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Brexit – what does it mean?

The UK’s decision to leave the EU is likely to have far reaching consequences albeit that there will be some time to adapt and implement the changes. As matters stand, EU laws are still effective and supreme over English law. However, that will change on a Brexit. At the moment, EU laws come into effect in three ways:

(1) An EU Directive which, in turn, is implemented by the UK Parliament thus coming into legal effect.
(2) An EU Regulation which does not need approval from the UK Parliament.
(3) An EU Court judgment which binds UK Courts.

There is already talk by those in the Brexit camp of interim measures to reduce the powers of the EU Courts and/or in relation to new regulations and directives. This would put the UK in breach of its treaty obligations. The only clean way to proceed is for the UK to repeal or amend the European Communities Act of 1972. That could take a number of years which raises confusion as to what happens as regards new EU Directives, Regulations and EU Court decisions as the European project moves on with a reluctant UK in tow. If there are interim measures then UK laws could rapidly diverge from EU laws such that businesses may find themselves having to comply with two sets of laws.

Here are just a few of the questions that have already come up just one day after the Referendum:

1. What will the effect of Brexit be on my dispute with an EU party? Answer – Arbitration will continue as normal and arbitration awards are of course enforceable under the New York Convention which applies to the EU as well as many other countries. However, court proceedings will be affected in the sense that the EU model is that the Courts of each member state have equal standing and primacy and, where disputes arise as to which jurisdiction should apply, it is the Court of the member state first seized that should make a decision on that issue. The Recast Brussels Regulation governs jurisdiction and the mutual recognition and enforcement of EU Member State judgments. This will of course cease to have effect post Brexit which gives rise to an issue as to how UK judgments will be enforced in the EU and how EU judgments will be enforced in the UK. Those currently involved in litigation with EU parties need to consider the very real risk of how they enforce any judgment in their favour in a post Brexit environment. However, in practice it will be probably be several years before the current regime changes and so it should be possible to wind up existing litigation.

2. What will the effect of Brexit be on UK insolvencies? Answer – The 2006 Cross Border Insolvency Regulations (CBIR) are commonly used by shipping companies who fall on hard times and need to seek restructuring. The CBIR are based on the UNCITRAL Model Law which has been enacted by certain other states so as to achieve a measure of reciprocity. However, most EU countries have not adopted the UNCITRAL Model Law and instead rely on the EC Regulation on Insolvency Proceedings. Those regulations apply across the EU such that UK shipping and trading companies seeking protection have certain rights in relation to proceedings in other EU states, for example the right to have the UK insolvency proceedings recognized and/or have proceedings in other states set aside or stayed. Obviously the EU Regulation will not apply post Brexit so cross border insolvencies as between UK and European companies will be much more complex.

3. What is the effect of Brexit on EU Competition law? EU Competition laws will still govern UK based shipping companies who trade with the EU. However, the EU will no longer have the power to conduct dawn raids in a post Brexit environment. The UK would have to develop its own competition law and conduct its own investigations albeit that it may end up working closely with the EU in respect of multi-jurisdictional anti-trust breaches.

We will release more updates via our blog as the situation develops over the next few months. What is clear is that Brexit may well see an upturn in work for English lawyers as clients try to restructure their business models and contracts to deal with a post Brexit world.

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