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The long- and short-term impacts of Brexit on the UK legal industry

October 23, 2019

By all appearances, the UK legal industry is poised for a dramatic shift. Not only is the Brexit decision likely to lead to more litigation generally, but because several key regulations will no longer apply to the UK, there are also questions surrounding the future of judgment enforcement and jurisdiction.

Contract disputes

The changes that will be wrought in Britain from leaving the EU ostensibly opens the door for increased activity relating to commercial contracts that are subject to force majeure clauses. A force majeure clause excuses a party or parties from performing their obligations under a contract following an event (or events) outside of their control.

As just one example of how this might play out in practice, Brexit could result in import taxes being imposed by EU Member states on UK imports (or vice versa), which would likely increase the price of a good for the importer and end purchaser. Depending on when a contract was negotiated, a party could argue that both parties did not foresee such taxes when they entered into the contract—and therefore one of them could invoke the force majeure clause to bring the contract to an end without incurring liability. The question as to whether the imposition of new taxes as a result of the UK leaving the EU constitutes a force majeure is an issue that will almost certainly be decided by the courts.

Jurisdictional uncertainty

As trade among EU member states continues to increase, a growing number of commercial contract disputes involve an EU element. Under the Brussels Regulation and the Rome I and Rome II Regulations, jurisdiction within Europe is based on the principle that all European courts are competent to determine jurisdiction amongst themselves and so, with limited exceptions, a court in one EU country will not attempt to prevent another court from determining questions of jurisdiction and will stay its own proceedings in favor of another European jurisdiction that is better placed to hear the dispute.

If the UK leaves the regime of the existing regulations without replacing them with something similar, then it would be treated by member state courts as a country outside this framework, which would have two implications. First, it may be harder for parties to ensure that the case is heard in the UK. Second, claims heard in an EU member State would likely require permission of the court (which incur additional cost and add time to the process).

Enforcement of court judgments

Under the Brussels Regulation, English judgments are currently enforceable in all EU Member States. When the UK leaves the EU, however, these regulations will no longer apply, which means that—unless other arrangements are made—UK advisers face the prospect of adhering to the domestic enforcement rules of each of the 27 EU member states as they apply to non-EU judgments.

While there is the possibility of the UK negotiating its own new multilateral treaty to ensure reciprocal enforcement rights with the EU, this is unlikely to be a priority in the short- or medium-term, as issues such as immigration and access to the single market take precedence.

The role of litigation finance post-Brexit

Litigation finance has proven to be an efficient tool for law firms and businesses needing to offset risk or cover legal costs—and is especially valuable in times of increased litigation activity. For issues related to the enforcement of court judgments, Burford is uniquely positioned as the only provider with an in-house judgment enforcement team, equipped to navigate enforcement regulations around the world. As the legal industry continues to evolve post-Brexit, we are confident that it will be an even more useful solution.