Brexit and Its Effects on Dispute Resolution – A How-to Guide on Civil Disputes Post-Brexit (Vol. 1): The Choice of Law and Jurisdiction

Don't look back in anger - that's how the British band Oasis sang their way into continental European hearts through the 1990s. In the meantime, the Brexit happened. The United Kingdom left the European Union on the 30th of January 2020. But does Oasis' recommended life wisdom also apply without exception to the legal consequences of Brexit? Two years have passed and many questions regarding civil disputes are still unresolved. A reason to take a closer look at current British-German/EU developments and on practical strategies parties may consider when entering cross-border civil disputes.

In our series of blog posts, we examine constellations in civil disputes that are increasingly arising in practice in connection with Brexit and German Law. In our first article, we explain the influence of the Brexit on the choice of law and jurisdiction. The second article deals with the enforceability of German or British titles while the third deals with a case recently decided by the Regional Court of Berlin concerning a limited company with its administrative seat in Germany. Our last article sets out the consequences of Brexit in litigation or arbitration proceedings regarding anti-suit injunctions.

Commercial contracts usually contain governing law and jurisdiction clauses. Before Brexit, a well-structured legal framework governing cross-border disputes between the United Kingdom and the European Union including Germany existed. Since the United Kingdom's withdrawal from the European Union, the general European rules on the choice of law and jurisdiction no longer apply. What is the applicable position now?

Choice of Law

Generally, Brexit does not have an impact on governing law clauses irrespective whether they are governed by German law and point to the UK or whether they are governed by English, Northern-Irish or Scots law and point to Germany.

A choice of law clause is a term of a contract in which the parties to the contract specify that any dispute arising under the contract (including the interpretation of the contractual terms) shall be determined in accordance with the law of a particular jurisdiction. In general, the parties are free in their choice of law, but also bound by their choice.

Before Brexit, the rules regarding the choice of law were set out in the Rome I Regulation on the law applicable to contractual obligations (593/2008) and the Rome II Regulation on the law applicable on non-contractual obligations (864/2007). Post-Brexit, the United Kingdom has transferred these "Rome-regulations" into British law. As it relates to the applicable law provisions, it follows that EU member states must generally respect such provisions regard-less of whether the law chosen is that of an EU member state or of a "third country", like England and Wales.

Consequently, there is no big difference towards pre-Brexit times. The parties may govern their contracts under their preferential law. Brexit should, therefore, not have any influence for the parties from choosing either English or German law. The only possible negative impact of Brexit could be that the case law of the European Court of Justice will be no longer applicable. British courts may interpret case law on a different approach. However, as the "Rome-Regulations" are still applicable, British courts will probably continue interpreting the case law by reference to the case law of the European Court of Justice.

Choice of Jurisdiction

The situation regarding the forum selection clauses is different. Pre-Brexit, the courts applied the EU's Brussels Ia Regulation on Jurisdiction and the Recognition and Enforcement of Judgments (EU No. 1215/2012). Post-Brexit, the courts determine their own jurisdiction according to the law of their own jurisdiction, so called "lex fori". English courts determine their jurisdiction from the perspective of the laws of England & Wales, the EU Member States, as Germany, from their perspective of national applicable law. This carries the risk of conflict in the choice of jurisdiction and parallel proceedings on both sides of the Channel: A party sued in Germany and domiciled in the UK is no longer prevented from bringing the dispute already pending before an English court.

But let's start from the very beginning: A forum selection or choice of jurisdiction clause regulates in which country's court the civil dispute should be resolved and settled. If the contract contains a choice of jurisdiction clause, the contractual situation is clear. The parties are bound by the chosen place of jurisdiction. If the chosen place of jurisdiction is in England, the parties must litigate the civil dispute in England. But what happens if the British party also wants to take legal action in Germany despite of a jurisdiction clause pointing to the English courts? Or how should the court handle the opposite case, if a German party wants to take legal action in England despite a German choice of jurisdiction clause?

As already mentioned, since the United Kingdom's withdrawal from the European Union, the general European rules on civil procedure law no longer apply. The only remaining option is the applicability of international conventions:

As of 21 January 2021, the United Kingdom has acceded to the Hague Convention on Choice of Court Agreements ("Hague Convention"). The Hague Convention applies in international cases only to exclusive choice of court agreements in civil or commercial matters. If the jurisdiction clause is exclusive, the court of the contracting state designated in this exclusive choice of court agreement shall have jurisdiction to decide a dispute to which the agreement applies, Art. 5 (1) of the Hague Convention. For instance, if a jurisdiction clause between German and British parties gives exclusive jurisdiction to German courts, the German courts must hear the case. The British court shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies.

Other international conventions are not apparent. An attractive alternative would have been the Lugano Convention, which has the same background as the EU Brussels regulations. Contracting states, are in addition to the EU also Norway, Iceland and Switzerland. However, in summer 2021 the European Commission blocked the accession of the UK to the Lugano Convention.

It is also uncertain whether the Anglo-German Treaty on Legal Relations of 20 March 1928 applies. This agreement has been superseded by the EU's Brussels Ia Regulation on Jurisdic-tion and the Recognition and Enforcement of Judgments. It is disputed whether this Treaty and others are revived due to the Brexit.

In any case, it is apparent that none of these agreements would help over any exclusive English or German jurisdiction clause.

To be continued.

Christina Weinzierl
Tobias Pörnbacher
Alexander Braun