UK also apply this Convention. This will change, however, after the transition period (as the Rome I Convention will then no longer apply to the UK). Should, after this, a party initiate legal proceedings in the UK (and provided the courts of the UK have jurisdiction), the courts of the UK will determine the applicable law based on their own rules of international private law, instead of the Rome I Convention.
At present, it remains uncertain which rules or regulations will be applied.
Some contend that the courts of the UK will apply the predecessor of the Rome I Convention, the "Convention on the Law applicable to Contractual Obligations" (to which the UK will remain a party, even after they have left the EU); others argue that the courts of the UK may apply general law. Others still reason that the British government may transpose the relevant provisions from the Rome I Convention into local law. Please note that this issue is only raised if proceedings are initiated before any of the courts of the UK; should proceedings be started before EU-courts, then the EU-courts will continue to apply the Rome I Convention – also where British parties are involved.
Jurisdiction clause in general terms and conditions may be insufficient
After the transition period, it will no longer be a party to the Brussels I recast Regulation, which addresses which courts have jurisdiction as well as whether foreign judgments may be executed. At first it seemed that, instead, the courts of the UK would apply the Hague Choice of Court Convention, as the UK had filed an act of accession to that Convention at the end of December 2018. This Convention appears to be rather stricter than the Brussels I recast Regulation where the jurisdiction clauses are concerned. The English wording of the Hague Choice of Court Convention explicitly refers to an "exclusive choice of court agreement". This wording suggests that parties should reach mutual agreement on the competent court. This begs the question whether a unilateral jurisdiction clause in general terms and conditions – which may not be explicitly agreed between the parties – meets this requirement.
However, the UK withdrew its act of accession to the Hague Choice of Court Convention at the beginning of this year. While doing so, the UK stated its intention to submit a new act of accession at an appropriate time before the end of the transition period. This has not yet been done.
In the meantime, the UK has formally applied to accede to the Lugano Convention. Although countries such as Norway, Iceland and Switzerland have already indicated to support the accession, the European Commission seems to be holding back for the time being. If the UK does indeed become a party to the Lugano Convention, the consequences in terms of jurisdiction and the enforcement of judgments after 31 December 2020 will remain fairly limited. This is because the provisions of this Convention are very similar to the provisions of the predecessor of the Brussels I recast Regulation.
Consumer law may require attention where diverging future regulations are concerned
Each EU country (including the UK) has transposed EU consumer law into local law. We do not expect Brexit to majorly affect this – although problems may arise where the interpretation of this EU consumer law by the courts of the UK will differ from that of the EU Court of the Justice. The jurisdiction of the EU Court of Justice will come to an end. The relevant question then arises as to how the UK will subsequently deal with the the EU Court of Justice case law. This could potentially affect consumer's abilities to exercise their rights. We do expect, however, that where future consumer law is concerned, EU consumer law and local UK consumer law will be diverging, as the UK will no longer be obliged to implement the many rules that the EU is currently developing within this area of law. In principal, diverging systems in themselves are not necessarily problematic. This may change, however, if it should turn out that the local rules applied in the UK are stricter than those developed by the EU.
Practical advice for (drafting) commercial contracts
Given all the above mentioned uncertainties, we advise to always include a jurisdiction and choice of law clause in your contracts. Should your contracts not include such a clause (or should it only be contained in the applicable terms and conditions), we advise you to agree on jurisdiction and choice of law in an amendment on that existing contract. This way, both parties avoid any unnecessary uncertainties and focus on their business instead.
Please also see the articles on the impact of Brexit in other practice areas. For a more detailed analysis of the impact of Brexit on your business, please do not hesitate to contact any of our experts.