In the fiery political debate on Brexit, relatively little attention has concentrated on the threat to the UK as a world-renowned centre for litigation. Some say that an abyss beckons and that there will be an exodus of litigants fleeing our jurisdiction. Are these fears justified?
For starters, our legal system remains highly respected for its integrity and expertise. Our European neighbours are promoting their credentials as never before, but in truth, many smaller European countries are far from being able to compete in terms of sophistication and true independence. Moreover, English remains the language of international commerce, and this factor alone will continue to have a bearing albeit that the Netherlands and Germany are now developing English-speaking courts.
Other important factors will influence forum shopping. The existence of disclosure will always count, but it can cut both ways. On the one hand, a litigant, keen to get his hands on his opponent’s evidence, may well want something other than reliance discovery. On the other hand, disclosure is expensive, and if keeping costs low is a priority, this country is not cheap.
Equally significant in that context is the question of adverse costs risk. Again, this can be viewed as a double-edged sword depending on one’s viewpoint. Also playing into the mix of cost issues are litigation funding and after-the-event (ATE) insurance, both of which can heavily influence decisions about choice of jurisdiction. In Ireland, for example, litigation funding remains prohibited. The UK is ahead of the game in terms of its sophisticated approach to alternative funding models, but the sands are shifting and one can certainly expect other European countries to challenge us on this front.
A related issue is that of contingency fees. Subject to strict regulatory constraints, conditional fee agreements (CFAs) and damages-based agreements (DBAs) offer scope for off-balance sheet charging structures that, to a large extent, remain out of bounds in most European countries. Contingency fees are no longer just the preserve of impoverished individuals; risk-averse corporate players with pressures on their legal budgets are scrutinising more than ever their funding options when it comes to litigation.
‘The UK is ahead of the game in terms of its sophisticated approach to alternative funding models, but the sands are shifting and European countries will challenge us.’ Clive Zietman, Stewarts
Another relevant topic is the mutual recognition of judgments. A judgment in one EU member state is automatically recognised and capable of enforcement in another EU state. What will happen in the post-Brexit world? Will a French judgment be enforceable in London? Will we be able to enforce an English judgment in Germany? Until the terms of a wider deal are hammered out, no one knows. It may be that legislation that predates our EU membership will be revisited. In all probability, a new arrangement will be forged. It is hard to see who would have an interest in any other outcome.
It is difficult to say whether the UK’s standing as a forum for disputes will be radically altered by our departure from the EU. In truth, as with so many other aspects of Brexit, it may take five years or so for the dust to settle.
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