The political struggle following the British exit intensifies as Great Britain approaches 29 March 2019, when the united kingdom leaves the EU community. By now, concerns in and outside Great Britain are palpable as the time for securing a deal with the EU is running out. In light of this, Bech-Bruun takes a hard look at the expected changes in the area of litigation proceedings involving British parties and/or stakeholders, should the Brexit end with a No Deal (a "Hard Brexit").
A Hard Brexit (i.e. No Deal) will involve significant changes for Great Britain.
In the judicial area, the principle of mutuality in EU law will be the most noticeable loss. Commercial interests with the Brits and in Great Britain should be closely reviewed to ensure the maintaining of relations on acceptable terms. This also applies if Great Britain after its exit should still wish to apply the regulations of EU law in relation to issues involving one or more of the other Member States. In other words, Great Britain is to be considered and treated as any other third country outside the community.
Even now, some areas within litigation proceedings can be identified as being more or less impacted by the Brexit. These areas, which we review below, are:
- Governing law
- Jurisdiction agreements
- Taking of evidence
- Provision of security, and
- Recognition and enforcement of rulings.
Our conclusions are also summarised in this schedule.
This article does not concern arbitration, since the rules on arbitration proceedings were adopted through the international New York convention, i.e. on an intergovernmental level, and thus are independent on EU membership.
Jurisdiction – where to commence the case?
Through Great Britain's membership of the EU, the Brussels I Regulation – better known as the Jurisdiction Regulation – applies on court hearings of disputes involving cross-border elements. After 29 March 2019 this regulation must be expected to lapse and refer Great Britain to apply historical regulation in this area, dating back to the time before it became a Member State in 1973.
Prior to the Jurisdiction Regulation, the Brussels Convention applied in Great Britain. Presumably, today the wording of the Convention is outdated in a number of areas, for instance labour law and consumer law.
Besides, it is generally uncertain whether Great Britain can apply the Convention or whether it too presumes membership of the EU. Several theorists believe that it is not possible to revert to the Convention as it presumes EU membership, and that the Convention became inoperative on introduction of the Jurisdiction Regulation.
As mentioned, if the Brussels Convention applies, the wording must be expected to be widely outdated. For instance, unlike the Brussels Convention, the Jurisdiction Regulation ensures that lawsuits filed in one state for the sole purpose of stalling the hearing of the same case in a different jurisdiction as set out e.g. in a jurisdiction clause (so-called torpedo actions) are not possible. The term "torpedo" was applied after the Gasser case, where the EU Court of Justice found that an Austrian court – despite a jurisdiction clause pointing at Austria – had to stay its hearing of a case because one of the parties had "parked" the case at an Italian court. This gave one party immunity against lawsuits until the Italian court had decided whether it was competent to hear the case.
However, if the Brussels Convention does not apply, the question of jurisdiction must be considered – i.e. where a case is rightly to be commenced – subject to British or Danish national legislation. This may cause problems, as national sets of rules, contrary to the EU harmonisation of the area, do not offer the same predictability or efficiency. As such, situations may occur where both a Danish and a UK court finds itself the competent venue or, the other way around, that neither does. One way to attempt to avoid this is to agree on the jurisdiction in the event of a dispute at the time of concluding the contract. The issue of jurisdiction agreements is discussed below.
Governing law – British or Danish legal system?
The issue of which country's legal system governs the specific dispute for contractual relationships is determined in Denmark and Great Britain according to the rules of the Rome Convention. The convention is adopted by both nations and is implemented into national legislation.
Regarding claims outside contractual relationships, for instance damages for personal injury, Denmark applies the general rule of the law in the country where the site of damage is. In Great Britain, the rules of the Rome II-regulation apply, but in relation to Denmark, due to the Danish JHA opt-out, Great Britain uses its national laws, which also applies the law in the country where the site of damage is. Consequently, a termination of the Rome II-regulation will not have any effect on the choice of law in conflicts between Danish and British parties.
Through its EU membership, Great Britain adopted the Hague Choice of Court Convention of 30 June 2005. Due to the Danish Justice and Home Affairs (JHA) opt-out, Denmark did not ratify the Convention until 2017, and the Convention took effect in Denmark on 1 September 2018. The Convention applies to legal relationships that are subject to a jurisdiction agreement.
Since Great Britain adopted the Hague Choice of Court Convention through its EU membership, a Hard Brexit would require independent ratification.
On 13 September 2018, Great Britain issued a Statutory Instrument in which the Brits declared that they would ratify the Convention regardless of the outcome of the Brexit negotiations. Under this presumption a Hard Brexit is not expected to cause any changes in the area of jurisdiction agreements.
However, the Convention covers only a fraction of the application area of the Jurisdiction Regulation, and cases concerning e.g. insurance, insolvency, labour agreements or consumers will not be covered by the application area of the Convention, as opposed to the Regulation. Another important exception is cases concerning non-contractual actions in damages as these by their nature are not covered by a jurisdiction agreement.
Please mind the gap!
In addition to the above, it is important to note that in the event of a Hard Brexit there will be a gap of a few days or more where the Hague Choice of Court Convention will not apply in Great Britain. The reason is that a Brexit will be effective from the end of Friday 29 March 2019, and according to the provisions of the Convention it cannot become effective until three months after being adopted, at the earliest. To our knowledge, Great Britain has not initiated any adoption procedures yet.
Besides the issue of when the Convention can take effect in Great Britain looms the issue of whether the possible lapse of the Convention in Great Britain could also have an impact on jurisdiction agreements concluded before 29 March 2019. So far, Great Britain has declared that it will disregard such legislative technicalities; however, other countries that have ratified the convention might hold different views.
Under the current rules, in cases with cross-border elements, writs etc. are served in accordance with the applicable rules of EU law under the Service Regulation (Regulation 1393/2007). Today, the Regulation applies in Great Britain as well as in Denmark. However, Great Britain has already declared that it does not expect to uphold the Regulation after leaving the EU, Deal or No Deal.
Instead, the Hague Convention of 15 November 1965 regarding service abroad of judicial and extrajudicial documents about civil and commercial matters (the Service Convention) will apply.
The Service Convention also applies in Denmark.
The Service Convention is not as broad as the Service Regulation, and as regards Denmark, service will take place as if it concerned a third country that had adopted the Service Convention. For instance, the uniform rules regarding translation of documents and the use of modern means of communication will not be part of the Convention, which expectedly will complicate the process in relation to service.
Taking of evidence
Great Britain adopted Council Regulation (EC) No 1206/2001 of 28 May 2001 on the Taking of Evidence in Civil or Commercial Matters that include a cross-border element. Due to the Danish JHA opt-out, the Regulation does not apply in Denmark. However, the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters will apply.
Great Britain has declared that, as with the Service Regulation, EU regulations concerning the taking of evidence in legal proceedings will not be upheld. Instead Great Britain will apply the Hague Convention, as Denmark does. Consequently, there will be no material changes in this area for Danish or British stakeholders.
Security for costs
In Denmark, a plaintiff who is not a member of the EEA may be requested to provide security for any litigation costs ordered by the court.
Since Great Britain will not be part of the EEA without a Deal, as a consequence of the Brexit a British plaintiff will not enjoy the protection granted by the EEA in this context, but will as a plaintiff from a third country risk having to provide security when bringing an action in Denmark.
As an exception to the general rule, a (British) plaintiff may not have to provide security if the plaintiff can prove that a plaintiff resident in Denmark would not need to provide security if bringing an action in Great Britain. By ruling of 17 September 2013 (published in UfR 2013.3358 H), the Danish Supreme Court determined that exemption must be based on treaty law.
For a British plaintiff, the relevant treaty law basis would be the Hague Convention of 1954 on civil procedure. However, Great Britain never adopted or ratified this convention, which consequently does not apply and thus cannot be relied upon by a British plaintiff in Denmark against providing security for costs.
Recognition and enforcement of rulings
The regulations on recognition and enforcement of foreign rulings given in other EU Member States are governed by the Jurisdiction Regulation. As such, the views are similar to those stated above concerning jurisdiction, including with regard to possible application of the Brussels Convention of 1968.
Outside the EU community, the possibility of recognition and enforcement in Denmark of rulings given in third countries is very limited, if even existing. Thus far, to our knowledge there is only one example of an Argentinian ruling (published in UfR 2001.1949 Ø) that was – probably – recognised by the Danish courts. Nor may it be ruled out that Great Britain's future recognition and enforcement of, for instance, Danish legal decisions will be similarly narrow.
Our conclusions are summarised in this schedule.