Brexit: Cross-Border Disputes update - good news for contracts containing English exclusive jurisdiction clauses

By Louise Lanzkron, Victoria Hobbs

01-2019

As the political uncertainty surrounding Brexit increases, the UK government is preparing for a potential 'no deal' scenario. In the context of cross-border disputes a major step was taken towards this preparation at the end of December 2018 when the UK government deposited its instrument of accession in respect of the Hague Convention on Choice of Court Agreements 2005 ("the Convention").

The Convention provides a worldwide framework of rules in relation to exclusive jurisdiction clauses and the recognition and enforcement of those judgments based on such clauses in civil and commercial matters. The UK's Accession to the Convention in its own right, (it is currently a participant as a result of its membership of the EU), is an important step in retaining some of the reciprocity that currently exists in the recognition and enforcement of judgments regime between EU member states. The UK's accession to the Convention is good news, but the Convention does have its limitations.

The Convention only applies to agreements containing an exclusive jurisdiction clause in favour of the courts of those states that have ratified the Convention. At present, those states include the EU along with Denmark, Mexico, Montenegro and Singapore. China, the United States and the Ukraine are also signatories but are yet to ratify the Convention however, Chinese commentators are of the view that the PRC may ratify the Convention in the near future. In addition, the Convention does not apply to non-exclusive jurisdiction or asymmetric jurisdiction clauses even between states which have ratified it.

The Convention will come into force in the UK on 1 April 2019 but only in the event of a 'no deal' Brexit. If a managed withdrawal takes place, allowing a transition period in a similar vein to that set out in the Withdrawal Agreement made between the EU and the UK government and rejected by the UK parliament on 14 January 2019, then the UK government will withdraw the instrument of accession.

Further there is some concern as to whether the Convention will apply to the gap in time between the UK leaving the EU on 29 March and the Convention coming into force on 1 April 2019. In the Civil Jurisdiction and Judgments (Hague Convention on Choice of Court Agreements 2005 (EU Exit)) Regulations, the UK government has sought to deal with this issue by providing that the Convention will continue to apply to all existing agreements and to any new agreements entered into during this two day gap. It is not clear at this stage whether the courts of EU member states will agree to extend the jurisdiction of the Convention in this way although, it must be kept in mind that the gap is only two days long, and both days fall over the weekend.

For more information about the existing cross-border regime between the UK and EU member states and what will happen to this system in the event of a 'managed' Brexit with an agreed transition period for exit, or alternatively, in the event of a 'no deal' Brexit please read our note: Brexit: Cross-border Dispute Resolution implications.

To read more articles related to this topic or to view other know-how material relevant to dispute resolution please visit our dedicated know-how portal Disputes+.