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Brexit: What now for English litigation?

Posted on: 11 March 2021

Following the UK’s departure from the European Union on the night of 31 December 2020, lawmakers, legal professionals and businesses alike are faced with many questions on the effect of Brexit on jurisdiction, recognition and enforcement, and what the lasting impact may be on choice of court and law agreements, say Hill Dickinson’s Partners Beth Bradley, Jeff Park, Michael French and Victor Oliynik, Associate in the first of two articles focusing on the subject.

This article will look at how the UK’s long-expected departure will effect (a) jurisdiction and choice of court agreements; (b) recognition and enforcement of judgments; and (c) marine contracts. The subsequent article will discuss the impact on related actions and choice of law.

(a) Jurisdiction and choice of court agreements
With Brexit, the Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments (the Brussels I Recast) is scrapped for all parties that have not commenced litigation – whether in England or Wales or an EU member state – under the Brussels I Recast (Regulation 89 of the 2019 Withdrawal Agreement). Regulation 92 retains its applicability for those that had already done so and it will continue to apply in cases where (a) it applied immediately before 31 December 2020 to determine the jurisdiction of an English or Welsh court to hear proceedings in which it was already seised, by which time those proceedings were not concluded; or (b) in relation to recognition or enforcement by a court in England or Wales if: (i) a judgment/decision handed down by a foreign court bound by the Brussels I Recast; or (ii) where a court settlement was concluded, or authentic instrument registered, before exit day in a state bound by the Brussels I Recast, and the question of recognition or enforcement has either not arisen for consideration, or, having so arisen, has not been concluded before the UK’s exit day.

In all other cases, recourse will have to be sought under either (i) The Hague Convention on Choice of Court Agreements 2005 (the Hague Convention); or (ii) English common law.

Firstly, it must be noted that the Hague Convention applies only to ‘exclusive jurisdiction agreements’ (EJA), limiting parties’ choices to the ‘the courts of one contracting state’ (Articles 1(a) and 3(a)). This does not go as far as the Brussels I Recast’s inclusion of non-EJAs. Although, the Hague Convention leaves it open to national courts to choose to recognise non-EJAs under Article 22. Notably, there are also no rules on establishing jurisdiction by default (as in Articles 4, 7, and 24 of the Brussels I Recasts) nor are there rules concerning asymmetric clauses. Whether asymmetric clauses could ever be deemed ‘exclusive’ was considered in Etihad Airways PJSC -v- Lucas Flother [2020] EWCA Civ 1707, though the case mainly concerned the Brussels I Recast, and its views on the Hague Convention were provided obiter, therefore no clear answer was provided. As such, parties should be cautious when drafting and agreeing jurisdiction clauses, ensuring that they understand the limitations of the Hague Convention and checking that the clause is Hague Convention-compliant.

To complicate matters further, there are also questions regarding the Hague Convention’s ‘commencement date’ in light of Brexit. There is no question that England and Wales acceded to the Convention in 2015. However, on 1 January 2021, s1(2) of the Private International Law (Implementation of Agreements) Act 2020 gave the Hague Convention the force of law in England and Wales in its own right. As such, it has been debated whether exclusive jurisdiction agreements entered into before 1 January 2021 will be effective, since the Hague Convention has been ‘re-entered’ into. The EU Commission noted that the ‘new’ Hague Convention could not be ‘back-dated’ to apply to existing contracts, however their opinion is not definitive or binding on the subject. In any event, should parties wish to avoid testing these untrodden waters, it may be prudent to re-enter into their High Court EJAs to ensure their validity under the ‘new’ Hague Convention.
As to the common law, jurisdiction would have to be established either by: i) service of proceedings on the defendant within the UK; or ii) outside of the UK through the procedure set out in CPR Rule 6, using the gateways in Practice Direction 6B. In such a case the claimant must show that there is a serious issue to be tried (AK Investment CJSC -v- Kyrgyz Mobil Tel Limited [2011] UKPC 7), to the standard of a good arguable case (Canada Trust Company -v- Stolzenberg v Gamba [2000] UKHL 51), and that England is the proper forum for the case.

(b) Recognition and enforcement
For parties falling within Regulation 92 of the Withdrawal Agreement, the position remains unchanged. Parties will be able to take advantage of the streamlined Brussels I Recast procedure under the principle of mutual recognition, however the rules become slightly different for parties applying the Hague Convention, and even more so for those seeking recognition and enforcement under common law.

Under Article 8(1) of the Hague Convention, judgments handed down by the court of a contracting state must be enforced by other contracting states. Article 8(2) mirrors the reciprocity requirement of the Brussels I Recast, stating that an enforcing court is bound by the findings of fact of the chosen court and cannot review the merits of the chosen court’s decision.

The procedure for seeking recognition under the Hague Convention will be slightly longer than through the Brussels I Recast (CPR 74.4A). In order for a foreign, Hague Convention-compliant, judgment to be recognised in England and Wales, the judgment creditor must submit an application on form N244 to the High Court (CPR 74.3), providing the information required under CPR 74.4(1), (2), and (5), along with any other documents listed in Article 13 of the Hague Convention (as required by s4B(3) of the Civil Jurisdiction and Judgments Act 1982 under national law and CPR 74.4(5A)). It is currently unclear how long a judgment will take to be recognised and registered in England and Wales , however it is hoped that the Hague Convention’s reciprocity requirements will expedite the process, as they previously did for the Brussels I Recast. As to English and Welsh national law, a foreign judgment sought to be recognised and enforced in England and Wales must pass the Adams -v- Cape Industries Plc [1990] 1 Ch 433 threshold, i.e. it must be a final and conclusive decision, for a sum of money (excluding taxes or penalties), on the merits, and with the proviso that the foreign court had jurisdiction, either on a territorial or consensual basis, to hear the case. The latter threshold is decided to an English/Welsh standard, meaning that an English or Welsh court seeking to recognise a foreign decision will judge the foreign court’s jurisdiction according to English and Welsh national law. There may, as a consequence, be two jurisdictional hurdles in cases with international elements where a final judgment is sought to be enforced in England and Wales – that of the foreign court, and that of the enforcing English/Welsh court vis-à-vis the foreign court’s own jurisdiction. Cases such as this would undoubtedly be costly and time consuming.

As for the enforcement of English or Welsh judgments abroad, judgments (save for those falling within the Hague Convention) made after 31 December 2020 are no longer automatically enforceable in EU member states. It is now up to the national laws of each individual state to make that decision. This will undoubtedly involve overcoming many procedural steps, such as instructing national counsel and obtaining declarations of enforceability, which may, again, serve to significantly increase the time and costs of the exercise.

If it becomes difficult for English judgments and interim orders to be enforced across the EU, then obviously the English jurisdiction and English choice of court agreements may become to be seen less favourably by members of the international commercial community.

(c) Maritime consequences
Perhaps most importantly for business in the shipping industry, it is vital to be aware that the Hague Convention contains specific exclusions in relation to marine contracts. For example, it does not apply to:
1.    contracts of carriage (Article 2(2)(f));
2.    general average (Article 2(2)(g)); and
3.    limitation of liability for maritime claims (Article 2(2)(g)).

As such, jurisdiction clauses contained in these types of contracts may not be protected. Shippers should pay particular heed to this, in light of the fact that contracts of carriage (such as some bills of lading) will fall into this category. Parties to these contracts should carefully consider whether English courts remain the most favourable option for these types of contracts, and whether it is necessary to amend already executed contracts.

Notwithstanding the above, the Hague Convention does apply to charterparties. Therefore, parties’ exclusive choice of court agreements will be protected.

At this juncture, it bears reminding that London remains one of the most prominent seats for international maritime and commercial arbitration and it is doubtful that Brexit will have a hugely detrimental impact on arbitration.

London arbitration has a strong legislative base in the Arbitration Act 1996. The Arbitration Act provides a malleable system for parties to design the way in which their disputes are resolved. This all serves to maximise the autonomy of the parties. This flexibility and commitment to the parties’ autonomy has resulted in the English judiciary garnering a reputation as impartial, experienced and skilled resolvers of commercial disputes and arbitration. This, coupled with a well-established selection of arbitral bodies, such as the LMAA, LCIA, CIArb, along with a host of commodity-specific organisations (e.g. GAFTA, FOSFA, ICA) – a large number of which apply English law by default – provides a well-established framework for arbitration unlikely to be hit hard by Brexit.

Moreover, England and Wales are a signatory to the New York Convention 1958 on Recognition and Enforcement of Foreign Arbitral Awards. The New York Convention contains its own framework for straightforward recognition and enforcement of arbitration awards and is applicable in 157 countries.

If you would like to get in contact to discuss any of the above vists here.

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