Brexit: Choosing English law as a governing law

(Please read Brexit Implications: Introduction & General before this section)

The first question to be addressed in this respect is whether the UK's transition out of the EU would compromise the continued viability of such a choice as a matter of substance. At a very general level the answer to this would seem to be “no” as many of the advantages of English law (such as its commerciality, predictability and depth of judicial precedent) are not contingent upon EU law (although the drafting of contracts may need to consider the potential for change in the event that particular EU Laws, concepts or definitions are relevant to the situation). These points are considered in more detail here.

The second issue is whether the UK's transition out of the EU will compromise the enforceability of a choice of English law. In other words: can parties be happy that it will continue to be given effect?

This issue arises if a matter will fall to be litigated before the UK (including English) or other EU Member State courts. Before EU Member State courts (excluding Denmark, which has opted out of Rome I and Rome II, but applies the Rome Convention) applicable law in contractual and non-contractual matters is currently governed by, respectively, the Rome I and Rome II Regulations and both, subject to limited exceptions, require those courts to give effect to the parties’ choice of law.

In so far as the English courts are concerned (for example where a choice of such courts has been coupled with a choice of English law), they will continue to apply those rules for the duration of the Transition Period and, in addition, there are separation provisions in the Withdrawal Agreement by which, in respect of contracts entered into (and tortious events occurring) before the end of the Transition Period, they will be bound to continue to apply those instruments even after the end of the Transition Period (Article 66). Beyond the Transition Period and those separation provisions, even if further retention by the UK were not agreed as part of any future UK/EU relationship the UK Government has confirmed that the content of Rome I and Rome II will be enacted into domestic law - which can work as operation of these applicable law statutes does not fundamentally depend on reciprocal treatment from other States (see for example, its September 2018 paper “Handling civil cases that involve EU countries if there’s no Brexit deal" - click here for more). A UK SI has therefore also been made which will preserve those instruments (subject to a few domesticating amendments) and which would enter into force accordingly at the end of the Transition Period (the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (EU Exit) Regulations 2019) (under UK "no-deal" SIs the end of the Transition Period will be known as "Implementation Period Completion Day" and "Exit Day" in those SIs (i.e. the day which they are stated to apply from) will be amended accordingly by the UK act implementing the Withdrawal Agreement (see the UK Withdrawal Agreement Bill)).

Accordingly, in so far as the English courts are concerned, such choices would continue to operate within the same regime as before.

In so far as other EU Member State courts are concerned, Rome I & Rome II would still apply in those Member States. For the duration of the Transition Period they will treat the UK as if it were an EU Member State, but even when that comes to an end the parties’ choice of English law would be given effect under the same regime because the fact that the applicable law may be that of a non-EU Member State does not mean that those instruments cease to apply (Rome I – Article 2, Rome II – Article 3).

Finally, although Rome I is likely to continue unaffected, in assessing contractual relationships be aware that wider changes to structures prompted by Brexit can increase the potential for certain of its provisions which can bring in the rules of a non-chosen law, to apply. In particular, if restructuring of transactions in the light of Brexit results in a situation wholly local to the EU, or a particular Member State then be aware of Articles 3(3),3(4). Similarly if, say, English law is chosen but matched with an EU Member State court then Article 9(2) (overriding mandatory rules of forum) and 21 (public policy of forum) may need to be considered (note that the continued use of English jurisdiction clauses in situations where they would otherwise be first choice, and the viability of certain alternatives, is considered more generally here).