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07th November 2018

BREXIT – So what if there is no deal?: A Reality Check

If the UK and EU do not reach a Withdrawal Agreement there will be a crowd of legal uncertainties in key areas of civil justice and commercial law affecting businesses.
The UK Parliament has passed the European Union (Withdrawal) Act 2018 which amongst other things ends the supremacy of EU law in UK law with effect from 29 March 2019, whilst providing that EU law as it stands on the exit date will continue as part of the UK’s domestic law. Whilst there are all sorts of tricky questions that flow from this, domestically the UK Courts will at least have some sort of framework of law to work with. Where a legal point crosses borders within the EU (eg between a UK business and a business in a EU Member State), the question begged however is: What principles can the Courts of another Member State be expected to apply if there is no Withdrawal Agreement to address the issue?

As the EU Commission ‘Notice to Stakeholders’ (November 2017) concerning the Withdrawal of the UK and EU Rules in the field of Civil Justice and Private International Law highlighted:-

Jurisdiction: In civil and commercial cases where a defendant is domiciled in the UK, the rules on international jurisdiction in EU legislation in the fields of civil and commercial law will not apply to judicial proceedings within the EU. Jurisdiction will be governed by the national rules of the Member State of a relevant Court.

Recognition and enforcement of judgments: Judgments of the UK Courts will no longer be recognised and enforced in EU Member States under EU legislation in the area of civil and commercial law. Recognition and enforcement of judgments will be governed by the national law of the State in which recognition and enforcement is sought or by international Conventions where both the EU (or EU Member States) and the UK are contracting parties.

Judicial cooperation procedures: EU legislation facilitating judicial cooperation (e.g. in relation to the service of documents, taking of evidence or within the context of the European Judicial Network in Civil and Commercial Matters) will no longer apply between EU Member States and the UK.

Specific EU procedures: Specific EU legal procedures eg the European Payment Order Procedure or the European Procedure for Small Claims, will no longer be available in the courts of EU Member States where one or more parties are domiciled in the United Kingdom.

The EU expectation (ref: the European Commission’s position paper on Judicial Cooperation in Civil and Commercial matters of 13 July 2017) has been that a Withdrawal Agreement would also mitigate the ‘cliff edge’ on consequential questions arising, for instance how should the applicable law for contractual obligations and choice of forum be decided for contracts concluded or choices made before the exit date where a UK domiciled business is involved. No Withdrawal Agreement, then no scheme or clarity on such matters within the EU.

When a business is agreeing the terms of a bargain with an international counterparty, minimising complexity and achieving confidence in outcomes are key. If the UK and EU proceed without a Withdrawal Agreement that answers key questions and provides a transition period allowing a sensible new framework of cooperation to be established, this will do nothing to assist with those imperatives. When the UK steps out of the established legal framework at the end of March, it will be into a much foggier world both for the UK and EU businesses.

Crossed fingers for a deal.

Dominic Hopkins is head of Disputes and Litigation at Hewitsons and an Associate Member of the UK Constitutional Law Association. For more information please contact Dominic Hopkins on 01604 233233 or click here to email Dominic.
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