Client Alert

Brexit: Service Implications For Contracting Parties And Disputes

22 Jan 2019

The Brexit date of 29 March 2019 is fast approaching, and there is now a distinct possibility of the UK leaving the EU without agreed terms.  Our MoFo Brexit Task Force is coordinating Brexit-related legal analysis across all of our offices, and working with clients on key concerns and issues, now and in the coming weeks and months.  We are also continuing to provide MoFo Brexit Briefings on a range of key issues.  We are here to support you in any and every way that we can.

From a commercial contracting and disputes perspective, Brexit has the potential to impact four key areas: jurisdiction; recognition and enforcement of judgments; service; and governing law.  This update note focuses on the third of these areas – service.  You can find our update notes on the other three areas here.

As with other areas, it is difficult to predict what the exact impact of Brexit will be on these matters until we know what post-Brexit model and terms the UK and the EU will agree, if any agreement is reached at all.  In the meantime, uncertainty remains.  That said, there are some practical steps that parties entering into or renegotiating contracts can take now to seek to protect themselves from the impact of Brexit and the intervening uncertainty.

How easy will it be to serve proceedings on EU parties post-Brexit?

Brexit is likely to impact the ease with which parties in EU Member States can be served with proceedings.

The current regime

Under the Recast Brussels Regulation, permission to serve English proceedings in another EU Member State is generally not required.  In addition, the EU Service Regulation provides a clear and predictable process for effecting service of English proceedings in EU Member States and vice versa.

Post-Brexit options

Post-Brexit, the Recast Brussels Regulation and the EU Service Regulation will cease to apply in the UK.  This has been confirmed in the draft Service of Documents and Taking of Evidence in Civil and Commercial Matters (Revocation and Saving Provisions) (EU Exit) Regulations 2018.  Although it is theoretically possible for the UK and the EU to agree that the Recast Brussels Regulation and EU Service Regulation, or equivalent agreements, will continue to apply, this is unlikely. 

Whatever international treaty the UK adopts (if any), the process of effecting service in EU Member States is likely to be slower and less predictable post-Brexit. The government has previously announced its desire to participate in the Lugano Convention post-Brexit (although noting its view that the Lugano Convention is limited in scope) and its desire to explore a bilateral agreement with the EU. A similar exemption to the requirement to obtain permission to serve out of the jurisdiction applies under the Lugano Convention as under the Recast Brussels Regulation

The UK also originally signed and ratified, in its own right and prior to joining the EU, the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters Convention (“Hague Service Convention”), which will continue to apply post-Brexit (including between the UK and those EU Member States that are signatories to it).  The Hague Service Convention permits contracting states to designate a Central Authority to receive and execute requests for service from other contracting states.  In most cases, however, service under the Hague Service Convention is likely to be considerably slower than under the existing EU Service Regulation.

No-deal Brexit

On 13 September 2018, the UK government published guidance on “Handling civil legal cases that involve EU countries if there’s no Brexit deal”. As the guidance notes, in a “no-deal” scenario, the UK would “revert to the existing domestic common law and statutory rules”.  Service will need to be effected under the Hague Service Convention (in those EU Member States that are signatories to that convention) or another bilateral service treaty.  Alternatively, in any states for which there is no applicable convention or treaty in place, parties will have to apply to the English court for permission to serve proceedings in those EU Member States under English law civil procedure rules (as is presently the case with respect to service in other countries outside the EU).  This would create an additional (albeit generally surmountable) hurdle to bringing proceedings against parties in EU Member States, with associated substantial time and cost implications.

What you should do now

A common practical workaround to address problems of service abroad (and avoid the need to apply for permission to serve out of the jurisdiction) is to include an agent for service of process clause in contracts, providing an address for service in England and Wales.  It would therefore be advisable in the short-to-medium term to ensure that such a clause is included in all contracts with EU parties. 

MoFo Brexit Taskforce

The process of Brexit will take many years, and the implications for our clients’ businesses will unfold over time. Our MoFo Brexit Task Force is coordinating Brexit-related legal analysis across all of our offices, and working with clients on key concerns and issues, now and in the coming weeks and months. We will also continue to provide MoFo Brexit Briefings on a range of key issues. We are here to support you in any and every way that we can.

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