Traditionally, English law has been a popular port of call for international contractual disputes. The English legal system has demonstrated its flexibility whilst also proving to be particularly stable and predictable. Will Brexit risk diminishing these revered qualities? We take a look at what Brexit means for English contract law, interpretation of terms, and remedies for breach of contract.
We’re now several months further on from the historic Brexit poll. We are just beginning to build a picture of what Brexit will entail and the timetable associated with the process. At the Conservative party conference this week we got our clearest indication yet that the crucial triggering of Article 50 will happen before the end of March 2017. But what changes should commercial parties expect as a result?
European Union
European Union law is reasonably entrenched in the law of contract. The fundamental principles of contract law such as the formation and interpretation of contracts stand apart from the principals of European Law. At first glance, there would be little reason to be concerned. However, delve a little deeper and there are clear concerns for commercial customers.
Generally, the English courts seek to interpret contracts in such a way as to give the meaning it would convey to a reasonable person with all the background knowledge available to the parties at the time the contract was made.
One clear potential issue comes about by way of interpretation of contracts which specifically refer to European Regulations. Should they be interpreted in a way that gives effect to the Regulation as it was in force when drafted? Or should any legislation enacted following Brexit take precedence? The government may choose to deal with this issue by amending or enacting legislation. However, parties should anticipate these issues with an express interpretation clause.
Inevitably, disputes will arise where there is no interpretations clause. In such cases, parties may look to fall back on section 17(2) of the Interpretation Act 1978. This provides that where an enactment is repealed by re-enacted, it should be construed as a reference to the re-enacted version. That is unless provision is made to the contrary within the re-enacted statute.
Life after Brexit?
Post-Brexit, the UK court system will no longer be bound to interpret UK legislation in accordance with EU law. It remains to be seen how persuasive EU law will be to judges in their interpretation of specific provisions. It seems likely that where the legislation was enacted specifically to implement an EU directive or regulation, English judges will continue to refer to the European legislation and case law as a matter of course.
Further judicial intervention might also be needed in smaller, but no less important clauses contained within commercial contracts. For example, many contracts refer to the EU in a variety of contexts. Once Brexit takes hold and the UK leaves the EU, Courts will be required to interpret the meaning of territory defined; with reference to the EU. This problem could be particularly problematic for distribution agreements.
Above are just a few contractual interpretation issues that might arise as a result of Brexit and the British government’s attempts to renegotiate the UK’s relationship with its European allies. The issues will become clearer as negotiations begin in earnest.
Fisher Jones Greenwood’s commercial litigation department is able to assist in a wide range of commercial contract disputes. If you are experiencing issues and would like to book a fixed fee consultation with one of our solicitors, please contact us on 01206 700113 or email [email protected].
Credit – blog post written by Lawrence Adams.