For Scottish businesses trading with European customers and suppliers the recent EU-UK trade deal offered little clarity on the question of what happens now if that business relationship turns sour and you need to enforce the terms of your contract?

Prior to our exit from the European Union the rules of jurisdiction, applicable law and how to enforce court judgements and recover lost monies under a contract were all found in the so-called Brussels regime which operated across the Union.

The recent trade deal allowed that litigation commenced prior to 31 December 2020 would remain under the Brussels regime, but what protection do you have now if there has been a breach of contract by a European business partner?

In relation to choice of law, little will change so if your contract identifies that it should be interpreted under Scots Law then that will remain the case. Even where the contact is silent on the applicable law, determining the law to be applied will still be with reference to established principles of international law.

The issue of deciding which country’ courts hold jurisdiction for a particular dispute may be more complicated however. If the contract holds an exclusive jurisdiction clause that will still be respected by courts in most EU jurisdictions, however if there is no such clause then legal advice should be sought as to where proceedings can be brought, and time will be of the essence to avoid your opponent getting in first by raising proceedings in the jurisdiction that suits them.

But what if you do raise court proceedings and obtain a court judgement in your favour how do you turn this into payment or performance in a foreign jurisdiction? The answer will now depend on the domestic law of the country where you are seeking to enforce that judgement as the umbrella protection  of EU law can no longer be relied upon.

So disputes with foreign counter-party’s particularly with respect to jurisdiction and enforcement of judgments are considerably more complex than they were prior to the turn of the year and that will remain the case until the UK is able to enter into a formal agreement with the EU states in relation to cross-border disputes. It is difficult to say when that might happen as it falls within a long Governmental to do list with regards our future relationship with the EU.

Scottish companies who are regularly trading within the EU should seek legal advice to review their contracts and consider introducing an arbitration clause for dispute resolution. Arbitration can side-step complex issues of jurisdiction and choice of law and also produces enforceable outcomes. Advice should be taken on the form of arbitration and dispute resolution best suited for your business.

By Andrew Tolmie, Clyde and Co