English law has become the pre-eminent commercial law in Europe because it is flexible and trusted to provide a fair outcome in the event of a dispute. In a competitive legal marketplace, it is the box business people tick when entering into a contract, even though the substance of the deal has little or nothing to do with England and Wales.
That market is going to change after Brexit, with enforcement of orders from an English court likely to become very problematic within the EU. Business needs certainty and this is a classic case in which business cannot wait to see whether this Brexit issue gets resolved.
You cannot sign a five-year contract now subject to English law and the jurisdiction of the English courts, and not know whether a judgment you obtain in four years’ time from an English court will be easily enforceable in the EU.
One solution is to keep on using English law, but have the cases heard before a jurisdiction within the EU. This way you get continuity of law and do not have to worry about English court orders being unenforceable.
The French government has recently announced it will establish a commercial court which will operate entirely in English and apply English law. The French court is to be set up before the end of 2018 as part of the Paris Court of Appeal.
Preparatory work with the commercial court in Paris is due to start this autumn. At the moment, there are no published documents on how the French court will operate and how judges will be recruited. Recruitment of high-calibre judges will be important in ensuring the success of the new court.
Many lawyers in England will dismiss this on the basis that non-English courts will not have the experience or quality of judges and lawyers to provide the same service as in England and Wales. However, the same argument was made in the manufacturing context in the 1960s, when the first Japanese cars arrived in the UK; and, tellingly, was what the Swiss watch industry said at the beginning of the 1970s when it was still completely dominant and before the quartz watch took over the market.
There must be a significant risk that what happened in manufacturing 40 years ago could happen in the service sector even more quickly.
None of the proposed English law foreign courts have yet been set up by any EU country, but there is no doubt they are coming – and soon. A hard Brexit will make it inevitable, with several countries trying to secure the business. It also creates a financial interest for a hard Brexit.
It is likely that the procedural law will differ from England and that this will be driven by the market. Procedural innovations will be easier to introduce with the aim of gaining more litigation work. This will involve the use of new technology.
The costs rules are likely to be different to lower the barriers to litigate with – for instance – the indemnity principle unlikely to apply. Court fees will be a fraction of the costs claimants have to find in England, which represents a significant barrier.
Another factor which has been little discussed in this context is new technology. The ease with which witnesses can give evidence and be cross-examined by Skype, and the advent of virtual reality make it easier for courts to deal with cases remotely and will help competitors to English courts.
As yet we have seen no progress on substantive Brexit issues, including cross-border enforcement of judgments, and the leaving date is less than 18 months away. No wonder business people will be considering which court they put in their contracts to hear any dispute.
It is surprising that other EU countries have not moved faster to establish local English law courts, given that the barrier of upfront costs is very low compared to the high fees which could be generated locally.
David Anderson is a solicitor and director at Sykes Anderson Perry in London