Commercial law

Commercial contracts

Choice of law

Parties to a commercial agreement will remain free to decide on the domestic law applicable to their underlying contracts (“choice of law” clause), which can be enforced before national judges. 

Pursuant to relevant provisions of the Rome I and Rome II Regulations, national courts within the European Union (“EU”) will be bound to apply the law chosen by the parties in their contracts, whether it is the law of an EU or non-EU Member State.

As the United Kingdom (“UK”) has already implemented the Rome I and II Regulations into its domestic law, these provisions will remain unchanged.

In the same vein, Brexit will have no impact on EFTA countries (i.e., Norway, Switzerland, Lichtenstein, and Iceland), nor on other non-EU countries as their respective bilateral agreements will remain in place.

Jurisdiction 

Contractual parties may also agree on the national court which will be competent to adjudicate a dispute arising from the contract (i.e., jurisdiction clause).

Since the Brussels and Lugano provisions are not applicable to UK courts any longer, the Hague Convention on choice of Courts Agreements will apply. 

Parties which have ratified the Hague Convention are namely all the EU member states, the UK, Singapore, and Mexico, Gibraltar, and Montenegro.

This Convention entered into force on October 1st, 2015 and provides that signatory countries’ jurisdictions shall solely be bound by exclusive jurisdiction clauses. For this reason, parties to future agreements may be willing to include such clauses into their contracts to increase legal certainty.

Contracts concluded between October 1st, 2015 (day of entry into force of the Hague Convention for all EU member states) and December 31, 2020 (day of entry into force of the Hague Convention for the UK as a standalone party) may be of particular concern. While a statutory instrument requires UK courts to apply the Convention as such, EU-courts may be willing to follow the European Commission’s (“EC”) opinion expressed during the “transition period”. The EC was of the view that the Hague Convention should not apply to contracts that entered into force during this period. EU member states following this opinion would therefore apply their own conflict of laws rules. 

To avoid potential difficulties stemming from these considerations, parties may be willing, where possible, to either restate their contracts or re-execute their jurisdiction clause. 

Finally, it should be noted that the UK has requested to rejoin the Lugano regime. A decision shall be rendered in the course of this year.

Arbitration

Arbitration does not fall within the scope of EU Law. The Convention of New York of 1958 ensures mutual recognition and enforcement of awards.

Price mechanisms and trade barriers

Trade in goods

As a consequence of the withdrawal by the UK from the EU Single market and the customs union, traders will be facing a number of new trade barriers. Although the EU-UK Trade and Cooperation Agreement (“Agreement”) limits negative impact for businesses resulting from the separation of their respective markets, traders willing to integrate the UK-EU supply chains will be confronted with increased costs and adjustment requirements.

The envisaged measures to liberalise market access and facilitate trade between the EU and the UK include the creation of a free trade area, which provides for zero tariffs and quotas on trade of goods between the EU and the UK where appropriate rules of origin are complied with. In addition, the Agreement establishes some rules to ensure open and fair competition among traders. 

Border checks and controls will be restored for all goods entering or exiting the respective markets and the import and export of goods will be subject to specific procedures and declaration requirements. 

To facilitate bilateral trade, the EU and UK have agreed among others on a definition of international standards, on the use of self-certification mechanisms enabling traders to self-certify the origin of their products and, in sectors such as automotive, pharmaceutical, chemical, wine and organic products, specific agreements have also been reached in order to facilitate the trade of these products.

Trade in services 

In the field of services as well, the UK will no longer benefit from the freedoms of movement of services and persons allowing businesses to freely supply their services over the EU territory. As a result, to be able to pursue their operations in the EU, UK service providers may have to establish in one of the EU’s member states.

In that regard, the Agreement provides for non-discrimination obligations ensuring that EU or UK service suppliers and investors establishing in a foreign country, whether the UK or an EU Member State, will benefit from the same treatment as the one that is granted to nationals of that country. 

Since the country-of-origin principle, the passporting concept (e.g. for financial services) enabling access to the EU single market, and the mutual recognition principle will no longer benefit UK service suppliers, these will have to comply with the rules of each of the EU hosting Member State. In the same vein, EU service suppliers will have to comply with the UK internal rules.

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