How does the “Brexit” affects your contracts with British companies?

If you have contracts with British companies, this note will be useful to understand the regulation of relevant issues such as (i) the applicable Law, (ii) jurisdiction, (iii) recognition and enforcement of judgments, and arbitral decisions. 

Many questions have arisen after the victorious “yes” of the referendum with which the United Kingdom have decided to leave from the European Union, since with this decision the UK will become a non-EU country, in consequence, some rules on the Law applicable to contracts, jurisdiction and recognition and enforcement of judgments and arbitral decisions will no longer apply.

There is no certainty in how the future relationships will be handled until we know all the details of the agreement, which in accordance with the article 50 of the TEU (Treaty on European Union) establish the arrangements for the exit.

Notwithstanding, in terms of the applicable Law regulation, the “Rome Convention I” will remain applicable to contractual obligations. In principle, the exit of a Member State from the European Union, will not affect the implementation of the referred Convention but it must also take into consideration that there are certain restrictions provided by the same Convention and by other EU rules when the Law of a non-EU state is chosen.

Regarding the choice of forum clauses (competent courts), it is an issue covered by the “Brussels Convention I” and “Brussels Convention I Bis” incorporated into the EU legislation by the 1215/2012 Regulation or Brussels I Bis Regulation. However, those instruments do not apply universally, therefore shall only apply when the domicile of the defendant is within a Member State, consequently, with the departure of the United Kingdom from the EU, it is not possible to apply those instruments, leaving said issues governed by the rules of national legal systems. 

An alternative possibility is the application of the “Hague Convention” on choice of Forum of 2005 which is part of the EU and the United Kingdom legislation, but with reduced scope since it applies only to exclusive choice of forum agreements, with certain exclusions, among others, those relating to the transport of passengers and merchandise agreements, and certain issues related to insolvency. 

On the other hand, the recognition and enforcement of judgments is also regulated by the “Convention of Brussels I” and “Brussels I Bis Agreement”, again due to its inapplicability, the alternative is apply the “Exequatur” procedure (which had been removed by the referred instruments). It is a procedure followed in a State to recognise and execute foreign decisions with the specificities required by the national legislation.

Finally, the exit of the United Kingdom from the EU does not affect, in principle, the recognition and enforcement of arbitral awards since this matter is regulated by the “New York Convention of 1958”, but we must to consider that the exit will definitely affects the support and evidence collection procedure facilitated between Member States. 

Sources:

Miguel Asensio, P. A, “Brexit and international litigation: First reflections”, La Ley No. 8791, June, 27^th 2016.

 
Garrigues, “Uncertainties arising from the Brexit in the field of international litigation, restructuring and corporate insolvencies”, July 8^th 2016.