Brexit: Considering the impact of Brexit on the use of English governing law and jurisdiction clauses in cross-border commercial contracts

As the UK is in the transition period (the "Transition Period") under the EU/UK Withdrawal Agreement (the "Withdrawal Agreement"), parties to commercial contracts which would usually have been made subject to English law and/or a jurisdiction clause in favour of the English courts may well be concerned to know whether those choices remain viable. Although the UK/EU Withdrawal Agreement has come into force, this does not mean that the possibility of an outcome akin to a “no-deal” scenario has disappeared and, in that respect, the main issue that parties should be aware of is the potential impact on the future enforceability of English judgments abroad. In circumstances where this may be made problematic, parties may wish to consider their options.

Introduction and general

A governing law clause and, where the parties wish to resolve their disputes by litigation (as opposed to arbitration), a jurisdiction clause form key, but distinct, provisions in a cross-border commercial contract’s dispute resolution provisions. The former determines which law will be applied to the parties’ relationship, whilst the latter intends to ensure that the chosen court will hear the dispute (and, if exclusive, instruct other courts not to). English law is commonly chosen by parties to govern cross-border commercial contracts and any associated non-contractual claims. It carries various attractions such as its commerciality, predictability and depth of judicial precedent. Similarly, the English courts are a popular choice of venue because of , amongst other adjudicative attractions, the quality of judges, the breadth of commercial disputes heard in England and the speed at which the courts act.

Although many of these advantages will remain, it cannot necessarily be assumed that matters will remain exactly as before. This is because certain important statutes which govern such choices before the English, and EU, courts are instruments of EU law.

Until the end of the transition period under the Withdrawal Agreement (which started at 11pm (UK time) 31 January 2020 and, conservatively, should be assumed will end at 11pm (UK time) 31 December 2020) the current regime will largely remain in place in, and in relation to, the UK. But after that, and even in some cases before, it cannot just be assumed that things will remain exactly as before. Sensible contingency planning may therefore wish to take account of what might replace the current EU law instruments, whether that situation would be acceptable and, if not, what to do instead.

In this section we therefore consider how the UK's transition out of the EU may affect matters from the perspective of, first, choosing English law in a governing law clause and, second, choosing the English courts in a jurisdiction clause. Click on the respective topics in the left hand menu for more information.

We assume, in both cases, that the Transition Period is to apply on the timeframe set out above, and that the UK and EU27 do not agree any civil justice co-operation measures as part of a future relationship (as there can be no guarantee of this). We also assume that the parties are seeking to conclude a cross-border commercial contract in a context within which they are generally free to make such a choice. By contrast if, for example, any relevant EU law (or, in the UK, Retained EU law) would mandate a particular choice or outcome in this field (either now, or once the Transition Period is over) then more bespoke consideration of the potential issues arising from Brexit may be needed.