In a word, yes.
In the wake of the UK vote to leave the European Union, this blog will look at the extent to which Brexit may impact the use of English governing law clauses in commercial contracts.
Of course, until the Article 50 formal notification is triggered which will lead to a two year countdown for withdrawal from the EU (note, this time period can be extended by agreement), the UK will remain a member of the EU. As such, the referendum has not changed the current legal relationship between the EU and UK and nothing will change for several years.
English governing law clauses
First and foremost, English contract law will be largely unaffected by a UK withdrawal from the EU as the bulk of English contract law is governed by English common law, and not EU law. English common law promotes the principle of ‘freedom to contract’ between businesses and our contract law is known for being commercially-orientated, aiming at giving effect to the bargain agreed between the parties, with minimal judicial interference for public policy or other reasons.
However, two EU Regulations which apply to English contract law are the Rome I and Rome II Regulations which set out certain rules on choice of law for contractual and non-contractual relationships.
As a reminder, EU law is issued in the form of Directives or Regulations. Most EU law is issued as a Directive which ‘directs’ an EU member state to implement the provisions in the particular Directive as part of that member state’s national law. The UK does this implementation either by an Act of Parliament or by a statutory instrument under the European Communities Act 1972. To a much lesser extent, some EU law is issued as a Regulation, which does not need to be formally implemented in individual member states but applies automatically. EU law has become slowly and more thoroughly embedded in the UK’s national law for the last 40 years and it is almost inconceivable that any of these laws will be unpicked on the day the UK finally leaves the EU, unless the UK Parliament specifically amends them.
Both the Rome I and Rome II Regulations require EU courts to respect parties’ choice of law in a commercial relationship and the Rome Regulations apply whether or not a party is located in the EU. EU courts should therefore continue to respect English governing law clauses in the same manner as currently and there is therefore no legal reason why Brexit should impact a choice of English law.
Our view is that English law will continue to be a secure and stable choice of law and will in general remain a sensible choice for commercial contracts between businesses post-Brexit.
Note: We will be posting future blogs on the potential impact of Brexit on jurisdiction clauses, commercial agency, consumer law, data protection and telecoms.