Brexit and Cross Border Litigation
10 September 2020
On 27 August 2020, the European Commission published a notice to stakeholders on the withdrawal of the United Kingdom (“UK”) from the European Union (“EU”) and rules in the area of civil justice and private international law (“Notice”).
The UK formally withdrew from the EU on 1 February 2020. In a withdrawal agreement (“Withdrawal Agreement”) concluded between the EU and the UK, a transition period was agreed, from 1 February 2020 to 31 December 2020 (“Transition Period”) to allow the UK and the EU negotiate an agreement for a more permanent commercial relationship.
The Transition Period within the Withdrawal Agreement allowed for EU law to continue to apply to and in the UK until 31 December 2020. At that point, the UK becomes a third country, no longer a member of the EU and if a trade deal has not been concluded, World Trade Organisation rules will apply to the relationship between the UK and the EU. Considering the geographical location between Ireland and the UK, including the sharing of a land border, the consequence of no specific deal or arrangement on cross border litigation will be very significant.
Notice to Stakeholders
In light of the concerns that an agreement may not be reached between the EU and the UK before the end of the Transition Period and the potential vacuum which this could cause, the Commission published the Notice to give some certainty on issues concerning cross border litigation post Transition Period. The Notice sets out the following in relation to the issuing of proceedings:
- Where proceedings issue prior to the expiry of the Transition Period, EU rules on international jurisdiction continue to apply.
- If proceedings issue post Transition Period and those proceedings concern the UK and a Member State, the Member State court will determine international jurisdiction.
- If the proceedings concerned fall within the scope of EU instruments in civil and commercial matters and the instrument in question provides, a court of a Member State may apply its national rules of international jurisdiction.
- If, however, the proceedings fall outside the scope of EU Instruments, international jurisdiction will be governed by the national rules of the Member State in which a court has been seized.
One exception to the general rule that EU procedures will not apply post Transition Period is in a case where proceedings are in being, having been issued before the end of the Transition Period and additional proceedings, with the same cause of action are issued after the Transition Period. In such a scenario EU rules will apply. This exception is to ensure that EU rules are not circumvented by proceedings involving the same cause of action and between the same parties being brought in both the courts of a Member State and the UK before and after the end of the Transition Period.
The Withdrawal Agreement provides that contracts concluded and concerning the UK will be subject to the provisions of (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) provided the contract was concluded prior to the expiry of the Transition Period. As with all third countries (a non-member of the EU), the UK may continue to have obligations under Rome I, in certain situations following the Transition Period.
Similar to the provisions for Rome I (contractual obligations) under the Withdrawal Agreement (EC), No 864/2007 on the law applicable to non-contractual obligations (Rome II) is to apply to the UK in respect of events giving rise to damage, where such events occurred before the end of the Transition Period.
Recognition and Enforcement
The Withdrawal Agreement provides that the various Regulations concerning recognition and enforcement of EU decisions shall apply in the context of the UK, provided the proceedings, underscoring the relevant order or decision were instituted before the end of the Transition Period. With regard to proceedings instituted following the end of the Transition Period, the Regulations on recognition and enforcement shall not apply to any decisions or orders concerning such proceedings. The recognition and enforcement of UK judgments handed down post Transition Period will be governed by the national rules of the relevant Member State.
On choice of court agreements, the Notice states that proceedings instituted, based upon a choice of agreement in a UK court after the end of the Transition Period, may not apply for recognition and enforcement under EU rules. With regard to specific mechanisms under EU law, for example European payment orders and European Procedure for Small Claims, these procedures will apply in the context of the UK provided they were applied for before the end of the Transition Period.
Judicial Cooperation between Member States
There are various Instruments in place to support and foster co-operation between the courts of the various Member States. In the context of the Notice, they include the service of legal documents between Member States, the taking of certain evidence and certain requests for judicial co-operation between Member States. On these points, the Notice provides that it is permissible for the UK to continue to engage with these mechanisms up to the end of the Transition Period.
The Withdrawal Agreement provides that Regulation (EU) 2015/848 (the Insolvency Regulation) applies provided the main proceedings were commenced before the end of the Transition Period. Where, prior to the end of the Transition Period, main proceedings are commenced in the UK and secondary proceedings are commenced in one or more EU Member States, the courts of the Member States in question will retain international jurisdiction according to the Insolvency Regulation. This Regulation also applies to judgments, compositions or provisional measures handed down in such proceedings. Therefore such judgments, compositions or measures are mutually recognised between the EU and the UK without further formalities, and if required, are enforceable under the Brussels Recast Regulation. At the end of the Transition Period, the UK will have no power to open insolvency proceedings on the basis of the Insolvency Regulation. At that point, the UK will be considered a third country and the Insolvency Regulation will not apply.
The Notice also addresses a number of general matters including:
- Public documents: The simplification of formalities for public documents between Member States, provided for under Regulation (EU) 2016/1191 will no longer apply to public documents issued by the UK authorities at the end of the Transition Period.
- Legal Aid: The minimum common rules relating to cross-border disputes will apply to applications for legal aid which are received, by the relevant receiving authority before the end of the Transition Period. At the end of the Transition Period, Directive 2003/8/EC (Legal Aid) will no longer apply between the Member States and the UK.
- Mediation: Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters will apply where, before the end of the Transition Period, the parties agreed to use mediation after the dispute had arisen, mediation was ordered by the court or the court invited the parties to use mediation.
- European e-Justice Portal: The Commission provides for information on national judicial systems through the European e-Justice portal. Pending procedures and proceedings initiated before the end of the Transition Period will continue under EU law. The e-Justice Portal will maintain the information related to the United Kingdom, including dynamic forms and the UK factsheets until the end of 2022.
The Commission, by adopting the Notice seeks to provide some clarity to parties engaged in cross border litigation. The purpose of the Transition Period within the Withdrawal Agreement was to retain the status quo and allow the EU and UK to conclude an agreement which would address not only trade issues but also a myriad of other issues including cross border litigation.
While the Notice does provide clarity on what will not continue from 1 January 2021, it offers no real alternatives to the complex and highly evolved private international law system in operation within the EU. What is clear is that UK companies and individuals trading outside the UK and companies and individuals in Member States trading in the UK will now face a far more complicated procedure for resolving disputes. As a result it will be necessary to engage with international instruments of private international law, for example the Hague Conference on Private International Law which would not have been necessary in the EU context. It will be vital for parties experiencing these procedural issues to seek legal advice in a timely manner as it may be a considerable period of time before the EU and UK puts in place a more competent set of rules to address issues with cross border litigation.