Legal implications of Brexit on litigation

Written on 29 Sep 2016

From a procedural point of view the European Union has developed an important legislative body that primarily affects matters such as jurisdiction and the recognition and enforcement of judgments and, ultimately, cooperation between Member State courts in their judicial, an element which would cease to apply to the United Kingdom and those resident there.

For this reason, the legal implications of Brexit in the field of litigation and conflict resolution will depend largely on the decisions taken in the exit process relating to the adaptation of the current system of judicial cooperation, attribution of jurisdiction and the acknowledgment of judgments etc. existing between Member States of the EU. Further, the present Brussels Regulations I and II, as well as the Rome Regulations I and II, will lost their validity in the UK which will likely lead to doubts and litigation as to the law applicable to the contract, the jurisdiction that will hear the case, and the “lis pendens” between proceedings or obtaining recognition within the EU of judicial or arbitral decisions handed down in the UK. Proceedings already underway will lose the advantages of European regulations with regard to cooperation between various jurisdictions (e.g., notice and obtaining of evidence), all of which aspects that will have to be supplemented with new bilateral treaties or by reference to the rules of international law.

The potential scepticism of submitting contracts to English law and Anglo-Saxon courts, so widely used today in transactions between parties from different Member States, may present an issue.

In addition, the non-application of treaties and EU rights will mean that neither the legislation nor the courts of the United Kingdom will be obliged to respect decisions of the European authorities in judicial matters or those of the Court of Justice of the European Union. Further, Anglo-Saxon courts will not be influenced by precedents set by European Court of Justice case law, which may have positive consequences from the perspective of legal certainty and procedural economy as the court judgment will not change nor will it be susceptible to examination by a higher court than that set out in national law.

To this we can add the uncertainty about how contractual provisions which are affected by EU laws which will cease to be in force in the United Kingdom will be interpreted when complying with the obligations agreed in said contracts. There is no doubt that the exit of an EU member country may be seen by the parties to a contract as an extraordinary and unpredictable circumstance that allows a request to modify the conditions initially agreed to, or even frustrates the ultimate aim of the contract. These consequences, besides being contemplated in our law through the figure of rebus sic stantibus or
standing to trigger the termination of the contract, they are also anticipated in the Common Law through legal principles such as “force majeure” and “frustration of contracts“. Consider, for example, how they would affect the possible restrictions on goods traffic or the imposition of tariffs to a contract between parties residing in the UK and in a Member State. A contract of this type could completely lose the intended economic purpose and therefore oblige both parties (or solely the party at a detriment) to proceed to the modification of the original conditions or indeed resolution of the contract.

Notwithstanding that drastic changes to the applicable legislation are not expected to occur in the short term, there remains a high level of uncertainty about what position will be taken by the UK and the EU respectively on the subject. The decoupling of the UK and the EU and the non-application of EU treaties will, without a doubt, cause conflicts that will need to be resolved through resorting to international systems and regulations or by signing new bilateral treaties.