Implications of Brexit - Challenge and Opportunity in 2019
23 January 2019
Perhaps 2019 will be the year where dull detail has its moment in the sun.
In the UK, Ireland and the wider EU, it must be clearer to more people than ever before that it is the details that matter, not speeches about sovereignty or “taking back control”.
As a lawyer, I am of course delighted about this. After all, we get hired to negotiate the seemingly dull detail in a contract or to fight about the dull detail when it transpires that the agreed detail no longer suits the plans or aspirations of one party or another.
Brexit will lead to so many detail changes that it is impossible to accurately predict its impact on economies and societies and their politics. It is instructive though to take just one change and see how it might play out. The one I’m going to take may seem to a layperson to be as dull as a grey day in Dublin.
For about a century, the default choice of governing law for international contracts was the law of England. And the default location to litigate disputes regarding those contracts was the English courts. While New York law and international arbitration made some headway into this hegemony over the years, the prevalence of the choice of English law and Courts to govern international contracts of all types remains widespread.
This seemingly small detail has had persistent large and small effects. The large effects include making international trade and expansion slightly easier for English entities or, to a lesser extent, for entities from jurisdictions which had an English law heritage. It also reinforced the pre-eminence of English as the language of trade. It also assisted in the projection of English influence and values in the wider world, particularly in a business context. Amongst the smaller effects were the generation and sustaining of a large, and premium, legal services industry in England. It is therefore unsurprising that the policy of promoting the use of English law and courts has been an active policy of UK Governments for decades and that policy is supported by real investment.
However, Brexit fundamentally undermines this policy because a key rationale for parties to choose the English courts to decide their disputes has disappeared. And if you are not choosing English courts, it seems illogical to choose English law. The rationale which has disappeared is the confidence that a dispute over your contract will lead to a judgment automatically enforceable throughout the EU. Such enforcement is underpinned by EU regulation and there is clearly absolutely no certainty, and very little comfort, that this will continue after whatever form of Brexit occurs.
This detail really matters. If you are looking for leverage to resolve a dispute and you can say that you don’t care about a judgment because it will be a useless piece of paper outside the UK, then you have real leverage in negotiations. Therefore, increasingly, international parties are choosing, and will continue to choose, the courts of other member states to decide on disputes and if they are choosing another country’s courts, they will likely choose that same country’s laws.
As you would expect, other member states see opportunity in the UK’s difficulty for broadly similar reasons to those that lead UK Governments to support the use of English law and courts for so long. Both France and Germany have established courts that will hear cases in English and decide on disputes governed by English law but will do so in France and Germany respectively so those judgments will be enforceable throughout the EU. And Ireland has now joined the scramble.
Ireland has a real advantage over France and Germany because the Irish legal system is based on English common law and is therefore familiar to likely users. Obviously, we are also native English speakers and we have a developed and sophisticated legal community and courts system. So the Irish Government is now promoting the use of the Irish courts and Irish law as an alternative to the UK. This policy will need to be underpinned by a commitment to spending the small sums routinely needed to ensure an international standard of law and process in terms of modernity, speed, predictability and resource but the amounts are negligible given the sustainable benefits that flow to a country if it manages to capture some degree of pre-eminence in the use of its law and courts in international trade.
So this small detail change could negatively impact on the UK and positively impact on other member states for decades. It will happen slowly; it may not be noticeable without historical perspective but it is just one small consequence of changing the dull detail.
The content of this article is provided for information purposes only and does not constitute legal or other advice.