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This article explores the impact of Brexit on disputes which arise between agents and their principals. For many, Brexit will bring no change. Indeed, there will be no change for agents and principals already involved in court proceedings at the end of the transition period, or for parties who are both based in the UK.
The impact of Brexit is on agents and principals with cross border claims. Such claims may involve enforcement of a judgment in another jurisdiction.
Claims issued by agents against an EU based principal after 31st December 2020 will no longer be subject to the European framework of rules, as those rules ceased to apply at the end of the transition period.
The Trade and Cooperation Agreement, which took effect on 1st January 2021, contains no provision for cross border cooperation in matters of civil justice.
Legislation which originated from Europe (which we refer to as EU law) and which applied to the UK at the end of the transition period has been incorporated as a new body of law known as "retained EU law. This includes the Commercial Agents (Council Directive) Regulations 1993. This means that UK based agents will still have their agencies governed by the Regulations where they are selling goods in Great Britain, but jurisdiction and enforcement of judgments may be affected in the event of a claim.
If there is a written agency agreement which specifies that English law will govern the agency agreement, that choice of law will continue to be upheld. That is because the rules which applied before Brexit to determine which law would apply to contractual and non-contractual obligations remain unchanged.
Unlike the rules which govern the applicable law, rules on jurisdiction have changed. The court with jurisdiction to hear a dispute can be different from the law which governs the contract.
Some agents will have a written agency agreement, and that agreement may contain what is called an exclusive jurisdiction clause – that is a clause within a contract whereby the parties have elected a particular court to determine any dispute. Such contracts will be afforded the protection of the Hague Convention on Choice of Court Agreements provided the chosen court is a court of a contracting state. English jurisdiction is a common choice. For parties whose contract specifies the English courts as having exclusive jurisdiction, parties can be certain that the English courts will determine their dispute.
However, there is uncertainty about whether the Hague Convention will apply to exclusive jurisdiction clauses entered into between 1st October 2015 and 31st December 2020. This was the period during which the UK was a party to the Hague Convention by virtue of its EU membership rather than in its own right. Agents should consider re-agreeing such clauses to ensure they are afforded the Hague Convention's protection in the event of a dispute.
If an agent's contract does not contain an exclusive jurisdiction clause, or the agent does not have a written agency agreement, the position is less certain.
If an agent issues a claim against an EU based principal, there are no rules for allocating jurisdiction when the claim is issued. The English common law rules will apply. This creates uncertainty and risk for agents when court proceedings look imminent. There is a possibility the English courts could exercise their discretion and reject jurisdiction on certain grounds, although this discretion is exercised very infrequently.
There is also the risk of what is known as parallel proceedings, which is where two sets of proceedings concerning the same dispute are issued in different jurisdictions.
Mutual recognition of judgments by EU member states no longer exists.
However, an agent who has a written contract containing an exclusive jurisdiction clause will be afforded the Hague Convention's protection. The English court's judgment will then be recognised and enforced in the EU in accordance with the provisions of the Hague Convention.
For agents without a written contract or contracts that do not contain an exclusive jurisdiction clause, enforcement will be governed by the state's national law where the judgment is being enforced. That will present procedural hurdles, will be more time-consuming and costly. Local law advice from the country in which the judgment is being enforced will need to be obtained.
There may also be grounds on which the principal can resist enforcement which would not previously be available under the European regime. Some EU member states already have laws which provide for the reciprocal recognition and enforcement of English judgments, but others do not, so an agent will need to seek country-specific advice on enforcement.
The UK has applied to join the Lugano Convention, which like the Hague Convention also deals with jurisdiction and enforcement of judgments. If the UK is permitted to join the Lugano Convention in its own right, all English courts' judgments will then be recognised in the EU, and there will be very little change as far as UK agents are concerned.
The unanimous consent of all contracting states is required if the UK is to join. The EU's position remains uncertain.
Agents can continue to effectively mediate disputes with their EU principals as there is no direct impact caused by Brexit on the English courts' powers in relation to mediation.
If an agent's contract contains an arbitration clause requiring the parties to refer any dispute to arbitration, that clause will remain effective. The recognition and enforcement of arbitration awards are governed by the New York Convention that the UK signed in its own right and not as an EU member state. Arbitration and the enforcement of arbitral awards are therefore not affected by Brexit.
Our expert team of Commercial Agency Solicitors can assist in all aspects of commercial agency law. We are always happy to have an initial no-obligation chat to help guide you in the right direction. You can contact us on 0161 941 4000 or you can email the Commercial Agency Team for more information.