UK's post-Brexit hopes for international disputes face setback

The Royal Courts of Justice in London enjoy a favourable position for resolving international disputes. For example, around 75% of the Commercial Court's caseload is international (relating to property or events outside the UK). Understandably, the UK government is keen to preserve that position after the end of the transition period, which is currently set to expire on 31 December 2020.

The UK has indicated that it intends to rely on two international jurisdiction regimes to replicate the current position under EU law once the transition period has expired.

The Hague Convention.

The UK is already a party to the Hague Convention on Choice of Court Agreements 2005 by virtue of its EU membership. The government intends the UK to sign up to the Hague Convention in its own right at the end of the transition period.

The Hague Convention largely replicates the current position in relation to jurisdictional issues as already exists between the UK and the EU27 (under the recast Brussels Regulation). Broadly, that means that the courts of the country nominated in an exclusive jurisdiction clause must hear the case and any other EU court must refuse to hear the case.

A problem has arisen, though, because the European Commission issued guidance in April 2019 suggesting that an exclusive English jurisdiction clause will only fall within the Hague Convention if it is entered into after the end of the transition period (that is, from the date the UK accedes to the Convention in its own right). There have been indications that individual EU27 countries may choose to adopt that stance too.

The Lugano Convention

The UK has also applied to join the 2007 Lugano Convention, which currently governs jurisdictional issues between the EU27 and the European Economic Area (EEA) countries of Norway, Iceland and Switzerland. Again, the Lugano Convention largely mirrors the current position under the recast Brussels Regulation.

Membership would be particularly important for the UK given the current uncertainty surrounding recognition of English jurisdiction clauses entered into before the end of the transition period highlighted above.

However, all existing parties must consent to the UK joining the Lugano Convention. Although the EEA countries have indicated that they are willing to allow the UK to join, it has recently been reported that the European Convention has told the EU27 countries that a quick decision on this issue was "not in the EU's interest" and it is unlikely to recommend allowing the UK to join the Lugano Convention.

Of course, this may simply be an attempt to use the issue as a bargaining chip in the ongoing wider Brexit negotiations, but the move creates further uncertainty regarding the effectiveness of exclusive English jurisdiction clauses entered into before the end of the year.

It also means that, as things currently stand, there will be no international instrument on jurisdictional issues in place between the UK and Norway, Iceland and Switzerland after the end of this year and those countries will apply their national laws when assessing what weight to give to an exclusive jurisdiction clause nominating the English courts.

It may therefore be worth bearing in mind that these issues do not arise where an arbitration agreement has been included in the contract, since those agreements fall under the 1958 New York Convention.