• Avinder Laroya

Contractual considerations for recovering debts & litigating disputes post Brexit

Updated: Feb 18


The UK officially left the European Union (EU) on 31st January 2020, together with the additional affects to the supply chain due to the Covid Pandemic, the increase in cross-border disputes is inevitable. This article will review through the considerations commercial businesses should consider when pursuing a claim to recover commercial debts.


The enforcement of English Court judgments for commercial cross-border disputes between the UK and EU Member State litigants has changed as the UK is no longer a member of the European Union. This article will focus on the impact on English Court judgments for commercial disputes in EU Member States from 1st January 2021 onwards.


In this article we will be reviewing through the following considerations when litigating disputes and recovering debts across borders including;


· Applicable Law

· Jurisdiction

· Enforcement

· Service of documents

· Evidence


1. Applicable Law


National laws determine the content and effect that can impact cross-border litigation. Parties to a contract may reside in different States and/or performance of the contract may be conducted in a third country. It is therefore important for parties to a contract to expressly indicate which law is applicable for the contract and in the event when there are triggers for disputes.


EU rules governing the law applicable in commercial disputes in Member States, including the UK before 1 December 2020, were found in the Rome I and Rome II Regulations. Post transition the position remains the same as these Regulations have been incorporated into English law by way of Statutory instrument (The Law Applicable to Contractual Obligations and Non-Contractual Obligations (UK Exit) Regulations 2019 (SI 2019/834)) and will therefore continue to apply in the UK to determine the applicable law in contracts between parties in the UK and remaining EU member states.


2. Jurisdiction


It is inevitable that disputes will arise from time to time in commercial contracts. Parties can choose to settle these disputes through arbitration or litigation. Whether the parties choose litigation or arbitration, a question can arise of which jurisdiction is applicable if there is none specified within an agreement.


Before Brexit, if parties to a contract agreed to grant the English Courts jurisdiction over their dispute, The EU Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (No 1215/2012) was applicable. However, now that the UK is no longer part of the EU, the common law rules apply where parties confer jurisdiction on the English courts.


At common law, the English courts hold party autonomy in high regard and hence respect the express choice of jurisdiction made by parties under their contracts. There are limited circumstances where the English courts may still have jurisdiction regardless of the supposed choice of the parties and this is usually due to poorly drafted jurisdiction clauses in contract terms.


The EU Commission has published guidance stating that The Hague Conference on Private International Law will continue to govern jurisdictional matters in commercial dispute resolution between the UK and EU.


Brussels Recast Regulation and the Lugano Convention no longer apply to civil and commercial cases after 1st January 2021.


3. Enforcement


As a creditor, acquiring a court judgment against your debtor may sometimes not be the final step in the litigation process during debt recovery. Sometimes, the debtor may refuse to honour the court judgment to make payment of the debt. To ensure that your debt is actually recovered, you may have to make a further application to court seeking to enforce the judgment through various enforcement methods ranging from an order for sale, a charging order and insolvency proceedings.


The recognition and enforcement of English court judgments between the EU and UK was formerly governed by The Brussels Regulation and its predecessors, The Lugano Convention, and The EU- Denmark Agreement. The effect of these regulations was revoked on 31 December 2020 by The Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 (SI 2019/479) which came into force in the UK on 1 January 2021 setting out several amendments to domestic legislation including rules of jurisdiction and recognition and enforcement of judgments.


Despite the UK’s exit from the EU, it remains a signatory to the Hague Convention on Choice of Court Agreements [2005] known as (“the Hague Convention”). Article 8 of The Hague Convention requires all courts of contracting states designated in an exclusive choice of court agreement to recognise and enforce judgments made by courts in other contracting states. The UK and the remaining EU Member States are signatories of The Hague Convention thus Brexit will not necessarily have an impact on the recovery of debts under commercial contracts. Therefore, the litigation of cross-border disputes between the EU and the UK will continue to be exercised with no interruption. English court judgments will continue to be enforced in all EU Member States.


In addition, the UK common law regime allows for all foreign judgments including those made in the EU to be enforced in the UK through the commencement of proceedings in the English courts, where the judgment is for a money debt claim.


A foreign judgment for a sum of money will be enforceable if;

· It is pronounced final and conclusive in the issuing court; and

· the issuing court had jurisdiction according to English law


Various remedies are also available under English law to protect debtors where the judgment was obtained by fraud or is inconsistent with an earlier judgment on the same subject matter between the parties, if the foreign court’s procedures are in breach of the natural rules of justice, or if the enforcement of the foreign judgment would be perverse to public policy or the European Convention on Human Rights.


4. Service of Documents


During litigation issued claims, judgments and court orders must be sent to the defendant to bring these to his/her attention. This is referred to as service of documents.


The service of court documents to EU member states is governed by the EU Regulation on the Service in the Member States of Judicial and Extrajudicial Documents in Civil or Commercial Matters, and Repealing Council Regulation (EC) No 1348/2000 (“The EU Regulation of Service”). Usually, the party issuing the claim would serve documents through a transmitting agency in their country of origin who would then send them to the foreign process section in the Royal Courts of Justice and vice versa.


The EU Regulation of Service no longer applies in the UK, however, this does not greatly affect the service of court documents from the UK to the EU and vice versa. Under English law, Part 6b of the Civil Procedure Rules (“The CPR Rules”) sets out the necessary guidelines concerning methods and steps to be taken when serving documents to foreign jurisdictions. The CPR Rules replace the former EU rules to promote effective service of documents and therefore there is little impact or change under English law for the service of documents.


5. Evidence


Collection of evidence is a very important step in court proceedings. Evidence collected through witness statements or gathering of relevant documents can be used to support your court claim during litigation.


To obtain evidence from a witness in England and Wales especially from one that is hostile, a letter of request must be sent by the foreign court to the court of the country where the witness resides. Whilst the UK was still a member of the EU, this process was governed by the EU Regulation on Co-operation Between the Courts of the Member States in the Taking of Evidence in Civil or Commercial Matters No 1206/2001 which set out the necessary form the request must take.


From 1 January 2021, the EU Regulation governing the collection of evidence was replaced by the pre-existing English law, (The Evidence (Proceedings in Other Jurisdictions) Act 1975 and Civil Procedure Rules 34.16 to 34.21) and The Hague Conventionon the Taking of Evidence Abroad in Civil or Commercial Matters [1970]. These laws set out the necessary steps for evidence collection for foreign jurisdictions in the UK and contracting member states respectively. The Hague Conventionon the Taking of Evidence Abroad in Civil or Commercial Matters [1970] has 63 contracting member states including the UK and the EU. As these rules have already been in place, there will barely be any disruption caused to the collection of evidence between the UK and the EU during cross-border litigation.


Summary


The UK’s exit from the EU has come with some changes to cross border litigation. The Covid-19 Pandemic has made it more difficult for businesses to adopt to these changes, instead, contributing to challenges and a rise in commercial disputes due to the disruption caused by the pandemic to the supply chains. As an international business owner, it is now more important than ever to familiarise yourself with the impact that Brexit may have on various aspects of the cross-border litigation process especially the enforcement of English Court judgments in the EU.


The changes due to the UK departure from EU regulation has made minimal impact to the commercial litigation process and is as efficient as ever. The UK continues to be a party to several international conventions such as The Hague Convention and The Hague Conference on Private International Law to which the EU is also a member. These International laws continue to regulate the debt recovery and litigation process between the EU and UK by ensuring that English court judgments are enforceable in the EU. The UK’s pre-existing laws such as The Civil Procedure Rules and The Evidence (Proceedings in Other Jurisdictions) Act 1975 which govern the collection of evidence and service of documents by foreign jurisdictions also continue to apply.


How can Serenity Law LLP help you?


There have been a number of regulatory updates in the last year due to the UK’s departure from the EU. Understandably, getting around or minimising the impact these changes may have on your business especially during these Covid-19 times may be difficult to navigate. Serenity Law LLP are able to assist with English and cross-border dispute resolution.


We also understand that sometimes litigation may not be the right path for you to resolve your commercial disputes. In our article on alternative dispute resolution, we looked at other procedures that can be used to resolve disputes.


Our co-founding partner, Avinder Laroya, is a member of the Chartered Institute of Arbitrators (MCIArb) and a CMC, CEDR accredited Mediator. She has meticulous attention to detail and international cross-border knowledge and experience. Please get in touch with our team on 08000197773 of click here to book a 15-minute free consultation.