UK shows pragmatism, high ambition in plan for post-Brexit cross-border disputes

Big Ben and Statue

22 August 2017. By Matthew Holehouse.

The UK's proposals today on handling cross-border legal disputes after Brexit tick many of boxes set out by London's legal industry.

The UK government today proposed signing up to two sets of European conventions to ensure that civil and commercial disputes continue to be heard before London courts, and their judgments enforced across the bloc after Brexit.

Doing so should soften the blow served by Brexit on the UK's lucrative legal industry.

It also reveals a more pragmatic approach to the country's future relationship with the EU Court of Justice, which oversees the bloc's system of civil judicial cooperation.

The plans would oblige British courts to "pay due regard" to the rulings of the Luxembourg-based court, suggesting there won't be a clean break with it.

Yet, a suggestion that the EU should develop a bespoke arrangement for the UK — that effectively preserves the current "sophisticated and effective" rules that govern cases that spread over several EU countries — could be too optimistic.

Proposals

After Brexit, the UK will drop legislation that determines where in the EU disputes about insurance, employment contracts, freight law and negligence should be heard — known as the Brussels I Regulation (Recast).

The regulation also ensures that judgments are recognized and enforced across borders.

To mitigate the effects, the UK plans to adhere to the Hague Conventions, which cover famil- law disputes such as abduction and maintenance payments. It also sets out which courts have jurisdiction to rule on international commercial transactions.

It also plans to take part in the 2007 Lugano Convention, which covers the recognition and enforcement of judgments in civil and commercial matters in disputes in EU states, Switzerland, Norway and Iceland. All EU states would have to agree to the UK's accession to this convention.

The third step is to transpose EU rules that govern the choice of law used in civil and commercial disputes, known as the Rome I and II regulations.

The plans suggest that the legal industry's lobbying efforts have paid off, and the government is attempting to address the concerns raised.

The House of Lords, the UK Parliament's upper chamber, said in March that these three measures would amount to a "workable solution" in the event country dropped the recast Brussels I regulation.

The Lords' report was highly critical of the Ministry of Justice, describing the government's position at the time as "lacking a clear policy" and negligent of the potential impact of Brexit on cross-border disputes.

"It is encouraging that the government has chosen to listen to the concerns raised by the solicitor profession, and give civil justice cooperation the high priority it clearly needs," the UK's Law Society said in a statement today.

Keeping the benefits

The Lugano Convention is based on the Brussels I Regulation before it was recast in 2012, and is regarded as less effective. Therefore, the UK government wants to set up a bespoke arrangement that will maintain the benefits of the current EU regime.

"Existing international conventions can provide for rules in some areas, but they would not generally provide the more sophisticated and effective interaction, based on mutual trust between legal systems, that currently benefits both EU and UK business, families and individual litigants," the position paper published today says.

"The UK will therefore seek an agreement with the EU that allows for close and comprehensive cross-border civil judicial cooperation on a reciprocal basis, which reflects closely the substantive principles of cooperation under the current EU framework."

In short, the UK will exit the EU, yet seek a deal better than that available to Norway and Switzerland, raising doubts that EU leaders would agree to it.

EU Court of Justice

The decision to accede to the Lugano Convention also demonstrates a new-found flexibility on the role of the EU Court of Justice after Brexit.

Prime Minister Theresa May has continuously vowed to end the "direct" jurisdiction of the bloc's top court.

But countries that adhere to the convention must "pay due regard" to the Luxembourg court's decisions on the functioning of the convention.

May is already aware that an excessively rigid approach towards the court could scupper an agreement.

Today's announcement indicates the UK is ready to adopt a model that would see national courts mirror legal precedents set in Luxembourg. Indeed, the policy paper acknowledges the difficulty in escaping the influence of the bloc's top court.

"The UK and the EU will need to ensure future civil judicial cooperation takes into account regional legal arrangements, including the fact that the [Court of Justice of the European Union] will remain the ultimate arbiter of EU law within the EU," the paper says.

Tomorrow, the UK government will release a paper setting out its proposals for a future UK-EU dispute-resolution mechanism. Today's paper is further evidence that a relationship more akin to what Norway enjoys with the EU is in sight.

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