Cross-border litigation and the end of the Brexit Transition Period

As the end of the Brexit Transition Period on 31 December 2020 approaches, the future status of English jurisdiction clauses and English court judgments in the EU remains unclear.  We consider what that means for businesses contemplating cross-border litigation involving parties in the EU in the near future.

Overview of current position

Jurisdiction clauses, as well as recognition and enforcement of judgments, are currently governed in the EU by the Brussels (Recast) Regulation. However, after the end of the Transition Period (ie from 1 January 2021), Brussels (Recast) will no longer apply in English law. In turn, courts of EU Member States will no longer be obliged to accept English jurisdiction clauses as a matter of reciprocity, or to recognise or enforce English court judgments.

At the time of writing, no further deal has been agreed between the UK and EU, and it is not clear whether any other regime will assist:

• The UK has applied to join the Lugano Convention, which would offer a similar framework to Brussels (Recast). However, this requires unanimous consent from the other state parties (including the EU). Whether this consent is given likely depends on the outcome of wider negotiations between the UK government and the EU.

• The 2005 Hague Convention offers some protection to exclusive English jurisdiction clauses, but not to any other kind of jurisdiction clause (eg non-exclusive or asymmetric). There is also some uncertainty about whether the Hague Convention applies to contracts entered into before 1 January 2021.

The default position is that, after the end of the Transition Period, local law will determine whether a given jurisdiction clause is effective, or whether a particular judgment should be recognised and enforced. If, however, proceedings are started in England before the end of the Transition Period, the Brussels (Recast) will apply to that claim.

For further detail and/or previous publications on these issues, please see our Brexit Feature page here.

What does this mean for you?

If an EU-UK deal covering jurisdictional issues is not reached, the consequences of this change are wide-ranging:

• exclusive English jurisdiction clauses in contracts entered into before 1 January 2021 might be able to rely on the Hague Convention, though this is not certain;
• any non-exclusive or asymmetric English jurisdiction clauses will not be protected by the Hague Convention, and will therefore fall to be interpreted and applied according to local law; and
• parties commencing proceedings from 1 January 2021 onwards take the risk that English-EU litigation becomes more complicated as different (and potentially divergent) national regimes are engaged.

Practical tips

• Whilst it is likely to be impractical to amend all your contracts, you may wish to repaper business-critical contracts or agreements with particular litigation risk if the current jurisdiction clause will become vulnerable after the end of the Transition Period.

• If you are considering launching a claim in the English courts against an EU party, or would want to enforce an English jurisdiction clause in the EU, consider whether there is an advantage in issuing proceedings before 1 January 2021.

• Once issued, you may also want to serve the other side with your claim before the end of the Transition Period. Issuing a claim appears to be sufficient to "institute" proceedings for the purposes of the Withdrawal Agreement, so long as the claim is properly served thereafter, though the Withdrawal Agreement is not entirely clear. Serving the claim by 1 January 2021 has the advantage of greater certainty, and from a practical perspective, cross-border service is likely to become more complicated thereafter.