Planning for Brexit – exclusive jurisdiction clauses under the Hague Choice of Court Convention

Promoting and facilitating cross-border trade and investment through common rules governing the interactions between the UK and EU legal systems post-Brexit is important to the UK government. On 28 December 2018 it deposited the Instrument of Accession to the 2005 Hague Choice of Court Convention (HCCC), which upholds exclusive jurisdiction clauses and facilitates the enforcement of resulting judgments between Contracting States. The EU Member States are already a party to the HCCC.

As we have explained previously, the UK government intends to implement rules to ensure the effectiveness (and continued popularity) of choice of law and jurisdiction clauses in commercial contracts drafted in favour of, respectively, English law and English courts. It also hopes to put in place a legal framework for the recognition and enforcement of judgments as between the UK and the EU.

In its August 2017 position paper on civil judicial cooperation between the UK and the EU, the UK government confirmed that it will seek to agree with the EU a new agreement allowing for “close and comprehensive cross-border civil judicial cooperation on a reciprocal basis”. It will seek to do this during the UK’s ‘transition period’ should the government’s Withdrawal Agreement be ratified by Parliament (and, subsequently, by the EU). This agreement will, amongst other things, seek to plug the gaps left by the UK’s withdrawal, as a corollary of Brexit, from the Recast Brussels Regulation (which governs jurisdiction and the enforcement and recognition of judgments) and the Rome I and II Regulations (concerning applicable law).

Planning for a ‘no-deal’ Brexit 

However, it is widely believed that, as things stand, Parliament will likely reject the Withdrawal Agreement at the ‘meaningful’ vote that has been (re)scheduled for 15 January 2019. If this happens, it is possible – although far from certain – that the UK will leave the EU without a deal.

In order to provide for continuity and legal certainty in all eventualities, the UK government intends to remain signed up to the following two conventions, regardless of the final form of Brexit (‘deal’, ‘no deal’, ‘managed no deal’, or otherwise).

1. The Lugano Convention regarding jurisdiction and the enforcement and recognition of judgments. (For more information on the Lugano Convention and Brexit, please see our previous blog post).
2. The HCCC regarding exclusive jurisdiction clauses and the enforcement of resulting judgments.

The HCCC

The HCCC is a multilateral international treaty, with both EU and non-EU Contracting States (e.g. Mexico and Singapore), which requires Contracting States to respect exclusive jurisdiction clauses in favour of other Contracting States and to enforce related judgments. Exclusive jurisdiction clauses, also known as ‘jurisdiction agreements’ or ‘forum selection clauses’, enable parties to determine which courts will hear any disputes arising from a contract.  Many are drafted in favour of English courts.

While the UK is currently bound by the HCCC, by virtue of its EU membership, upon a ‘no deal’ Brexit, the HCCC would cease to apply and courts of other Contracting States would not be obligated to respect exclusive jurisdiction clauses in favour of English courts. By depositing the Instrument of Accession, the UK government has taken steps to accede, in its own right, to the HCCC, which would ensure that, even in the event of a ‘no deal’ Brexit, EU Member States will be obliged to give effect to exclusive jurisdiction clauses in favour of English courts and to enforce any resulting judgments.

The Instrument of Accession covers both ‘deal’ and ‘no deal’ Brexit scenarios.

If the Withdrawal Agreement is ratified, the UK will withdraw the Instrument of Accession. That is because, pursuant to the Withdrawal Agreement, during the transition period from 30 March 2019 until 31 December 2020 (or until such later date as agreed by the UK and EU), EU law will continue to apply in the UK. The HCCC will therefore continue to have effect. During the transition period, the UK and the EU will then seek to agree the nature and terms of its civil judicial cooperation.

Alternatively, should the Withdrawal Agreement not be ratified and the UK leaves the EU without a deal, the UK will accede to the HCCC in its own right with effect from 1 April 2019.

No deal, no problem?

While the UK government’s ‘no deal’ contingency planning is reassuring (even if the prospect of a ‘no deal’ Brexit is less so), the HCCC is not without its limitations and complications.

1. The HCCC is narrower than the Recast Brussels Regulation in that it only relates to disputes arising from contracts containing exclusive jurisdiction clauses – non-exclusive jurisdiction clauses and sole option clauses are not covered.
2. The HCCC is prospective – it would only relate to exclusive jurisdiction clauses in favour of English courts that are concluded after the UK’s re-accession to the HCCC. Parties could address this issue by restating their contracts after the UK’s re-accession to the HCCC, but that will not be practicable in all cases.
3. Finally, it is not clear how, if there is a ‘no deal’ Brexit, any exclusive jurisdiction clauses executed after the UK leaves the EU on 29 March 2019 (more precisely, at 11:00 p.m. that day) but before the UK accedes to the HCCC on 1 April 2019 would be treated. The UK government has sought to bridge this gap by passing regulations that will come into force from 29 March 2019, which provide for UK courts to give effect to jurisdiction clauses concluded in favour of any Contracting State during the two-day period.  Whether the courts of other Contracting States will reciprocate in respect of jurisdiction clauses in favour of English courts that similarly fall between the cracks remains to be seen.