English law governing contracts after Brexit?

English law is frequently used to govern contracts between foreign parties. The common law system gives parties more comfort that the obligations in the agreement will be enforced as per the expressed intentions of the parties, without codified rules of law being applied and without terms being implied into the agreements.

Now that Brexit is a fact and EU law will no longer apply to the UK after the transition period, i.e. as from 31 December 2020, how should we treat agreements that are governed by English law, with (exclusive) English jurisdiction clauses? Is there a necessity to revisit the governing law and the jurisdiction clauses?

The law currently governing contractual obligations between EU member states is set out in the Rome I Regulation, which will continue to be binding on member states. It will disappear from the UK law on 31 December 2020 but will be re-incorporated into UK law as a result of the EU Withdrawal Act. Rome I require the governing law chosen by parties to apply and this choice of law rule applies even where the law of a non-member state is chosen. Therefore, there will be no change in the way governing law is considered by either the UK courts or EU member state courts.

Whether English jurisdiction is still suited after 31 December 2020, however, is largely dependent on the ability of the UK to agree on a Future Relationship Agreement with the EU. In such agreement, the recognition and enforcement of judgments would be dealt which, which is currently laid down in the Lugano Convention. The Lugano Convention will no longer apply to the UK after the transition period and cannot be re-incorporated in UK law via the EU Withdrawal Act as it requires reciprocity to operate. It is therefore important for the recognition and enforcement of judgments that a Future Relationship Agreement is agreed upon between the UK and the EU, to cover this gap.

The UK is now, as an EU member, a party to The Hague Convention on Choice of Court Agreements. After the transition period, the UK will probably accede to The Hague Convention (if a Future Relationship Agreement is not reached). The Hague Convention requires exclusive jurisdiction clauses in the signatory states to be upheld by the courts of those states, provided that the clauses are drafted in accordance with its rules. So, assuming that the UK will either agree on a Future Relationship Agreement or accede to The Hague Convention, Brexit will not influence the handling of exclusive jurisdiction clauses. Non-exclusive English jurisdiction clauses, however, will be a concern in the absence of a Future Relationship Agreement, as The Hague Convention does not see to the non-exclusive clauses.

The enforceability of international arbitration awards will be unaffected by Brexit. Therefore, parties can continue to agree to arbitrate their disputes. An arbitration award following arbitration in a signatory country to the New York Convention is enforceable with minimum procedural difficulty in approximately 160 countries including the EU member states.

Conclusion: if the UK uses its negotiation skills well, Brexit will not necessarily be detrimental to contracts governed by English law and with English jurisdiction clauses. However, it is wise to follow the negotiations between the UK and the EU closely to see if a gap occurs after the transition period.

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