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Legal aspects to consider in business following Brexit

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The UK Referendum will take place on 23 June 2016. Although the eventual exit route is hard to predict in the medium term there will be some European regime in place which would still affect the UK post Brexit.
Single market access is a key element in the trade arrangements between the England and Germany. Existing cross-border contracts have been governed for the most part by English law with reference to EU regulations, if and when applicable. Post-Brexit future trading relationships would consequently be entirely dependent on the nature of any agreement reached. German courts apply the same set of rules to determine the governing law of both contractual and non-contractual obligations in most commercial contexts, namely the Rome I and Rome II EU Regulations which require German court to respect party autonomy on choice of law subject to certain exceptions, regardless of whether the party is located within the EU or not. So for most English law contracts in force there will not likely be a direct impact. Exceptions may be IP or IT licenses and distribution or franchise agreements that may contain territorial restrictions that explicitly refer to the EU. These would likely need to be amended following Brexit, as would references to EU legislation to the extent it is no longer applicable.
English jurisdiction clauses have been included by commercial parties in German –English contracts, even when the German party has little or no connection with England. Following Brexit the litigation strategy would be affected for the English party when a dispute arises. The current rules on allocation of jurisdiction and recognition and enforcement of judgements in civil and commercial matters are included in the Brussels Regulation EU 1215/2015 („Recast“). It is unlikely that the UK would remain party to the Recast as the rules therein are predicated on reciprocity. Separately, the UK also is currently bound by the Lugano Convention 2007 („Lugano Convention“) as well as the Hague Convention on Choice of Court Agreements 2005 („Hague Convention“). The Hague convention will apply if an exclusive jurisdiction clause is stipulated in the contract, and where there is no intra EU matter. In such a case recognition and enforcement of an English judgement follows the regime set out in the Hague Convention. Litigation on non- exclusive jurisdiction clauses will be treated differently. An English judgement rendered on the grounds of non-exclusive jurisdiction clause may be enforced and recognised according to the Lugano Convention and/or the Brussels Convention, a predecessor of the Recast which the UK acceded to when it joined the EEC. The main difference (compared with the Recast) in respect of the recognition and enforcement of foreign decisions will be that the streamlined EU procedure will no longer apply and a national formal procedure to make the foreign decision enforceable in Germany will take its place. This would affect the usual recognition and enforcement progress. In practice, following a Brexit, the service of process will also be more complex as the English litigants may no longer be able to take advantage of the EU Service Regulation.

If the German contracting party was fearing that the English contracting party would bring a claim against it for breach of contract, in the context of exclusive jurisdiction and post Brexit it might quickly commence commercial proceedings with a „torpedo“ action in a court outside the agreed jurisdiction. This is because the helpful new proviso in the Recast that allows a court chosen in an exclusive jurisdiction to continue to hear proceedings, even if it is second seised, does not appear in the Convention, and the UK would therefore presumably be bound by these unreformed related action rules. For this reason a German party could also seek a declaration action in another court when a non-exclusive jurisdiction clause or even an asymmetric jurisdiction clause was agreed in the contract.

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