Brexit - Commercial Contracts
Choice of law
Although clear choice of law clauses should remain valid, Brexit may have an impact on situations where no such choice has been made. For future contracts, it may also be more convenient to opt for an applicable law from an EU Member State where the legislation and principles of the EU will still be in force.
Jurisdiction / Arbitration
Under the Brussels Ibis Regulation, decisions from EU Member State courts are automatically recognised and enforceable in other EU Member States. After Brexit, decisions from UK courts will likely not enjoy the same benefit, requiring enforcement proceedings. It may thus be advisable to opt for the state courts of another EU country in the contractual dispute resolution clause.
A good alternative dispute resolution mechanism is arbitration, which has been kept outside the EU regulations and is largely governed by international treaties (such as the New York Convention) and national arbitration laws.
After Brexit, there may be concerns about customs duties, increased transport costs, additional bank charges or other levies imposed on parties performing a contract. This could have an impact on the pricing structure and the overall economy of the agreement. It may be necessary to negotiate about who is to bear such additional costs, some of which may be unknown at the time.
Under Belgian law, hardship clauses are not automatically included in a contract. Without such a clause, parties bear the risks of unexpected changes which influence the economy of the contract. Only force majeure could be an escape route, but it remains unclear whether specific consequences of Brexit could qualify as force majeure in a specific contractual context.
Given the uncertainties surrounding Brexit, it seems advisable to anticipate a possible impact on parties’ duties and provide the necessary clauses to safeguard parties’ rights.
Brexit may have a major impact on parties’ performance of commercial contracts. It could therefore be wise to include clauses which form a way out and allow parties to terminate the contract.
- Identify contracts with UK companies and/or governed by UK law.
- Analyse possible Brexit-related risks regarding these contracts.
- Consider the possibility of not renewing / prolonging contracts that would expire within a short period without first renegotiating.
- For vital contracts, consider renegotiating the existing contract, preferably before the precise impact of Brexit is known.