House of Commons Justice Committee: Report on “The Implications of Brexit for Civil Justice”
27 March 2017
On 22nd March 2017, the House of Commons Justice Committee published a report entitled, “Implications of Brexit for Civil Justice”.
As well as outlining the implications for criminal justice, family law and the legal services sector, the report considers the potential impact of Brexit on commercial law with a view to informing the upcoming government negotiations with the European Union.
The report outlines that the UK commercial law sector has very significant economic influence, nationally and internationally, and recommends that protecting the UK as a top-class commercial law centre should be a major priority for the Government in the negotiations “given the clear impacts on the UK economy of failure to do so.”
At present UK governed contracts benefit from the mutual recognition and enforcement of judgments, and for choice of jurisdiction; provided for by EU Regulation 1215/2012, (the Recast Brussels Regulation). First established as an international treaty (the 1968 Brussels Convention), it was superseded by EU law as the Brussels Regulation in 2001, which was then recast in 2012. It ensures that clauses in contracts specifying jurisdiction are respected and that judgments in the UK apply across the EU; it also protects UK residents from being sued in unconnected EU courts.
The UK will cease to be a party to the Recast Brussels Regulation when it leaves the EU. The outdated original 1968 convention might still apply, but it does not include all Member States. The Lugano Convention 2007 (Lugano II) brings EFTA nations into the Brussels regime, and whilst modelled on Brussels prior to recasting it does not include some updated features such as streamlined enforcement and greater protection for exclusive choice of court agreements. There is also a 2005 Hague Convention on Choice of Court Agreements, though the report notes this is considerably weaker than the Brussels Regulation. Denmark agreed a bespoke version of the Brussels Regulation with the EU in 2005: however the agreement—which gives the European Court of Justice jurisdiction on interpretation— would seem to be contrary to the desire for a “clean break” from the European court.
The report acknowledges that the government cannot incorporate the Recast Brussels Regulation into domestic law unilaterally because the Regulation requires reciprocity. A free standing commitment in UK domestic law, the report states, would neither require other Member States to return the favour nor provide a mechanism for the resolution of any disputes arising on these matters. The report concludes that the government should in any event aim to replicate the Recast Brussels Regulation as closely as possible, and further notes that a limited role for the ECJ for procedural legislation may be “a price worth paying”, despite government’s current intentions.
In terms of applicable law issues, that is to say, the law which governs disputes (as opposed to questions of about which court hears them), the report notes and recommends that the European Rome I and Rome II Regulations should be incorporated into domestic law, which unlike the Brussels Regime, do not require reciprocity.
The report stresses that the government must also address the potential liabilities for non-performance of contractual duties that financial institutions may face as a consequence of Brexit.
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