Private International Law post-Brexit: Between Plague and Cholera

I. Introduction

II. Plan A: A Bespoke Bilateral Agreement

III. Plan B: Unilateral application of EU law and adoption of international treaties 1. Unilateral application of EU instruments

2. Ratification of international treaties

IV. Conclusions

I.

Introduction

For more than three years, the (close) outcome of the Brexit referendum has kept people on both sides of the Channel busy. But now - after intensive negotiations in Brussels, lively debates in the UK Parliament, two parliamentary elections and repeated extensions of the withdrawal period [2] - Brexit has actually become a reality: Since 1 February 2020 the UK is officially no longer a member of the EU.

For private international law - as for all legal fields that are dominated by European law - this marks a turning point. In fact, after two decades of integration the many regulations which the European legislature has adopted to improve judicial cooperation in civil matters, will cease to apply in the UK once the transition period provided for in the Withdrawal Agreement expires [3]. By the same token they will cease to apply in the remaining Member States in relation to the UK if and to the extent that they do not cover cases involving third states. The pressing question, therefore, is: What will happen then? Which provisions will replace the current European framework for cross-border cases involving the UK, notably the Rome I Regulation [4], the Rome II Regulation [5] and the Brussels Ia Regulation [6]?

Unfortunately, discussions about this question and, hence, the future of private international law post-Brexit have not even begun, at least not on the political level. The Withdrawal Agreement [7] focuses on Brexit as such and does not comment on the post-Brexit relationship in private international law [8]. The same holds true for the Political Declaration that accompanies the Withdrawal Agreement [9] as well as for all other publications and official statements issued by the EU. In fact, Brussels has - to this date - cautiously refrained from addressing publicly any of the many private international law issues that will now have to be discussed. The UK, in contrast, has been circulating ideas and suggestions about the future relationship in private international law since 2017 [10]. In addition, it has adopted a number of statutory instruments dealing with issues of choice of law, jurisdiction and recognition and enforcement over the course of the past year [11]. At least when it comes to private international law it, therefore, seems that the UK is better prepared than the EU.

The following contribution takes this finding as an opportunity to take a closer look at the future relationship between the EU and the UK in private international law. It starts with a brief analysis of the British proposal to conclude a bespoke bilateral agreement with the EU (infra, II.) and then goes on to review the British plans for the - not so unlikely - case that no such agreement can be negotiated (infra, III.).

II.

Plan A: A Bespoke Bilateral Agreement

British efforts to start a discussion about the future of private international law date back to 2017. At that time, shortly after the negotiations about an orderly withdrawal of the UK from the EU had begun, the (former) UK government published a series of “Future Partnership Papers”. Two of these papers dealt with issues of private international law [12]. And they made clear that the then UK government intended to build “a new, deep and special partnership with the European Union” [13] closely reflecting “the substantive principles of cooperation under the current EU framework” [14]. In another paper, published in September 2018, the (former) UK government went on to detail its vision for the “new, deep and special partnership” and suggested to negotiate a tailor-made bilateral agreement with the EU containing a “coherent package of rules on jurisdiction, choice of jurisdiction, applicable law and recognition and enforcement of judgments in civil, commercial, insolvency and family matters” [15]. The government also suggested to build the envisioned bilateral agreement on “the principles established in the Lugano Convention and subsequent developments at EU level” [16] and “the long history of cooperation in this field based on mutual trust in each other's legal system” [17].

Following its submission, the proposal of a new bilateral agreement for private international law based on the acquis communautaire was discussed in the literature. But it never really received much political attention. In addition, the UK government responsible for the proposal resigned in summer 2019 and a new government under the leadership of Boris Johnson came into office. This new government has - to this date - not publicly commented on the idea of a bilateral agreement for private international law. As a consequence, it is largely unclear whether it is still on the UK's political agenda. But assuming that it is, what would be its advantages and disadvantages? And what would be its chances of success?

It goes without saying that a new bilateral agreement for private international law would hold a number of advantages for both the UK and the EU. In particular it would provide legal certainty for commercial parties and, hence, establish the legal infrastructure necessary to engage in mutually beneficial cross-border trade. In addition, it would provide a chance to organize a smooth transition to a new legal regime similar or - ideally - identical to the one that is currently in place. Nonetheless it is not clear whether the EU would be willing to enter into negotiations about a bilateral agreement for private international law [18]. In fact, the EU might not be willing to give the UK any privileged position as compared to other third States. For one it has always been the EU's position that the UK shall not be allowed to “pick cherries” and to take from EU membership what it likes while dropping what it does not like [19]. And for another the EU might be concerned that a bilateral agreement with the UK would increase the already existing fragmentation of private international law [20]. Take, for example, the rules on jurisdiction. Member State courts currently have to choose between four different legal regimes depending on whether the case has a relationship with an EU Member State, with a Lugano Convention State, with a State which is a party to the Hague Choice of Court Convention or with some other (third) State. Adding a bilateral agreement that regulates the relationship with the UK would require courts in EU Member States to apply five different legal regimes to determine whether they are internationally competent to hear a case. Needless to say, that this would not make private international law more accessible in practice.

Problems, however, will also arise if the EU is generally willing to enter into negotiations about a new private international law treaty with the UK. Leaving aside all issues of substance that will eventually - and unavoidably - have to be discussed, a new bilateral agreement covering aspects of choice of law, jurisdiction as well as recognition and enforcement would need to establish a mechanism for resolving disputes about its interpretation. And while the EU would certainly want the CJEU to play a prominent role in this regard, the UK would certainly refuse to give the CJEU any form of jurisdiction. In fact, the former Prime Minister, Theresa May, stressed time and again that she wanted to “bring an end to the direct jurisdiction of the CJEU” [21]. And there is virtually no hope that the current - or any future - UK government would take a less strict approach. A new bilateral agreement would, therefore, require a solution that is able to bridge the diverging positions. But where could that solution come from?

A number of authors [22] as well as the (former) UK government [23], have suggested to look to the Lugano Convention of 2007 [24]. It regulates the relationship between the EU Member States on the one hand and Switzerland, Norway and Iceland on the other. As regards the question of interpretation, Article 1(1) of Protocol No 2 to the Convention [25] requires the courts of all Contracting States, including the courts of non-EU Member States, to “pay due account” to the principles laid down by any court of a Contracting State as well as the CJEU. In addition, Article 3 of Protocol No 2 allows the courts of Contracting States which are not EU Member States to submit statements of cases or written observations to the CJEU if the court of an EU Member State asks the CJEU for a preliminary ruling on a question relating to the interpretation of the Lugano Convention. Protocol 2, thus, goes a long way to ensure that CJEU case law - without being binding in a strict sense - is respected in non-EU Member States. It, therefore, might provide for an acceptable - even though not perfect [26] - solution for the post-Brexit relationship between the EU and the UK [27].

But even if the Lugano solution - or some modified version of it [28] - can be agreed one problem will remain: negotiation of a new treaty will be time-consuming. Considering how many years it took to negotiate the existing EU instruments - and considering how many other issues will require regulatory attention - chances are that no such treaty can be agreed before expiration of the transition period provided for in the Withdrawal Agreement (or any possible extension) [29]. As a consequence, negotiation of a new bilateral agreement seems to be a - if at all - a long-term solution.

III.

Plan B: Unilateral application of EU law and adoption of international treaties

The preceding analysis shows that it is at best unclear whether the EU and the UK will eventually agree on a bespoke bilateral agreement for private international law. In any event it is very unlikely that any such agreement will be ready to enter into force once EU law ceases to apply in the UK. What will happen in this case? Which provisions will take the place of the current European provisions? According to the various position papers published in 2017 and 2018 the UK will pursue the following strategy: It will apply some EU instruments unilaterally. And it will ratify a number of international treaties. For all remaining issues it will (have to) reactivate the traditional rules of the common law.

1.

Unilateral application of EU instruments

Unilateral application of EU instruments is the dominant strategy of the UK to avoid uncertainty following the expiration of the transition period. In fact, according to the European Union (Withdrawal) Act 2018 [30] as amended by the European Union (Withdrawal Agreement) Act 2020 [31] EU-derived domestic legislation as well as direct EU legislation that was effective in the UK immediately before 1 February 2020 will continue to have effect once Brexit becomes fully effective [32]. Unilateral application, however, does make little sense with regard to jurisdiction as well as recognition and enforcement of judgements [33]. Why should the UK recognize choice-of-forum clauses in favour of Member States courts on the basis of the Brussels Ia Regulation if Member States courts will recognize choice-of-forum clauses in favour of UK courts only according to their - at times rather restrictive - national laws? And why should the UK (automatically) recognize and enforce judgments from EU Member States if Member States will recognize and enforce UK judgments only if the requirements of their national laws are met?

Against this background it does not come as a surprise that the UK plans to limit unilateral application of EU law to the Rome I and Rome II Regulation while excluding the Brussels Ia Regulation (with the exception of the provisions relating to consumer and employment contracts) [34]: both instruments do not rest on the principle of reciprocity. And since both instruments enjoy universal application, they will also be applied by Member State courts in cases relating to the UK after expiration of the transition period [35].

When it comes to issues of choice law, unilateral application will, therefore, go a long way to safeguard the status quo which is good for both the EU and the UK. Nonetheless it comes with problems. The first relates to interpretation. Unilateral application of the Rome I and Rome II Regulations can only ensure long term uniform application - and hence legal certainty - if the UK also follows or at least “pays due account” to ECJ decisions along the lines of, for example, the Lugano Convention of 2007. However, upon expiration of the transition period, UK courts will only be under a very limited obligation to do so. In fact, according to the European Union (Withdrawal) Act 2018 only lower UK Courts will be required to decide any question as to the validity, meaning or effect of any retained EU law in accordance with any EU case law and any general principles of EU law in force before 1 February 2020 [36]. The Supreme Court, in contrast, will not be bound to follow any ECJ case law [37]. And no UK court will be bound to follow ECJ case law rendered on or after the day of Brexit [38]. As a consequence, it is unclear, whether UK courts will systematically apply the Rome I and Rome II Regulations as interpreted by the ECJ and, hence as applied in the remaining Member States [39]. Another problem is related to the first and concerns a potential reform of the Rome I and Rome II Regulations. Clearly, the UK will not, at least not automatically, adopt any changes and amendments it did not have a right to vote on [40]. Against this background, chances are that unilateral application of the Rome I and the Rome II Regulations will not lead to complete uniformity in the long run [41].

2.

Ratification of international treaties

In addition to the unilateral application of EU instruments the UK government plans to ratify existing international treaties dealing with issues of private international law, notably the earlier mentioned Lugano Convention of 2007 and the Hague Convention on Choice of Jurisdiction Agreements of 2005 [42]. Both Conventions regulate issues of international jurisdiction, recognition and enforcement and are currently applicable in the UK by virtue of its EU membership. Since their binding effect will, hence, cease upon expiration of the transition period [43], ratification of the two Conventions by the UK in its own right will help to ensure a smooth transition from the current to the future legal regime in private international law.

This finding, however, should not lead us to believe, that all would be fine and well then. Take for example the Lugano Convention. Here the first problem is that the UK cannot just sign. According to Article 70 I lit. c) it will have to go through a fairly strict vetting procedure [44]. And all other Contracting States - including the EU - will have to agree to the UK's accession [45]. More problematic, however, is the Convention's substance. After all, it was never aligned with the recast Brussels Ia Regulation which entered into force in 2015 and introduced, among others, new lis pendens rules and the direct and immediate enforcement of judgments of other Member States. The Lugano Convention will therefore, ensure continuity only in relation to Switzerland, Norway and Iceland, while it will not compensate the loss of the Brussels Ia Regulation in relation to the remaining EU Member States [46].

The situation looks somewhat better with regard to the Hague Choice of Court Convention of 2005. According to Article 27 (1) and (3), it allows any state to accede - without the consent of the other Contracting States and without complying with further conditions. The UK can, therefore, simply sign the Convention and has expressed its intention to do so [47]. However, when it comes to the substance, the Hague Choice of Court Convention - like the Lugano Convention - is far from being a full substitute for the Brussels Ia Regulation [48]. In fact, since its scope of application is limited to (certain) choice of forum clauses, it only covers a small part of the issues regulated by the Brussels Ia Regulation [49]. The UK is, therefore, most likely to also accede to the Hague Judgments Convention that was adopted in summer 2019 and that regulates issues of recognition and enforcement of foreign judgments [50]. However, since the new Convention does not contain (direct) rules on international jurisdiction it will - like the Lugano Convention and the Hague Choice of Court Convention - only be a partial substitute for the Brussels Ia Regulation [51]. In the absence of a global convention on jurisdiction, recognition and enforcement of foreign judgment, the ratification of existing international treaties will, therefore, never result in a complete and coherent legal framework for issues of private international law.

IV.

Conclusions

There is no denying the fact that Brexit will create disruptions on both sides of the Channel. In private international law these disruptions will be particularly severe if the EU and the UK do not manage to agree on a new regulatory framework before expiration of the transition period provided for in the Withdrawal Agreement (or any possible extension) [52]: Issues of choice of law, jurisdiction and recognition and enforcement will then be governed by a complex patchwork of provisions which do not keep pace with the current level of integration. It is, therefore, urgently recommended that the EU and the UK pull themselves together to find solutions that will - at least in the long-term - ensure legal certainty for parties that engage in cross-border trade. The EU in particular should rather sooner than later get involved and play a more active role in the building of a new post-Brexit framework for private international law. This holds true even though the best available option - the negotiation of a new bilateral agreement - will be a step back when compared to the status quo. But life is not a bowl of cherries. And sometimes you only get to choose between plague and cholera.