Brexit.it finally happened - what you need to know

The UK’s withdrawal from the European Union, the labyrinthine process with the pithy name of “Brexit”, approached some degree of finality as the transition period ended on 31 December 2020. That was the date that marked Britain’s formal withdrawal from the EU after 47 years.  

Regardless of the divergent views on the merits of that decision, there should at last be some common relief at the prospect of this drawn out process is now finally approaching a conclusion following the UK referendum which took place in June 2016.

It’s hard to think of any other political decision in our lifetimes which has generated so much discussion without any understanding or knowledge of what its effects may be. And whilst the future is uncertain, now is a good time to summarize the issues that will affect the maritime community.

What has not changed as a result of Brexit?

UK law as we know it is totally unaffected by Brexit. Statute and common law are unchanged, and any EU directives and regulations which were brought in prior to withdrawal are now incorporated into UK legislation.

By way of an example, the EU regulations on contractual and non-contractual matters (Rome I and Rome II) are part of domestic law by way of statutory instruments. The English courts will continue to apply the Rome I and Rome II regime when deciding questions of governing law. In the absence of an express agreement, the governing law is that of the country most closely connected to the dispute.

Other notable examples include the Environmental Damage Regulations and the International Convention on Civil Liability for Bunker Oil Pollution which are also implemented into UK law.

London arbitration furthermore, as shipping’s most popular forum, should be unaffected. UK statute which governs London arbitration (under the Arbitration Act 1996) remains the same as does the common law, and enforcement of London arbitration awards under the New York convention is also unaffected.     London as the international dispute resolution centre, with 1500 more arbitrations last year than its closest rival Singapore, is expected to continue to dominate.

The UK is still party to the International Maritime Organization (IMO), so no change there either, although the UK is no longer required to toe the EU line in any decisions going forward.

What has changed?

There have been some changes to financial passporting, which is or the process by which one company in the European Economic Area (EEA) can automatically do business with another EEA company. For that reason, Lloyds of London has its Brussels subsidiary and the UK Club will do certain business from its Rotterdam office.

Brexit also means that the UK is no longer part of the EU sanctions regime, in which it previously took a leading approach. The UK will prepare its own sanctions list, and whilst we can expect some overlap between the two lists and hopefully a degree of cooperation, it will be necessary to check both lists separately to be fully confident of your position in relation to potential trading sanctions in Europe.

The UK has left the European Maritime Safety Agency, and an independent set of rules and safety, security and sustainability will follow, presumably from the UK Maritime and Coast Guard Agency.

A symbolic point, frequently referred to during the Brexit campaign, was the role of the European Court of Justice as the final say in UK law. It will no doubt please the Brexiteers that the UK Supreme Court is again the highest court in the country and cases no longer can be appealed or handed over to the European Court of Justice for a final decision.

Lastly, one of the most significant changes which will impact English law relates to high court judgments and their enforcement. The Recast Regulation under which the rules of jurisdiction and enforcement of court proceedings were harmonized falls away. So it will not now be as straightforward to enforce English High Court decisions across Europe, and that may well impact the value and desirability of English High Court awards, but will not affect London Arbitration Awards.

As the Recast Regulation no longer applies, the UK is seeking to rejoin the 2007 Lugano Convention which is the Recast Regulation’s previous iteration and would broadly have the same effect. In order to rejoin Lugano, permission is needed from all current members, and the UK’s request to join is still pending. The European Commission has advised that there are clear reasons not to agree and the trade deal recently negotiated with Europe did not deal with this issue.

If the UK is to accede to the Lugano convention, it would make things far easier for enforcement of English High Court awards. The UK courts would still not be bound by the decisions of the European Court of Justice, with the sole requirement being to take them into consideration only.

The other effect would be to bring back the ‘Italian Torpedo’ – the process by which the first court seized of a dispute will decide in the first instance whether it has jurisdiction, regardless of any express agreements on jurisdiction. The tactic was notoriously used oppressively in the past by parties deliberately commencing in slower jurisdictions in order to delay matters, with Italy being the preferred destination for that more unhurried approach.

If accession to Lugano is not granted, the UK will have to fall back on the Hague Convention for enforcement, and where things fall out of the scope of that, the UK’s own domestic laws and conflict of law rules to determine questions of jurisdiction and enforceability of judgments. Things may lack a degree of efficiency in the first instance, but one interesting upshot might be the return of the anti-suit injunction in court proceedings. That injunction, used to prevent parties commencing in jurisdiction X when there is an agreement to proceed in jurisdiction Y, was unavailable under the Recast Regulation and the Lugano Convention, but may now again become a feature of English Law litigation. The lawyers at least therefore have something to be happy about.

For more information please get in touch with Oliver Goossens in our New Jersey office who will be pleased to assist you.