Back to the common law. Jurisdiction and judgments if there’s a ‘no deal’ Brexit.

 

 

On 13 Sept 2018 the UK government stated that in the event of a no-deal Brexit, it would repeal most of the existing civil judicial cooperation rules and instead use the domestic rules which each UK legal system currently applies in relation to non-EU countries. This is due to the lack of reciprocity from EU Member States that would pertain after ‘exit day’.

So, for the bin, would be:

The 2012 Brussels Regulation (Recast). Back to common law. The return of the anti-suit injunction to protect London arbitration agreements from suits commenced in EU states.

The Enforcement Order, Order for Payment and Small Claims Regulations: which establish EU procedures for dealing with, respectively, uncontested debts and claims worth less than EUR5,000

The EU/Denmark Agreement: which provides rules to decide where a case would be heard when it raises cross-border issues between Denmark and EU countries, and the recognition and enforcement of civil and commercial judgments between the EU and Denmark

The Lugano Convention: which is the basis of our civil judicial relationship with Norway, Iceland and Switzerland.

Most of the Insolvency Regulation, which covers the jurisdictional rules, applicable law and recognition of cross-border insolvency proceedings, although the EU rules that provide for the UK courts to have jurisdiction where a company or individual is based in the UK will be retained.

In addition, last year shipping minister John Hayes told members of the UK Major Ports Group that the hated 2017 Port Services Regulation will be “consigned to the dustbin” in the UK due to Brexit.

 

Staying out of the bin will be Rome I and Rome II on choice of law in contract and non-contractual matters. No reciprocity is involved with these regulations.

The Government intends the UK to accede to the 2005 Hague Convention on Choice of Court Agreements in its own right and anticipates that the convention would come into force across the UK by 1 April 2019. This is somewhat of a surprise as article 31 (a) provides the convention to come into effect for each state ratifying it on the first day of the month following the expiration of three months after the deposit of its instrument of ratification, acceptance, approval or accession. So, 1 July 2019.

The Convention does not apply to: consumer or employment contracts; insolvency; carriage of passengers or goods; maritime pollution; anti-trust/competition; rights in rem in immovable property, and tenancies of immovable property; the validity, nullity or dissolution of legal persons, and the validity of decisions of their organs; various matters concerning the validity or infringement of intellectual property rights; the validity of entries in public registers; arbitration and related proceedings

 

 

 

Korean rehabilitation proceedings. Tricky English law issues may be resolved in English proceedings.

Ronelp Marine Ltd vs. STX Offshore & Shipbuilding Co Ltd : [2016] EWHC 2228 (Ch)

In May 2016 rehabilitation proceedings were commenced against STX, a South Korean shipbuilding company, and in June 2016 the English court recognised these as the foreign main proceeding under the 2006 Cross Border Insolvency Regulations (the ‘CBIR’) which give the force of law to the UNCITRAL Model Law on Cross Border Insolvency.

At the time of the rehabilitation proceedings, there were already actions afoot against STX in the English Commercial Court under guarantees it had provided in respect of five shipbuilding contracts entered into by its Chinese subsidiary Dalian, which were subject to English law and jurisdiction. In 2014 the contracts had come to an end with Dalian’s entry into Chinese insolvency process under which the Chinese office holder had issued a notice stating that the ships would not be built. STX raised two defences which involved complex issues of English law. First, it was alleged that the contracts were vitiated by illegality in that there had been a sideletter which intended to mislead third parties as to the true price paid under the contracts. Second, the contracts did not entitle the Buyers to damages but confined them simply to the return of instalments plus interest and since Dalian has received no instalments, it was not in breach of any obligation, which raised difficult issues relating to the interaction of contractual remedies and common law remedies for repudiatory breach.

Under the UNCITRAL Model Law, article 20.1(a) provides for a stay of actions subject to courts power under art. 20.6 to modify the stay on such terms as it thinks fit, provided the court is satisfied that interest of creditors and other persons interested are adequately protected. Article 21 provides that the Court has power to grand discretionary relief including any relief under paragraph 43 Schedule B1 of the Insolvency Act 1986.

The buyers applied to the court to exercise its discretion to allow the proceedings already commenced in England to continue. Their sole object was to obtain an adjudication of the claim, with a view to presenting the outcome to the Korean Rehabilitation Court. It was accepted that any judgment obtained from the Commercial Court could not be enforced against STX and that the conversion of the claim into a judgment could not alter the priorities within the Korean insolvency. The Buyers would continue to have an unsecured claim, but one that would be verified and quantified by the Commercial Court, which it was up to the Korean Rehabilitation Court to adopt or reject.

Norris J found himself in a similar position to that of Briggs J in Cosco Bulk Carrier: Ltd v Armada Shipping SA [2011] EWHC 216 where he was concerned with competing claims to sub-freights of the shipowner pursuant to a lien on sub freights and the time charterer, a Swiss Company subject to Swiss liquidation. The resolution of that dispute involved a consideration of competing views, expressed at first instance (and once in the Court of Appeal) on the one hand and in the Privy Council on the other hand, about the juridical nature of a lien on sub-freights. Briggs J had there exercised his discretion to allow the English arbitration proceedings brought by the shipowners against the sub-charterers to continue.

Accordingly Norris J. exercised his discretion to lift the stay and to allow the English proceedings to continue, given that otherwise the Korean Rehabilitation Court would have to grapple with these difficult issues of English law in assessing the buyers’ claims against STX under the guarantee.