Brexit: what might it mean for dispute resolution?

Brexit: what might it mean for dispute resolution?

eumapShould the UK vote to leave the EU on 23 June, the UK’s legal system will be forced to change. Against this backdrop, Camilla Macpherson considers what issues disputes lawyers should be considering, and how can they prepare ahead.

The UK's legal system has become tightly enmeshed with that of the EU over a period of forty years. The unravelling process would undoubtedly be slow, complex and expensive. Difficult decisions would need to be made about which EU legislation and jurisprudence should be kept, and which should not. Not all EU law would fall away automatically. EU directives, for example, have to be implemented into domestic legislation and that domestic legislation would remain unless repealed. Regulations on the other hand, which are directly applicable to Member States without further domestic legislation, would probably fall away, unless there was an agreement to the contrary with the remaining EU Member States.

Key EU regulations and cross-jurisdictional disputes

Disputes lawyers have grown used to relying on a number of key EU regulations on jurisdiction, governing law, service of legal proceedings and enforcement. For the most part, these regulations have had a useful stream-lining effect in cross-jurisdictional disputes, in creating relative certainty about where disputes will be heard and what law will be applied to them. Without them, service will be slower, issues of forum and law less certain and enforcement more difficult. It therefore makes sense (both to the UK and to remaining EU Member States) for everyone to continue to abide by the current set of rules for the purposes of continuity.

Where gaps do arise in legislation, decisions will also have to be made about how they are filled - either with new legislation, which will take time to produce, or by reverting to the pre-EU rules, which may now feel out-dated. None of this will happen overnight. It will be part of a negotiated withdrawal process from the EU.

Contractual issues

Contract disputes in the event of a Brexit are inevitable. For example, will a contractual requirement to comply with a particular piece of EU legislation still be binding? In interpreting how a contract is meant to work, will decisions from the CJEU be a deciding factor for the courts, simply persuasive or be side-lined altogether? If the UK does come out of the EU, some parties may also try to terminate their contracts, for example by citing force majeure or material adverse change provisions. These types of dispute could give rise to some challenging points of interpretation.

A ‘Brexit’ clause?

Should parties negotiating contracts now prepare for the possibility of a Brexit, for example by including a Brexit clause? This is easier said than done, because it is far from clear what such a clause would look like. For instance, why should one party (or all parties) be entitled to terminate or re-negotiate a contract in the event of a Brexit? Should parties instead agree to wait until the effect on their obligations becomes clear? Or apply some measure of materiality before the clause is activated? One size is not going to fit all.

Alternative jurisdictions or arbitral clauses?

Should negotiating parties be thinking now about moving away from English law and jurisdiction to govern their contracts? Selecting the jurisdiction of another EU country would allow parties to be sure of being able to rely (at least within the EU) on the helpful regulations relating to service, enforcement etc. However in practice it may also mean having to operate in an unfamiliar system. It would certainly be advisable to include a process agent clause in all contracts, so as to avoid the need to rely on the EU service rules. An alternative approach would also be to agree to arbitration as a means of dispute resolution.

As with all elements of the Brexit debate, the only genuine certainty is uncertainty. Until the referendum takes place, and - depending on the outcome - for some time thereafter, this will continue to be the case.

Camilla Macpherson is head of the Litigation & Regulatory know-how team at DLA Piper. She trained and qualified with Allen & Overy, where she remained in practice for over ten years and worked on a wide range of commercial matters including a number of banking and insurance disputes and complex jurisdiction challenges. Her experience spans both litigation and arbitration.

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