Commercial dispute resolution

1 July, 2016

The current situation:

As a full member of the EU, the UK has the benefit of a raft of harmonisation measures that apply to cross-border contracts and disputes.

EU law[1] allows parties to choose which country’s laws will apply to contractual relationships. It also provides a structure for determining the governing law for a contract, where that is disputed, and for non-contractual claims.

It also[2] helps to determine the effect of contractual jurisdiction agreements and which court has jurisdiction to hear disputes where there is no agreement.

There are procedures for bringing small claims, alternative dispute resolution and on-line dispute resolution[3] for consumer/trader disputes.

If legal proceedings cannot be avoided, EU regulations make it much simpler to serve claims on defendants in other EU states than it is to serve on defendants outside the EU.

Similarly, having obtained a judgment, the EU regulations set out a simplified regime for recognition and enforcement of that judgment against defendants in other member states.

These measures are all aimed at simplifying procedures to minimise the cost of doing business and resolving disputes when things go wrong.

 

What might change?

Until we are formally ‘out’ of the EU, so for the next two years at least, the current regime will still apply. After that, we will lose it in its current form. Any replacements will depend upon the deals the UK government negotiates with the remaining EU member states and the rest of the world.

Simplified service and enforcement across borders benefit EU citizens as much as they do UK citizens, so it seems reasonable to think that these might survive in a new form. The UK could, for example, accede to the Lugano Convention, which already governs the relationship between the EU, Norway, Switzerland and Iceland. This convention also provides help with the choice of law issues.

Arrangements for alternative dispute resolution and continued use of the on-line dispute resolution platforms for consumers and traders might be more vulnerable to changes in the trading arrangements between the UK and the EU.

 

What impact could this have on businesses?

In a nutshell, changes could mean increased complexity in determining which country’s laws will apply between contracting parties and, more complexity and expense in bringing and defending claims.

 

What you need to be thinking about now:

Existing proceedings should not be affected. They will carry on under the existing regime but bear in mind that enforcement of judgments could be more complex beyond Brexit, so avoid delay where possible.

If you already know that there might be a dispute arising from a contract where there are European parties, assets or issues, consider trying to resolve it now under the current regime.

Review existing contracts to check what they say about governing law and jurisdiction and consider whether leaving the EU will have a fundamental impact on the basis of the contract e.g. because the trade done under it is dependent on EU trading arrangements. If so, can you renegotiate now? These issues will be less significant for shorter term contracts because of the two year exit window. Any longer term contracts should be closely scrutinised.

When drafting new contracts, make sure they do contain governing law and jurisdiction clauses. The courts of both the EU and the UK are likely to continue to respect agreed provisions wherever possible.

If you have a query about any aspect of commercial dispute resolution, please contact Joanna Ford at joanna.ford@crippspg.co.uk.

 

[1] Rome I and Rome II

[2] ‘the recast Brussels Regulation’

[3] https://ec.europa.eu/consumers/solving_consumer_disputes/non-judicial_redress/adr-odr/index_en.htm