The implications of Brexit 'for UK commercial disputes

Andy McGregor and Sarah Shaul consider the possible effects of withdrawal from the
EU on the use of English governing law and jurisdiction clauses in commercial contracts

English law is renowned for being a safe pair of hands. The courts strive to give effect to the commercial intentions of the parties, judges are respected for their expertise and independence, and English governing law clauses are highly popular in cross-border commercial contracts, often considered part of the contractual boilerplate.

Despite Brexit, there is little
to suggest this will change. Reasons for picking English
law as the governing law for commercial contracts are unrelated to the UK's position within the EU. Although there may be some uncertainty with respect to the application of more precise legal obligations, English law as applied to general commercial contracts will remain unaffected by Brexit. Indeed, substantive English law as applied to general commercial contracts has been relatively unaffected by EU law.

Currently, member states apply the same set of rules to determine the governing law of contractual and non-contractual obligations, namely the Rome I and Rome II Regulations. These regulations stipulate that member state courts must respect the parties' choice on governing law, whether or not that is the law of a member state. This means an English governing law clause will continue to be upheld. It is worth checking whether commercial contracts refer to European legislation,
use European legal concepts,
or refer to territory in terms of the EU. Such clauses may need
to be revised.

English jurisdiction clauses

Currently, judgments handed down by English courts are enforceable in all EU member states under the Brussels I Regulation and the Recast Brussels I Regulation (the Recast). Upon leaving the
EU, English judgments will be enforceable according only to the individual rules applicable
to non-EU judgments in the different member states. It is imperative that the UK is quick
to negotiate an agreement which extends across the EU.

Additionally, the Recast stipulates that where a contract contains a jurisdiction clause in favour of a member state, that court will take jurisdiction over the proceedings, and the courts of the other member states are obliged to respect that agreement and decline to
hear those proceedings. In the absence of the harmonising effect of the Brussels regime, there are a few potential options:

• The UK tries to remain part of the Brussels regime. Unlikely. There would no longer be the reciprocity inherent
  in the Recast with other member states and, as the UK would no longer be subject to the jurisdiction
  of the European Court of Justice, there would be no guarantee that the terms of the Recast would be applied consistently;