Ann Henry: Post-Brexit pinch points in UK-Ireland trade disputes
Pinsent Masons partners Ann Henry and Jim Cormack QC address how UK-Ireland trade disputes will work following the end of the transition period and how vital this is for many companies.
Brexit as an event will cause disputes related to trade between the UK and Ireland, and the Brexit process will make those disputes more complicated in three main areas: the service of proceedings; jurisdiction, and enforcement.
UK and Ireland trade volumes are high: UK exports to Ireland in 2019 were worth £38 billion (€42bn), and Irish exports to the UK were worth £24bn (€27bn). Understanding how disputes will work following the end of the transition period on 31 December 2020 will be vital for many companies.
New customs checks and paperwork; delays, and rule of origin issues will disrupt many supply chains and will lead to disputes. The most important issues to understand when engaging in dispute resolution after the transition period are: the service of court proceedings between the UK and Ireland; determining which country’s courts will have jurisdiction, and enforcing judgments in the other country concerned.
Serving proceedings on a company in the UK from Ireland or vice versa has been until now governed by the EU Service Regulation, which sets out a fairly streamlined process. For example, in England & Wales there is a process in many cases of seeking the court’s permission to serve English court proceedings on a defendant in another jurisdiction, but under the EU regime it has generally been unnecessary to seek that permission for another EU member state such as Ireland. The Regulation also set out the framework for actually effecting service between the UK and Ireland. Subject to some limited transitional arrangements, the Regulation falls away for the UK on 31 December 2020.
Service of court proceedings between the UK and Ireland from 1 January will take place under a different international instrument, the Hague Service Convention. In many cases this will be similar to the EU Service Regulation, but there are differences. In England and Wales it will be necessary more often than before to seek the court’s permission to serve English court proceedings in Ireland, although it is likely that if the dispute arises out of a contract which contains an English jurisdiction clause, permission will not be needed.
The process of service under the Hague Service Convention generally involves a central authority, for example the Master of the High Court in Ireland or the Foreign Process Department at the High Court in England. While this is a well-established process, in many cases it will be simplest and quickest to be able to serve on a suitable agent within the jurisdiction where the proceedings are started; so, for example, to serve English court proceedings on an Irish defendant by serving on solicitors in England and Wales who have been authorised by that Irish defendant to accept service; or to serve Irish proceedings on solicitors in Ireland who have been authorised by UK defendants to accept service.
Specialist advice is needed to make sure that service is effected validly and efficiently according to the precise jurisdictions involved and the facts of each case. Parties entering into new contracts should consider agreeing service arrangements in contractual service of process clauses. The position on this is different in Scotland, highlighting the need for specific advice on service in the circumstances of each contract and dispute.
Which courts have jurisdiction?
Until now the Brussels Recast Regulation decided whether an Irish court or court of the relevant part of the UK should deal with a dispute which arises between Irish and UK parties. Subject to some transitional arrangements, in essence for ongoing proceedings, the Brussels Recast Regulation will no longer apply after 31 December.
In both Ireland and the UK new proceedings will be governed by rules found in the common law of each jurisdiction and the Hague Convention on Choice of Court Agreements (Hague 2005). Hague 2005 applies to contracts which contain an exclusive jurisdiction clause and provides for a substantial measure of respect for such jurisdiction clauses. Jurisdiction clauses are also widely respected and upheld under common law principles in Irish and English law.
As a result, where there is an exclusive jurisdiction clause in favour of the Irish or UK courts, that clause is likely to be upheld whether proceedings are brought in the UK or Ireland. However, we may see an increase in jurisdiction challenges, particularly as the new regime beds in. For example there is an unresolved debate as to whether Hague 2005, which the UK will re-join in its own right from 1 January 2021, will apply to jurisdiction clauses which were concluded before that date. While the UK courts will apply Hague 2005 to such clauses, as long as they were entered into after 1 October 2015, when the UK originally became party to Hague 2005 through its EU membership, the approach of the Irish courts remains uncertain. The Irish Courts will have to take into consideration the guidance from the European Commission to the effect that pre-2021 jurisdiction clauses are not covered. There are also wider grounds at common law for a national court to take or decline jurisdiction.
Looking further forward, it is possible that the UK and EU will agree that the UK should be allowed to re-join the Lugano Convention 2007 as an independent contracting party. Until now, the UK has been a member of the Lugano Convention through its EU membership. The UK re-joining Lugano would have benefits in terms of allocation of jurisdiction between the UK jurisdictions and Ireland as it is a similar regime to the Brussels Recast Regulation, albeit less robust in certain respects. However, it remains unclear whether the EU will allow the UK to become a party to the Lugano Convention.
Enforcement of judgments
Cross-border enforcement of judgments between Ireland and the UK has until now also been governed by the Brussels Recast Regulation. This provides for enforcement of judgments essentially ‘as of right’ between EU member states.
While the Brussels Recast Regulation generally ceases to apply to enforcement of judgments in or from the UK on 31 December, in practice the transitional arrangements under the EU/UK Withdrawal Agreement mean that the existing regime will continue to apply to the enforcement of judgments between the UK and Ireland for some considerable time to come. This is because the Brussels Recast Regulation will continue to apply in cases where proceedings were commenced before 11pm on 31 December 2020.
For cases begun after that date enforcement will take place under a combination, again, of common law rules and Hague 2005. These rules do provide for enforcement of foreign judgments, both in the UK and Ireland, but the procedure is likely to be more costly and in some cases less reliable than under the Brussels Recast Regulation.
This is because, for example, Hague 2005 facilitates the enforcement of judgments given by a court specified in an exclusive jurisdiction clause, but is a less robust regime than the Brussels Recast Regulation. The Irish courts may not apply it to UK judgments given by a UK court specified in a pre-1 January 2021 jurisdiction clauses as they may choose not to apply Hague 2005 to those clauses.
Hague 2005 also has subject matter limitations; it cannot be used to enforce interim remedies such as interim injunctions, and it contains wider grounds for refusing enforcement.
The common law rules both in Ireland and the UK permit enforcement of foreign judgments, but the requirements are narrower than under Brussels Recast. In both Ireland and England, for example, for a foreign judgment to be enforceable in common law: it must be for a sum of money, be final and conclusive and be given by a court of competent jurisdiction; parties must commence fresh legal proceedings, essentially suing on the judgment as a debt, and there are wider grounds for refusing to recognise and enforce a foreign judgment than under the Brussels Recast Regulation.
Again, if the UK could become a party to the Lugano Convention, that would have benefits in terms of the enforcement of judgments between the UK and Ireland as it is a similar regime to the Brussels Recast Regulation, albeit less robust in certain respects.
The uncertainty in this area makes it important for parties entering future contracts to consider carefully where they wish their disputes to be heard and if and where they may need to enforce judgments.
Ultimately, in most cases the issues which arise from Brexit are likely to amount to procedural delays rather than substantive issues in the disputes. . Therefore, in some cases arbitration may be a suitable alternative option to litigation. Arbitration awards are readily enforceable under the New York Convention on the Recognition and Enforcement of Arbitration Awards, to which the UK and Ireland are both parties, and which is unaffected by Brexit.
What is essential, however, is that specialist advice is sought where disputes between UK and Irish parties arise, particularly in the early post-transition period where some uncertainties will persist.