REUTERS | Hannibal Hanschke

No-deal Brexit and disputes: what do parties need to know?

A no-deal Brexit could never be ruled out as a possibility, but the volatile political climate in recent days and weeks has brought it, and the challenges it poses, into ever sharper focus.

So what would a no-deal Brexit mean for disputes and what questions should a business be asking its lawyers to advise on?

Different considerations apply depending on the stage reached in the disputes process. The general message though is: consider how a hard Brexit will affect your particular dispute and, in light of the advice you receive, consider whether there are any steps you can take now which will put you in a better position.

English court judgment obtained

If you have an English court judgment and you will need to enforce it in one or more EU member states, you should of course be thinking about whether your judgment will be enforceable in the country or countries where the judgment debtor has assets. The UK has introduced draft legislation which provides that it will continue to enforce judgments from EU member states where the relevant proceedings were commenced before Brexit: the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019, published last December (the Exit Regulations).

The EU however has stated in its Notice to Stakeholders on EU rules in the Field of Civil Justice and Private International Law, published on 18 January 2019 (notice to stakeholders), that the EU rules on recognition and enforcement of judgments will not apply to UK judgments unless the judgment has been exequatured before the withdrawal date. So, in other words, it is a judgment where formal equatur (declaration of enforceability) steps are available and have been taken and completed in the EU country where it is to be enforced. It will not be enough that the UK judgment was handed down before the withdrawal date, nor that enforcement proceedings were commenced before the withdrawal date. In those circumstances, each member state will apply its own national rules on enforcement of foreign judgments (assuming no other convention such as the Hague Choice of Court Convention 2005, applies).

You may think you already know that your judgment will be enforced; you may have established, for example, that the relevant country in principle enforces foreign judgments from non-EU countries under its national rules. You need to dig more deeply, however, and consider enforcement in the context of your particular judgment, asking the following questions:

  • Many countries will only enforce foreign judgments where there is reciprocity between the enforcement regimes, so, in other words, where the English courts would enforce a judgment from the country concerned. Where there is such a requirement, will this test be satisfied? Will it be sufficient, for example, that the UK will continue to enforce a judgment from the relevant EU member state in proceedings commenced before Brexit under the Exit Regulations?
  • Will all aspects of my judgment be enforced? This may depend on whether you have a money judgment or the judgment provides instead or in addition for other types of relief, such as an injunction. Enforcement may be restricted to money judgments in a number of countries.
  • Will the English court be considered by the enforcing court to have had jurisdiction? The grounds on which the English court took jurisdiction will not necessarily be sufficient for the purposes of enforcement, particularly where the defendant did not take part in the proceedings and judgment has been obtained by default.
  • Were the proceedings served in a manner acceptable to the enforcing court? Even if the English court had jurisdiction, you can expect the enforcing court to look closely at the manner in which service took place, so as to ensure the debtor was properly on notice of the proceedings where it hasn’t taken part.
  • What is the procedure for enforcement, how long will it take and how much will it cost me? Will I have to provide security and will there be a stay on enforcement if the judgment debtor appeals? The practical availability of enforcement can be substantially reduced where there is delay and significant expense involved. Enforcement outside of the Brussels regime will in most cases be more cumbersome, but the extent will vary from EU state to state.
  • Can I rely, in principle, on the Hague Choice of Court Convention 2005? So, was jurisdiction taken by the English court pursuant to an exclusive English jurisdiction clause entered into on or after 1 October 2015 in a matter which comes within the scope of the Convention? If yes, will the two-day gap in UK membership of the Convention at the end of March 2019 be likely to make any difference to enforcement? No definitive answer will be available, but the risks can be identified.

Depending on the answers to these questions you may want to apply for exequatur in EU countries where the debtor’s assets are located, where that is available and can be obtained in time. Where that is not possible, consider the enforcement steps (including possible protective measures) you can take before Brexit, so that you can take advantage of the Brussels regime while it is still in place.

English proceedings yet to commence

If you anticipate that there will be litigation but proceedings have not yet commenced, and you expect that enforcement will be necessary in an EU member state, then you will need advice on the enforcement questions set out above.

If you do not like the answers and you have a choice of where to commence proceedings, then you may want to consider commencing proceedings elsewhere (assuming you cannot opt for arbitration, which of course depends on both parties agreeing to use that method of dispute resolution). Bear in mind in making that decision that there are many advantages to English litigation which need to be weighed in the balance, particularly where the issues in dispute will be decided under English law.

Further, if there are significant assets in England, so that you may also wish to enforce here, then you will need advice on whether the judgment in question will be enforceable in England. In general:

  • As noted above, if proceedings are commenced in an EU member state before Brexit, then the resulting judgment will still be enforced in England under the rules in the Brussels regime by virtue of the Exit Regulations.
  • If the proceedings are commenced after Brexit, then, generally speaking, only money judgments will be enforced and only where the foreign court had jurisdiction based on limited grounds if it is a default judgment.

So, if you decide to opt for proceedings in an EU member state, in circumstances where you might have to enforce in England, commencing pre-Brexit would provide for a much wider and simpler enforcement regime.

If you decide you want to proceed with English litigation even if there is a no-deal Brexit, you will want advice on whether the English court will be able to take jurisdiction and whether the English proceedings will be respected by an EU member state. The rules will vary depending on a number of factors, including whether the English proceedings are commenced before or after Brexit and whether there is a jurisdiction clause.

So far as jurisdiction is concerned:

  • Where English proceedings are commenced before Brexit, the Brussels regime will continue to apply. So, for example, where the English court takes jurisdiction under those rules, as things currently stand, it will not have to consider whether England is the appropriate forum, or forum conveniens. This may represent an advantage in commencing proceedings pre-Brexit in some cases.
  • Where English proceedings are commenced after Brexit, the rules on jurisdiction will generally be the same for EU defendants as for defendants in non-EU countries. So, where England is the forum conveniens (and assuming there is no jurisdiction clause within the Hague Choice of Court Convention 2005), jurisdiction can be taken by the English court and exercised based on the defendant’s presence within the jurisdiction, however temporary (currently outlawed under the EU regime), and failing that by obtaining permission to serve outside the jurisdiction on various grounds. In some cases, this may mean there are advantages to waiting until after Brexit to start proceedings.

So far as English proceedings being respected by an EU member state’s courts are concerned, this is a complex area and will depend on the particular circumstances.

  • If there is an English exclusive jurisdiction clause within the Hague Convention, then subject to the effect of the two-day gap in membership, an EU court should post-Brexit defer to the English court. It may also be possible to obtain an anti-suit injunction from the English courts to restrain foreign proceedings brought in breach of the English exclusive jurisdiction clause (currently unavailable in respect of EU member state proceedings).
  • Where there is no English exclusive jurisdiction clause, or there is but the Hague Convention does not apply, then an EU court will in most cases have a discretion (but no obligation) post-Brexit to stay in favour of English proceedings commenced first in time. So where a number of jurisdictions may potentially have jurisdiction, you will put yourself in the best position by commencing English proceedings first.
  • Interestingly, if the EU court refuses to grant a stay, the English court will have the power to stay its proceedings, even if the English proceedings are commenced first in time pre-Brexit. This is under provisions introduced in the Exit Regulations which are designed to avoid a litigant being forced to take part in parallel proceedings.

English proceedings pending

Where English proceedings will be pending on 29 March 2019, there are a range of matters on which you may need advice, including:

  • As always, where enforcement will be needed in an EU member state, will this be possible? If this may not be possible or may be difficult, then this will affect decisions on allocating resources to the litigation, pursuing settlement options and seeking to identify (and if possible freeze or otherwise secure) assets which can be enforced against in due course.
  • What effect, if any, there will be on joining parties to the proceedings, given the Exit Regulations provide that the UK courts will continue to apply the Brussels regime rules to proceedings commenced before exit until they are concluded.
  • The effect on serving proceedings where service will take place after Brexit. The EU Service Regulation will no longer apply so advice will be needed on how to effect service in the relevant EU member state (including by taking advantage of the Hague Service Convention, other than for service in Austria). The notice to stakeholders states that EU member states should not, after Brexit, proceed further with pending applications from the UK on the basis of EU law, although it recognises it may be possible to continue under national law or international conventions if they are available in that member state.
  • The effect on taking evidence abroad post-Brexit. The Taking of Evidence Regulation will no longer apply so advice will be needed on other possibilities, including taking evidence under the Hague Evidence Convention (other than in Austria, Belgium and the Republic of Ireland) or pursuant to letters of request. Again, the notice to stakeholders provides that pending applications cannot proceed on the basis of EU law although other bases may be available.

Once again, depending on the advice you receive, you may want advice on whether there are any steps which it would be advantageous to take (and complete) before Brexit so as to take advantage of the current rules, for example on service or taking evidence. If the steps cannot be completed before Brexit, then consider whether a request under any alternative procedures can be made in the alternative, conditional upon there being a no-deal Brexit.

In conclusion

The rules on jurisdiction and enforcement of judgments have never been straightforward, but in the case of a no-deal Brexit they are set to get even more complicated. Giving some thought now to how they apply to your case may well pay dividends in the long run.

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