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22 June 2017

Bruegel: Can EU actors keep using common law after Brexit?


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English common law is the choice of law for financial contracts, even for parties in EU members with civil law systems. Parties will be able to continue using English common law after Brexit, but how will these contracts be enforced?


English common law is the preferred choice of law in commercial and financial contracts. This reinforces London’s position as a global center for international dispute resolution. With Brexit, the UK’s position in the European Union’s legal landscape will change. However, these changes will not necessarily challenge the supremacy of English common law.

At the moment UK court rulings are enforceable across the EU. The EU has a common judicial area governed by a regulation known as Recast Brussels I or the Brussels Regime. This regulation sets out a common set of rules governing which courts have jurisdiction in civil and commercial matters in the EU. Recast Brussels I creates a common judicial area, ensuring mutual recognition of court decisions. Thus a decision in one member state is enforceable throughout the EU.

When the UK exits the EU, Recast Brussels I will no longer apply to the UK, and as such decisions made in UK courts will not be automatically executed in other EU member states. This means that additional arrangements will need to be made to achieve enforcement and recognition in individual EU member states of legal decisions made in UK courts. This is currently the case with regard to US judgements and their enforcement in EU member states.

The EU also has rules that let contractual parties choose the law under which they draw up contracts. In addition to Recast Brussels I, the EU is governed by a legal framework known as Rome I. This set of laws gives the parties the freedom to choose the law to govern their contractual obligations. In contrast to Recast Brussels I, participation in Rome I is not exclusively for EU members. That is, when the UK exits the EU, it will exit both the Recast Brussels I and Rome I regulations. But Rome I can be adopted back into UK domestic law by an Act of Parliament.

This means that parties to a contract will have little difficulty choosing the law that will govern their contract – EU parties will still be able to draw up contracts under English common law if they wish to. However, if cases are settled in UK courts, it will no longer be certain that these decisions will be recognised and enforced in other EU countries. Access to a common judicial area could be limited, and negotiating a post-Brexit legal agreement on mutual recognition and enforcement of judgements between the UK and EU might prove to be a lengthy and uncertain process. [...]

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