by Alistair Maughan

Enemies of the People? | Brexit will have little impact on attitudes towards use of English law in commercial IT contracts

Nov 27, 2016
IT Strategy

The effects of Brexit will be many and varied – and, of course, largely unpredictable.

As a lawyer, do I need to be worried for my livelihood? Will English law cease to be the default choice of law for commercial contracts in the ICT field? Should I brush up on French law applicable to distribution contracts or how the Dutch civil code applies to outsourcing arrangements?

Probably not. Brexit will have little impact on attitudes towards the use of English law for a significant cross-section of commercial contracts in the ICT field – and especially cross-border or global agreements.

[See also: Legal implications of Brexit for CIOs – Alistair Maughan’s top 10 tips on preparing for Brexit]

And the reason for this? Step forward the “Enemies of the People” (© Daily Mail), the English judiciary.

Here in the UK, we get used to the fact that, more often than not, contracts even between non-UK parties may often be done under English law and in the English language. Parties choose English law because it’s predictable in outcome and also because it has the flexibility to effectively document and make a bargain between parties binding. Brexit won’t change that, and we expect English law to remain one of the main choices of law for cross-border transactions.

However, the UK as a place to sort out disputes depends not just on English law but on a sophisticated network of laws, regulations and treaties that make it comparatively easy to resolve a dispute that has little or nothing to do with the UK, feeling sure that the result from the courts can be enforced outside the UK.

The most commonly cited benefits of English law are its predictability, following of precedence, the fact that it gives parties freedom to contract, and its independence of a civil code. Especially in a business-to-business relationship between commercial entities, the parties are largely free to write down what they agree without the fear that a court or a separate set of mandatory laws might overrule whet they’ve agreed.

And the courts have repeatedly backed up this freedom to contract, ruling clearly that the function of courts is to interpret the contracting parties’ intention and not to re-write their commercial bargain or impose judges’ standards of “fairness”. So in this context (as, frankly, in the context of judicial views on Article 50 – whatever the rantings of the right-wing media) our apolitical judiciary is the business-person’s best friend.

Contracts under English law will continue to be attractive because of the certainty that the English legal system offers. There is little risk that parties will find themselves “trapped” in a governing law or jurisdiction that they don’t wish to be in as a result of Brexit.

That’s not to say that there may not be bumps in the road. The UK will need to come up with approaches to replace Treaty-based mechanisms for pan-European enforcement of judgements or service of process, for example. But alternatives exist and current non-EU members seem to cope pretty effectively with these topics.

But I anticipate that the status quo in relation to the recognition of governing law and jurisdiction clauses will broadly be maintained and that Brexit will not detract from the reasons why parties choose English law, namely procedural and substantive certainty and the courts’ reputation for impartiality and fairness.

It’s possible that, to counter any potential uncertainty in the short-medium term, some organisations may wish to adopt arbitration as their chosen dispute resolution mechanism, especially in larger contracts. The mechanics of enforcement of arbitral awards in a wide range of jurisdictions are well established under the New York Convention (to which the UK will remain a party). There are plenty of advantages to arbitration and I don’t anticipate that Brexit will have any adverse effect on the arbitration market in the ICT sector.