16 April 2019

With everything which is happening before our eyes in Parliament, it is easy to overlook that an enormous amount of work is going on behind the scenes to ensure that we are ready for Brexit in whatever form it might occur.

An example of this is publication of a draft Statutory Instrument at the end of 2018 with the mouthful of a name of “The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (EU Exit) Regulations 2019”.

This Statutory Instrument is being made in terms of the European Union (Withdrawal) Act 2018 and is intended to come into force on exit day.

Its purpose is to ensure that the existing European Union rules, which determine the law applicable to contractual and non-contractual obligations, continue to operate in our domestic law after our exit from the EU. 

The existing EU Rules set out the rules which determine which country’s law applies in relation to contractual and non-contractual obligations which raise cross-border issues.  

As we exit the EU, the existing domestic legislation which gave effect to the EU rules is retained by virtue of the European Union (Withdrawal) Act 2018 but, as you would anticipate, contain deficiencies which need to be corrected in order for our domestic legislation to continue to work effectively following exit.

As the UK will also cease to participate in what is known as the Rome Convention (the name given to these EU rules), it is necessary to amend our existing legislation to preserve the rules of the Convention insofar as necessary to apply to existing contracts.

Despite its long name, this Statutory Instrument runs to only eight pages.  Its effect is to ensure that the substantive rules of the Rome Convention will continue to apply as amended and brought into domestic law following exit.

The majority of the corrections which these Regulations deal with those aspects of the EU regulations which are no longer relevant after the UK has left the EU.  For example, these include deleting provisions which impose requirements on an EU Member to notify matters to the European Commission.  Other provisions are amended to take account of the UK ceasing to be an EU Member.  

The effect of all of this is that the courts in the UK will continue to apply the same rules immediately after exit as those being applied after exit day by national courts in the other EU Member States that continue to apply the EU Regulations.  This does not, however, mean that in all cases the determination of the applicable law by one national court of a remaining EU Member will be the same as that of a court in the UK, given the way in which the provisions of the EU Regulations are drafted. 

Notwithstanding the possibility for inconsistencies in the application of the rules between UK courts and the courts of EU Member States, the approach being taken is to preserve the existing rules as they currently apply in the UK immediately after exit day with a view to providing the maximum certainty and stability for business and individuals and to avoid any diminution in rights. 

The Impact Assessment produced by the Government in relation to the proposed Statutory Instrument assesses that there is no or no significant impact on business, charities or voluntary bodies, or on the public sector, as a consequence of its provisions.  It is anticipated that the impact on small business will be minimal as the applicable law rules for contractual and non-contractual matters will not significantly change, other than as required to reflect UK’s exit from the EU.  

Contact: Jeremy Glen, Partner, jsg@bto.co.uk T: 0141 221 8012