No-deal Brexit - Repercussions on legal relations

There are many aspects of business that remain hanging in the balance such as the free movement of goods, services and workers and the many other aspects such as competition and intellectual property law which rely on the principle of mutual recognition.

From the perspective of commerce there has been a focus on a number of priority areas, derived from the principles of the single market and, in order to maintain governance through the transitional arrangements of the withdrawal and beyond, a number of other considerations regarding legal structures. They include:

  1. Continued market access to and from the EU for the provisions of goods, services and labour mobility including UK solicitors practising in the EU, representing in EU courts and the continued recognition and respect of confidential communication between solicitors and clients;
  2. Continued civil justice cooperation, including the recognition and enforcement of judgements, mutual respect for jurisdiction clauses;
  3. Continued collaboration in criminal justice, policing and security;
  4. Continued promotion of England & Wales as a governing law of contracts, jurisdiction of choice and London as the preferred seat for arbitration;
  5. Continued certainty over aspects of company law, family law, insolvency and the law of intellectual property.

The event that the UK and the EU fail to sign a withdrawal agreement (a “no-deal Brexit”) will result in many shortcomings including, amongst other things, the loss of the citizens’ rights chapter of the Withdrawal Agreement which allows each relevant Member State to determine whether to guarantee the residence and working rights of UK citizens.

In respect of trade rules, the UK would fall to the international rules of the World Trade Organisation and, without the buffer of any EU concessions, import and export costs will likely rise and many more administrative procedures will be required. Some of our industries will very likely suffer as EU subsidies will be affected and many people may need to return to their country of residence in the absence of emergency reciprocal processes. There will, of course, also be the practical problems involved in managing the Irish border.

Significantly, in respect of the governance of UK business in Europe, UK lawyers will lose right to represent in EU courts as well as the protection of solicitor-client confidentiality. This means that UK lawyers will be unable to represent clients at EU level which will very likely impact a number of practice areas such as company, competition and intellectual property law. The Registered European Lawyers regime will conclude after a short grace period.

Further and in respect of civil and commercial cooperation, the current system of EU rules governs which country’s law should apply and which country’s courts shall be used. Also, how a judgement obtained in one country will be recognised and enforceable in another country.

In a no-deal scenario, this framework of country cooperation would be lost. The position is far from clear but it is possible that the UK will fall back on national laws and rules in respect of the recognition and enforcement of cross-border judgments and will use the same regime that it currently uses in respect of judgments derived from non-EU countries. This means that, rather than EU judgments being recognised and enforceable in the UK, separate and additional proceedings will be needed here and, even then, only if the matter meets certain criteria. Whilst the UK can continue to apply other international conventions of which it forms part, they may not provide as much certainty as the current EU framework.

In respect of domestic judgments being recognised in the EU, the relevant national law will need to be consulted to ascertain whether the judgement is enforceable. In countries which will not recognise or enforce foreign judgments without a separate agreement, fresh proceedings will need to be commenced in those countries which will likely result in parallel cases in separate jurisdictions and ultimately conflicting judgments.

This will surely have some impact on domestic commerce in general, choice of laws and jurisdiction and so it is important to be aware that in the case of a no-deal Brexit, or other agreement, the current regimes will simply cease to have effect which will impact the projections in existing ongoing cross-border cases. Any party involved in cross-border business should consider the effects of these likely changes.

For further information on this topic please contact Pammi Babbra on 0207 467 5768.

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