As Baron Rothschild famously said, “Buy when there’s blood on the streets”. His point was not to be taken too literally, despite his having made vast fortunes in the period directly before the Battle of Waterloo. However, the principle remains applicable today. In periods of uncertainty, it is often better to buy certainty at a quantifiable level than to wait for an outcome which may be significantly worse than what is currently on offer.
The referendum on Britain’s membership of the European Union (“EU”) was held and the result is known, that much is certain. What is not is the form Brexit will actually take and when it will happen. As no country has ever joined and then left the EU, Britain is in uncharted territory. It has not negotiated a trade deal in a long time, least of all as the fifth biggest economy in the world with one of its largest trading partners. No commentator, no matter how frenzied or seemingly authoritative, can predict the outcome of these negotiations, nor even when they will begin (in recent times, commentators and pollsters have repeatedly failed to predict the outcome of a string of British political results).
So just what will the UK replace its membership of the EU with? Many options were touted before the referendum and continue to be touted now:
- Membership of the European Economic Area – the so-called Norway model, which gives full access to the Single Market in return for payments to the EU, acceptance of the free movement of labour and acceptance of a significant number of EU laws;
- Membership of the European Free Trade Association – the so-called Swiss model, which grants access to the Single Market via a series of bilateral trade agreements in return for a less significant payment to the EU and acceptance of the free movement of labour;
- A Customs Union – the so-called Turkey model, which results in no tariffs on imports or exports of industrial goods between the contracting states in return for applying import tariffs to non-EU countries;
- A bespoke bilateral treaty – the so-called Canada option, as the best example is the proposed free trade deal between Canada and the EU which has been seven years in the making (thus far) and is yet to come into force. In this example, a bilateral agreement has been reached which removes most but not all tariffs on goods and services. Canada does not have as many trade links and is not as enmeshed to the EU member states’ economies as Britain, so a bilateral deal between Britain and the EU is likely to look quite different;
- Unilateral free trade – a model favoured by Hong Kong and Singapore who impose no tariffs whatsoever on imports regardless of whether tariffs are applied to their exports by foreign countries. This model prioritises giving foreign companies access to the host nation’s markets so as to foster trade (and inward foreign investment) without any barriers;
- Trade on reciprocal World Trade Organisation (“WTO”) tariffs – this is perhaps the least likely option, and will only manifest if no Brexit agreement can be reached between Britain and the EU within two years of triggering Article 50, which is not in the interests of either side. On this model, trade will be conducted on the basis of reciprocal import and export duties as set by the WTO.
Significantly, the British government has not yet indicated which path it wishes to take beyond saying that it does not feel obliged to accept any models that currently exist. There should be no doubt that we live in interesting times.
Whatever path Britain does take from the all of the choices listed above will inevitably have an impact on the world of litigation. Under the current EU regime, the judgments of the courts of England and Wales can be recognised and enforced in EU countries. Furthermore, they are generally considered to be amongst the fairest, fastest, most professional and rigorous on the continent – as well as providing the best value. Over the years, this has acted as a draw to international litigants, as being able to obtain a judgment in English language proceedings in London that can then be enforced throughout the EU has been attractive to many. How Brexit may affect this regime cannot be known until the legal system that results from Brexit comes into force, which may be a number of years hence. Many options for the future relationship between the English courts and the courts of the EU member states present themselves: some are rather simple, some more complex. But again, as can be seen from the wide variation of trade/tariff systems listed above, we do not know which system will prevail.
In these circumstances, it will be sensible for individuals and companies considering pursuing litigation with an EU dynamic to act now and “buy certainty” before the realities of the Brexit negotiations change the landscape to the cost of their potential claim.
Perhaps the best known feature of Article 50 is that it begins a two-year time frame during which a leaving country can seek to agree the terms of its exit. This is, at present, longer than the average life span of proceedings issued in the English High Court which, since 2009 has hovered at around one year to one year and three months. However, the stress being placed on the Courts by Government cuts is causing that time period to lengthen and there is certainly no guarantee that any proceedings issued now, would end with time to commence enforcement proceedings in an EU jurisdiction.
So for those who have been mulling over whether or not to take proceedings against a person or company based in an EU state, keep Baron Rothschild’s advice in mind. There may not be blood on the streets just yet, but things may look a little different the closer we get to the end of the two year Article 50 negotiations. In other words, for those who are a contemplating litigation, now may be the best time to take action in order to buy certainty.
This article should not be taken as definitive legal advice on any of the subjects covered. If you do require legal advice in relation to any of the above, please contact Simon Walton on 020 7955 1455 or any member of the Rosenblatt Dispute Resolution Department.