UK clarifies negotiating position on choice of law, jurisdiction and enforcement of judgments post-Brexit

Yesterday (22 August) the UK Government published a paper which outlines its position on the extent to which current EU rules on choice of law, jurisdiction and enforcement of judgments should continue to apply as between the UK and the EU27 post-Brexit. The paper, Providing a cross-border civil judicial cooperation framework, responds to the Position Paper on Judicial Cooperation in Civil and Commercial Matters published by the European Commission on 29 June (see our post).

Broadly, other than seeking wider enforcement of judgments, the Government agrees with the Commission's proposals on the terms of separation, if no agreement on a future relationship can be reached. More interesting, however, are the comments on what that future relationship might look like.

Commercial parties will be pleased to see the Government has taken on board the importance of agreeing reciprocal rules, closely mirroring the current EU system, which will support cross-border trade after Brexit.

In summary, the key points are:

• The Rome I and Rome II Regulations on choice of law and applicable law in contractual and non-contractual matters will be incorporated into UK domestic law. This means post Brexit courts in the UK and the EU27 will be applying the same rules to determine which law governs the parties' relationship. Nothing is said in the paper about interpretation of these former Regulations post Brexit, but presumably, pursuant to Clause 6(3) of the Withdrawal Bill, courts other than the Supreme Court should apply EU law pre-dating exit day. The Supreme Court will not be so bound but it must apply the same test as it would in deciding to depart from its own case law. In respect of post-Brexit EU case law, UK courts would be free to ignore this, but they may well look at that case law to assist in interpretation, in the same way that they might look at an Australian decision where the same principles apply in both countries. For more information on the European Union (Withdrawal) Bill published in July see our post
• The UK will seek to continue to participate in the Lugano Convention. This convention contains the reciprocal rules on jurisdiction and enforcement of judgments between the EU and Norway, Iceland and Switzerland and is modelled on the Brussels I Regulation, which is an earlier version of the recast Brussels Regulation (which contains the rules currently in place between EU member states). An intention to participate in Lugano is significant because the convention requires non EU member states to 'pay due account to' decisions of the CJEU.
• So far as jurisdiction and enforcement of judgments between the UK and EU 27 is concerned, no specific proposals are put forward. The Government states that it will seek an agreement with the EU that allows for close and comprehensive cross-border cooperation on a reciprocal basis 'which reflects closely the substantive principles of cooperation under the current EU framework.' Under that framework, courts of member states have to give effect to CJEU decisions. As the Government's paper once again makes clear, leaving the EU will bring an end to the direct jurisdiction of the CJEU in the UK. Given, however, the government is prepared to 'pay due account' to decisions of the CJEU in the context of the Lugano Convention, there is no reason in principle why it should not be prepared to reach a similar agreement regarding the recast Brussels Regulation. Whether the European Commission would be prepared to agree remains, of course, to be seen. (Note: If the UK were to participate in Lugano, without reaching any separate agreement with the EU 27, then the rules in the Lugano Convention would also govern jurisdiction and enforcement of judgments between the UK and the EU 27. That does not however appear to be what is envisaged; the paper suggests that the Government will be seeking to reach a separate agreement with the EU 27, closely reflecting the position under the recast Brussels Regulation, so that Lugano would apply in relation to Norway, Iceland and Switzerland).
• The Government intends to participate in the Hague Convention on Choice of Court Agreements 2005 which sets out jurisdiction rules where there is an exclusive choice of court agreement. The UK is currently a party to the Convention by virtue of its EU membership. The Government has been extensively lobbied to make clear its intention to join the Convention post Brexit. The UK can participate in Hague without agreement from the EU so this is a step which can be taken very quickly after Brexit.
• So far as separation without agreement is concerned:

Applicable law The existing EU rules on applicable law for contractual and non -contractual obligations should continue to apply to contracts concluded before the withdrawal date and, in respect of non-contractual liability, to events giving rise to damage which occur before the withdrawal date.

Jurisdiction The existing EU rules governing jurisdiction to determine disputes should continue to apply to all legal proceedings instituted before the withdrawal date.

Choice of Court Where a choice of court has been made prior to withdrawal, the current rules should continue to apply to establishment of jurisdiction and recognition and enforcement of any resulting judicial decision, where a dispute arises to which such a choice applies, whether before or after withdrawal.

Recognition and enforcement of judicial decisions The existing EU rules should continue to apply to judicial decisions given before the withdrawal date and those after the withdrawal date in proceedings instituted before that date.

Judicial Cooperation procedures and requests for information Those pending on the withdrawal date should continue to be governed by existing EU rules.

The most significant difference between the Government's separation proposals and those of the Commission is that,under the Government's proposals, certain judicial decisions given after the withdrawal date would continue to be enforced under the current rules ( and so subject to a more generous enforcement regime than would otherwise likely apply under the laws of each EU27 member state).

Next steps

The Paper points out that close and comprehensive civil judicial cooperation is in the mutual interests of the UK and the EU. It is to be hoped the Commission agrees and is prepared, sooner rather than later, to move away from looking just at separation issues and turn its attention to negotiating a solution for the future.

For more information, please contact Anna Pertoldi, Partner, or Maura McIntosh, Professional Support Consultant, or your usual Herbert Smith Freehills contact.