The UK formally left the EU on 31 January 2020 and the transition period (or “implementation period” under UK law) established under the Withdrawal Agreement is due to end on 31 December 2020.
While this will have wide-ranging implications for the commercial legal field as a whole, a particularly complex landscape in the field of litigation and dispute resolution emerges as a consequence of the Brexit decision. While much still depends on the final agreed scope of the EU-UK relationship in a post-Brexit world, some uncertainties have already emerged in this field.
The UK government has committed to the length of the implementation period, during which EU law will still apply in the UK. This includes the international agreements to which the EU is party (Article 129 of the Withdrawal Agreement). It is anticipated that a deal will be concluded during this period, however it should be borne in mind that if a new agreement is not in place in December 2020, a no-deal Brexit (save for the aspects agreed in the Withdrawal Agreement) could still be on the table.
Impact on popularity of England & Wales as a hub for commercial litigation
Parties across the EU have regularly chosen the English courts to resolve international disputes. Many of the reasons for this are independent of the UK’s membership of the EU: the reputation of the English courts for quality, consistency, transparency, expertise and technical knowledge; England’s status as a global financial centre; no juries in civil cases; no awards of punitive damages, and a ‘loser pays’ costs system.
While these factors should remain in place after the UK has definitively left the EU, much is still uncertain. For instance, the content of English law should a no-deal scenario occur against the odds is also not set in stone and this may well change due to increased legislative freedom.
EU regulations govern cross-border litigation in terms of jurisdiction clauses and enforcement
Many of the aspects governing cross-border litigation within the EU are governed by EU Regulations, or by international agreements applicable to the UK by virtue of EU membership. Key aspects relating to commercial litigation will be affected by the UK’s exit from the EU.
Jurisdictional questions and matters of enforcement of judgments frequently arise in litigious disputes that transcend borders. The recast Brussels Regulation, which has until today governed this area of law, and has applied to litigation taking place between the UK and both the EU and EFTA countries will cease to apply. If the UK joins the Lugano Convention, however, little will change in relation to jurisdiction and enforcement between these countries. Whether the EU is amenable to this accession however will become apparent in the course of the negotiations, which have now begun.
In terms of exclusive English jurisdiction clauses, the UK is planning to accede to the Hague Convention on Choice of Court Agreements of 30 June 2005. This would mean that exclusive jurisdiction clauses in favour of the UK would be enforceable under the terms of the convention. Some uncertainties arise concerning the status of exclusive jurisdiction clauses in favour of the UK contained in agreements concluded during the transition period, since only those clauses entered into after the Convention came into force for the chosen state are enforceable under the Hague Convention. The UK has expressed its intention to accede to this convention and has stated in a declaration that it “attaches importance to the seamless continuity of the application of the Agreement.” This planned accession does not depend on agreement with other contracting states, so the UK does not face the same obstacles as it does in terms of the Lugano convention.
Areas with no changes: applicable law to disputes and arbitral disputes
In terms of applicable law to disputes, the UK has legislated to incorporate Rome I and Rome II into English law, under the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019, which will enter into force at the end of the transition period. This means the current rules will be applied by English courts to determine applicable law, while EU courts will continue to apply Rome I and Rome II, giving effect to the choice of English law.
Further, arbitration with a seat in London will not be affected by the Brexit decision, since arbitration is regulated by international conventions (notably the 1958 New York Convention, to which the UK and the EU’s Member States are signatories) rather than EU law.
Effects on antitrust damages actions
Over the last few years, England has proven to be one of the most active European countries in which antitrust damages claims are initiated against cartelists or companies that abused their dominant position. The existence of a specialised tribunal, the Competition Appeal Tribunal, with jurisdiction to hear stand-alone and follow-on damages claims, as well as what practitioners describe as the English court’s “claimant-friendly” approach and a strong third-party funding culture, have made it very attractive for antitrust victims to issue their claims in this jurisdiction.
The recent confirmation that the UK has left the EU therefore levies uncertainty as to the consequences of Brexit for private antitrust litigation. Only time will tell whether the UK will remain a forum of choice for victims of antitrust violations, but Brexit’s main legal and practical implications should not have major consequences for antitrust damages actions in the short to medium term.
During the transition period, the English regime regarding private actions for breaches of European competition law will remain the same. It will thus still be possible to bring follow-on damages claims before the UK courts based on competition law infringement decisions by the European Commission.
However, from 1 January 2021, European Commission decisions relating to investigations initiated and conducted after the end of the transition period will no longer have an automatic binding effect on English courts. In the same vein, UK courts will no longer be under the obligation to interpret the UK competition rules in a manner consistent with the case-law of the European Court of Justice. They will only be required to avoid inconsistency between their decisions and the Court of Justice decisions taken before exit day.
Nevertheless, it is expected that European antitrust decisions will retain a certain persuasive value since the UK competition law regime is closely modelled on the EU regime. Victims of competition law infringements would thus not have to prove the existence of an infringement from scratch. However, if the two systems diverge over the years, the attractiveness of English courts for antitrust damages actions might decline.
In short, Brexit should not lead to a change in private antitrust enforcement in comparison to other jurisdictions immediately or in the medium term, but in the longer term it may become more attractive to bring follow-on damages claims in other Member States as EU court rulings and Commission decisions may no longerprovide a strong (binding) precedent for follow-on damages claims in the UK. In practice, this will also depend on whether English courts are willing to continue to play a dominant role for damages claims in Europe or whether they will let other EU Member States take the lead in interpreting the law in this area.
A number of changes can be expected in the field of European disputes as a consequence of Brexit, but whether these will vastly disrupt the disputes landscape is yet to be seen. Much will depend on the outcome of the negotiations during this crucial phase of Brexit, during which the concrete terms of a deal will be fleshed out by the UK and the EU’s 27 Member States. In the interim, litigators continue to keep a close eye on the UK and EU’s political announcements and declarations concerning their future legal relationship.
Written by Florine Verhaegen & Julie Bredée.
Written on March 11, 2020 by
Florine Verhaegen is Senior Legal Counsel and co-responsible for Antitrust Actions. Julie Bredée is Legal Advisor at Deminor Recovery Services.
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