Commercial disputes are a fact of life for all businesses, including those in the aggregates sector. From breach of contract claims to disputes about interference with mineral rights, what will Brexit mean for disputes and the enforcement of UK judgments abroad? Catherine Mathews, partner and expert in commercial disputes at Stephens Scown LLP explores the issues.
Breach of contract
With the UK leaving the EU on 31 January, the enforcement of UK judgments is coming back into focus. For businesses who operate across borders, like many in the aggregates sector do, this is an important issue.
When disputes involve organisations (or individuals) based in different countries, there are often an array of complex issues in various jurisdictions. Add Brexit into the mix, and the picture becomes even more complex.
Cross-border disputes raise a number of issues, including jurisdiction and which countries your claim can be brought in; consideration of which jurisdiction it would be most advantageous to bring your claim in; and finally, enforceability and consideration of whether a judgment will be recognised in another jurisdiction. This article focusses on the latter point of enforceability.
With disputes such as claims for breach of contract often having significant sums at stake, it is important to understand how Brexit could affect enforcement of English judgments abroad.
Pre-Brexit, enforcement of English judgments in the EU wasn’t too much of an issue because the UK is party to international agreements governing cross-border enforcement. However, the UK is party to many of these international agreements by virtue of its membership of the EU, so leaving the EU changes things and brings with it new challenges for enforcing judgments in the EU and beyond. Careful consideration and strategic planning are required whether you have obtained your judgment, are involved in ongoing litigation or are contemplating commencing a claim.
Date of dispute will be crucial
Due to the passing of the Withdrawal Agreement Bill, there will be a transition period until the end of this year. During the transition period, the current legislation applicable to jurisdiction and enforcement of judgments will continue to apply.
If court proceedings are commenced before the end of the transition period, the current rules will apply, and English judgments will be enforceable in EU countries. If court proceedings are commenced after the end of the transition period, the enforceability of any judgment will depend on a variety of factors, including the terms of any international agreements that the UK enters into during the transition period.
During the transition period, the UK courts will also continue to recognise and respect “choice of law” clauses in contracts. These clauses are particularly important in contracts where the parties are based in different countries, as they specify the applicable law in the event of a dispute.
In the absence of such a clause, the law applicable to the contract is determined by rules set down in legislation. This legislation will also continue to apply during the transition period, and the government has also indicated that it will be retained in domestic law following Brexit. This will bring welcome certainty for businesses trading outside the UK.
Importance of planning ahead
It is essential to plan ahead before you enter into any international contracts, particularly following Brexit. Preventative steps can be taken, for example, by ensuring that any agreements you are entering now are drafted to protect you as robustly as possible and ensuring that they include appropriate “choice of law” and jurisdiction clauses. The importance of well drafted contracts cannot be overstated. Having contracts professionally drafted will ensure that crucial terms dealing with the manner and timing of performance of the parties’ obligations under the contract, payment and termination are clear. This will reduce the scope for a dispute to arise in the future.
As well as taking protective measures, if a dispute has regrettably already arisen or you are considering litigation, it is crucial to take expert advice, so you are clear about what options are available to you. In many cases, court proceedings can be avoided by taking advice and communicating with the opposing party at an early stage, as soon as it appears that a dispute may arise.