Friday, 26 July 2019

Litigating in London after Halloween

Basher Eyre / Junction of Fetter Lane and Rolls Buildings / CC BY-SA 2.0

Jane Lambert

Unless the government loses a vote of confidence in accordance with s.2 (3) of the Fixed Term Parliament Act 2011, there is a strong possibility that this country will leave the European Union at 23:00 on 31 Oct 2019 without concluding an agreement in accordance with art 50 (2) of the Treaty on European Union. The reason I say that is the new administration has announced that it will not enter negotiations for such an agreement unless the remaining make concessions that they have so far refused to make (see Patrick Walker UK on course for no-deal Brexit as Johnson rejects EU agreement 26 July 2019 The Guardian).  That is a consideration to be taken into account by those who are contemplating proceedings in the Business and Property Courts of England and Wales or indeed the proper law of any contract that they may be negotiating.

One of the reasons for choosing London as a forum for the resolution of civil or commercial disputes is that the following legislation applies to the United Kingdom:
The benefits of this legislation were spelt out by the Bar Council's Brexit Working Group in paragraphs 4 and 5 of Paper 4 (third edition) of the Brexit Papers:
"4.1. Judgments of the courts of EU Member States are to be enforced throughout the EU as if they were judgments of a court of the Member State in which enforcement is sought. This includes “protective measures” such as injunctions freezing assets.
4.2. The courts of one Member State may apply “protective measures” to assist with proceedings in another Member State.
4.3. Subject to a number of notable exceptions, persons domiciled in an EU Member State should be sued in that Member State and where this is not what has happened courts are required to decline jurisdiction.
4.4. Where the parties have specified in their contract that disputes should be heard in a particular jurisdiction (an exclusive jurisdiction clause), the courts of other Member States are required to abide by the terms of that jurisdiction clause and to decline jurisdiction.
4.5. Where a person is one of a number of Defendants, he may be joined to proceedings which are commenced in another Member State where he is not 4 domiciled if those proceedings are “so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments”.
4.6. Where proceedings have already been commenced in one Member State, the courts of other Member States are required to stay any subsequent proceedings dealing with the same subject matter until jurisdiction has been decided by the court first seized of the matter (the lis alibi pedens principle).
4.7. Clarifies the scope of the exclusion of arbitral proceedings from the jurisdiction rules. 
5. Another vital element of legal process is the service of claims by claimants on defendants. Without proper service, as a general rule, a claimant cannot bring a claim against a defendant. The position as to service has also been regularised within the EU. The current position with regards to service is governed by the Service Regulation1, which has applied in the UK since 13 November 2008. It creates a ‘European judicial area’ for the free movement of judicial and extra-judicial documents."
Under the Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the EuropeanAtomic Energy Community 14 November 2018, this legislation would have continued to apply to the UK until 31 Dec 2020 at the earliest.  If the UK leaves without ratifying that draft agreement or renegotiating another in accordance with art 50 (2) of the Treaty on the Functioning of the European Union, this legislation simply falls away.

In its guidance note Handling civil legal cases that involve EU countries if there’s no Brexit deal 13 Sept 2018 the Department for Business, Energy and Industrial Strategy and the Ministry of Justice spelt out the consequences of the UK's departure from the EU without a withdrawal agreement:
"In the event of ‘no deal’, there would be no agreed EU framework for ongoing civil judicial cooperation between the UK and EU countries. Most of the EU rules operate on the basis of reciprocity between EU countries. If the UK continued to apply the rules unilaterally after exit, the UK’s status as a third country would mean that EU countries would not consider the UK to be covered by these rules. As a result, UK citizens, businesses and families would not benefit from these rules,"
The government warns that the following would be repealed in those circumstances:
  • Regulation (EU) No 1215/2012 which provides rules to decide where a case should be heard when it raises cross-border issues between the UK and other EU countries, and the recognition and enforcement of civil and commercial judgments between EU countries; 
  • Regulation (EC) No 805/2004 which establishes EU procedures for dealing with, respectively, uncontested debts and claims worth less than €5,000;
  • The EU/Denmark Agreement: which provides rules to decide where a case would be heard when it raises cross-border issues between Denmark and EU countries, and the recognition and enforcement of civil and commercial judgments between the EU and Denmark; and
  • The Lugano Convention: which is the basis of our civil judicial relationship with Norway, Iceland and Switzerland: This would not prevent us applying to re-join the Lugano Convention in our own right at a later date.
Thereafter the UK would revert to the existing domestic common law and statutory rules, which currently apply in cross border cases concerning the rest of the world.  The UK would continue to apply existing international agreements, such as the Hague Conventions, which in many areas provide alternative rules covering the same areas as the above instruments, although they are not always as comprehensive. The UK, which is currently a party to the Conventions as an EU member state. would apply for membership in its own right.

There is bound to be a consequence for businesses and individuals,  The government advises:
"Any party to a cross-border legal dispute, including businesses, consumers and families, would need to consider the effect that these changes would have on any existing or future cases involving parties in EU countries. Where appropriate you may wish to seek professional legal advice on the implications of these changes for your individual circumstances."
The following advice applies to those negotiating or drafting contracts:
"Businesses, individuals and legal practitioners would need to consider how these rules interact with the domestic rules of relevant EU countries to determine how jurisdiction in cross-border disputes should be established and whether any judgments should be recognised and enforced."
Finally, they should bear in mind that in certain cases, the interaction between the common law rules and national legislation may not be clear.  It is possible that certain countries may not recognize judgments from the UK#s courts. Businesses and individuals are advised to take legal advice about how these changes may affect them.

I can certainly provide such advice.  Anyone wishing to discuss any of these matters should call me on 020 7404 55252 or send me a message through my contact form.

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