The departure of the UK from the European Union and the end of the transitional period at the turn of 2020 and 2021 mean that the EU’s harmonised regulations on conflict of laws and the recognition and enforcement of judgments are no longer applicable between EU member states and the UK.
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In this blog post, we look at which legal instruments could replace the Rome I Regulation, which provides for conflict of laws, and the Brussels I Regulation, which provides for the recognition and enforcement of judgments, in the new relationship between the UK and the EU member states. We also provide some tips to keep in mind when agreeing on governing law and dispute resolution clauses post-Brexit.
No Significant Brexit Impacts on Conflict of Laws – Yet
The Rome I Regulation determines the law applicable to contracts in EU member states. The courts in member states are obligated to comply with the conflict of laws rules of the regulation, which means that the applicable law is determined the same way regardless of which member state the matter is being decided in. The Rome I Regulation assumes that the parties to a commercial contract can freely agree on what law they want to apply to their contract.
The conflict of laws rules of the Rome I Regulation do not limit the applicable laws to just those of EU member states. For example, Finnish courts continue to apply the same conflict of laws rules despite Brexit, and these rules could also lead to the application of English law. Thus, Brexit has not brought any significant changes to conflict of laws yet.
However, the end of the UK’s membership in the EU does mean that the Rome I Regulation’s conflict of laws rules are no longer directly applicable in the UK. At the moment, the content of the UK’s national conflict of laws rules is identical to those of the Rome I Regulation. These rules could lead to, for example, Finnish law being applied in UK courts under the same grounds as before. However, the UK no longer has any obstacles to changing its national conflict of laws rules in the future.
Major Changes to Recognition and Enforcement of Judgments
In contrast, Brexit has brough major changes to the recognition and enforcement of judgments issued in the UK in EU member states. Companies should take this into account when negotiating dispute resolution clauses with UK companies.
The recognition of foreign judgments requires a separate legal basis in Finland. Judgments issued in UK courts while it was still a member of the EU were subject to the Brussels I Regulation, which meant that they were extensively enforceable in Finland without separate court proceedings (exequatur). However, the trade and cooperation agreement between the EU and the UK, which entered into force on 1 January 2021, contains no provisions corresponding to or replacing Brussels I with respect to the recognition and enforcement of judgments.
UK Planning to Replace Brussels I with Lugano Convention
The UK is planning to fill the gap left by the Brussels I Regulation by acceding to the Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters. The Lugano Convention has been signed by the member states of the EU and EFTA, and it is substantially similar to the Brussels I Regulation.
The UK has applied for accession to the Lugano Convention. Acceding to the convention requires the approval of all of the other signatories, and the EU’s approval is currently uncertain.
If the UK’s accession to the Lugano Convention is approved, the enforcement of a judgment based on it in Finland will require exequatur, i.e. an enforcement order issued by a district court.
Post-Brexit Enforcement also Possible under Narrower Hague Convention
In 2020, the UK acceded to the Hague Convention on Choice of Court Agreements, which is narrower in scope and substance. The Hague Convention is an instrument of the Hague Conference on Private International Law and is currently in force in the EU member states, the UK, Mexico, Singapore and Montenegro.
Based on the Hague Convention, Finland will recognise and enforce judgments issued in the UK in which the jurisdiction of the court is based on an exclusive, written choice of court agreement. The enforcement of a judgment in Finland based on the Hague Convention requires an enforcement order from a district court.
After Brexit, companies need to consider carefully whether to select a UK court as the competent court and only do so after ensuring that any judgment issued by such court will be enforceable and recognisable.
Tips on Negotiating the Governing Law and Competent Court Post-Brexit
Courts in both the EU and the UK continue to respect agreements on the governing law applicable to contractual obligations as they did before Brexit. The choice of law rules that apply in the absence of an agreement also still lead to the application of the law of the same jurisdiction as before Brexit. However, it is important to keep an eye out for any changes that may be made to national legislation in the UK.
The clearest solution with respect to the recognition and enforcement of a judgment is to agree to resolve disputes in arbitration. Finnish courts continue recognise and enforce arbitral awards issued in the UK under the same conditions as before Brexit.
When dealing with British companies after Brexit, it is important to expressly agree on the competent court. If a UK court is selected to settle disputes, we recommend ensuring that the wording of the choice of court agreement fulfils the requirements of the Hague Convention and falls within its scope.
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