Brexit and Dispute Resolution – How Can You Start Preparing Yourself Now?

The result of the referendum arranged in Britain was a surprise for many. Never before has a Member State withdrawn from the European Union and only a few have considered withdrawal to be a feasible option. Before 2009, the treaties of the EU did not even include any provisions concerning withdrawal.

For the time being, the biggest impact of the decision of Britain to leave the EU has been increasing uncertainty. No one knows how the relationship between Britain and the EU will evolve, and forthcoming negotiations are likely to take years. However, business operations will not simply stop and wait for the end results of the negotiations, which is why it is important to be prepared already now for Britain's withdrawal from the EU, to the extent possible.

Common Rules at Stake

The EU's legislation facilitates cooperation between the Member States' courts on many occasions. EU regulations lay down the frameworks binding all Member States on the following questions, among other things:

  • Which Member State’s law is applied?
  • Which court has jurisdiction to settle a dispute?
  • How is a judgment given in one Member State enforced in another Member State?
  • How can the hearing of the same matter be prevented in other Member States?
  • How do courts cooperate as regards the service of documents and the taking of evidence?

Upon Britain's withdrawal from the EU, the regulations specified above will not necessarily continue to be applicable to Britain. In addition, Britain's national legislation is expected to be amended in any case as a result of the withdrawal. It is also unclear what the significance of the case law given during the EU membership will be in Britain after the withdrawal.

The prevailing uncertainty creates added challenges for dispute resolution as the time between the drafting of an agreement and the emergence of a dispute can be years, if not decades. In order to manage risks related to Brexit we recommend, for the time being, favouring arbitration and choosing the laws of Finland or another Member State as the law applied to the agreement.

Two Clauses You Can Use to Reduce Risks Related to Brexit

  1. Arbitration clause: Brexit's possible risks are mainly related to courts of general jurisdiction. Arbitration will remain a foreseeable choice in the future, because the enforcement of arbitral awards is arranged via international treaties, not by EU regulations. 
  2. Governing law clause: At the moment, it is impossible to predict what the contents of English law will be, for example, ten years from now. It is therefore recommended to choose Finnish law or some other EU Member State's law as the applicable law.