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Brexit and the Conflict of Laws

24th May 2018

Christopher Reid discusses the implications for conflict of laws:

  • Brexit will potentially have an impact on the rules and principles determining the jurisdiction and proper law of litigation between English parties and European counterparties.
  • The uncertainty has been whether English law will revert to the common law rules post-Brexit, where there is no express or implied choice of jurisdiction or law by the parties.
  • The draft ‘Withdrawal Agreement’ provides for a transitional period during which the Rome I, Rome II and Brussel I bis Regulations will continue to apply, which would give practitioners some breathing space if finalised.

The potential impact of Brexit on construction disputes has occupied all three contributors to this issue of the Brexit Bulletin. In this article, I concentrate on the rules which will determine the jurisdiction and proper law of litigation between English parties and European counterparties after the United Kingdom leaves the European Union. This is an area which has been extremely fluid over the last few months, as the United Kingdom has sought to agree a form of words with the European Union recording those matters which have, in principle, been agreed during the first phase of the Brexit negotiations.

It is however worth starting by reminding ourselves of the rules which presently apply. With the exception of arbitration and certain issues relating to the insolvency of one of the parties, the conflict of laws rules applicable to construction disputes will usually fall within the following European harmonized instruments:

  1. The (recast) Regulation (EU) No 1215/2012 on jurisdiction and the enforcement of judgements in civil and commercial matters (“the Brussels I bis Regulation”);
  2. Regulation (EC) No 593/2008 on the law applicable to contractual obligations (“the Rome I Regulation”);
  3. Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (“the Rome II Regulation”).

The uncertainty since the Brexit vote has been whether – after the United Kingdom leaves – English law will revert back to the mix of domestic statutes and common law rules which determined issues of jurisdiction, recognition, and choice of law before the Regulations were enacted.

For many individually negotiated contracts, this may not have made much of a difference. Under each of the Regulations, parties have substantial freedom to agree between themselves the jurisdiction which would hear – or the law which would govern – their dispute, which is substantially similar to the position which applied at common law. However, where there is no express or implied choice of jurisdiction or law by the parties, the position is much less clear and there is room for considerable uncertainty as to the impact of Brexit.

For example, the immediate predecessor to the Rome I Regulation was the Rome Convention, an international treaty between the members of the then-European Economic Community given domestic effect by the Contracts (Applicable Law) Act 1990. Would this be repealed following Brexit, as an example of law which originated in the European Union, such that the common law rules would apply? If it is to be repealed, this would mean that an area of the common law which effectively ceased to develop on 1 April 1991 would resume its application in March 2019. On the other hand, if it is not to be repealed, it would be a curious result if English courts were to apply rules derived from the Rome Convention when the successor to that instrument – the Rome I Regulation – would presumably have ceased to apply.

While the ultimate answer to these and other questions remains uncertain, construction practitioners can draw some comfort from the fact that it appears that these issues have been put off during the so-called ‘transition period.’ On 28 February 2018, the European Commission Task Force for the Preparation and Conduct of the Negotiations with the United Kingdom published a draft ‘Withdrawal Agreement’. The Withdrawal Agreement defines the transitional period as ending on 31 December 2010. In broad summary, the position appears to be as follows:

  1. Both the Rome I and the Rome II Regulations will continue to apply “in respect of contracts concluded before the end of the transition period” and “in respect of events giving rise to damage which occurred before the end of the transition period” (Title VI, Article 62);
  2. The Brussels I bis Regulation as a whole will continue to apply “in respect of legal proceedings instituted before the end of the transition period” (Title VI, Article 63(1)(a)) and special provision is made for Article 25 of Brussels I bis (which governs jurisdiction agreements) which will continue to apply “in respect of the assessment of the legal force of agreements of jurisdiction or choice of court agreements concluded before the end of the transition period” (Title VI, Article 63(2)).

While the draft Withdrawal Agreement itself will doubtless be subject to change before the target date for agreement of October 2018, it remains to be seen whether the above settlement with respect to the conflict of laws Regulations will be the final position. If so, this will give construction practitioners some breathing space during which the Regulations will continue to apply. It is to be hoped that – during this period, if not before – practitioners can have some certainty with respect to the rules which will apply going forward.

Christopher Reid

 

Christopher Reid_AtkinChambers

Christopher undertakes a broad range of commercial work in both litigation and arbitration. In line with Chambers’ profile, he has a particular expertise in the areas of energy, construction, and engineering. Christopher frequently acts as junior counsel as part of large teams in high-value disputes, which are often factually, legally, and technically complex. In addition, he regularly acts as sole counsel representing and advising a range of clients in these fields, as well as in general commercial and professional liability disputes.

Recent examples of Christopher’s work in arbitration include being led in a circa 1 billion AED dispute under the DIAC rules over the alleged breach of a sub-developer’s obligations in respect of a large mixed-used project in the Middle East. Recent examples of Christopher’s work in litigation include being led for Volkerfitzpatrick Limited in a claim against three defendants in a dispute over the defective design and installation of cladding for buildings developed for a local authority.





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