Tags

The Brexit effect on European judgments and jurisdiction
29/03/2021
Main image
Court of Justice of the European Union

By Sara Ibrahim and Hannah Fry

Brexit has reshaped the landscape for both employers and employees. The transition period ended on 31 December 2020, at a time when the covid-19 pandemic brought questions on the future of the workplace and the relationship between employer and employee to the forefront. How has Brexit affected the status of Court of Justice of the European Union (CJEU) judgments and jurisdiction and what are the practical implications for employers and employees?

Pre-Brexit CJEU judgments

The European Union (Withdrawal) Act 2018, as amended by the European Union (Withdrawal Agreement) Act 2020 (EUWA), makes detailed provision about the retention and status of EU law following Brexit.

Pursuant to section 6(3) EUWA, all pre-Brexit case law of the Court of Justice handed down prior to 31 December 2020 will continue to be binding on UK courts and tribunals. This is subject to an important exception. Section 6(4) and (5) EUWA provide that the Supreme Court and the Court of Appeal are not bound by any retained EU case law and can depart from such judgments “if it seems right to do so”.

Therefore, the freedom to depart from pre-Brexit CJEU judgments could lead to divergence with EU employment law in the future. However, this is subject to the UK’s “non-divergence clause” in the EU-UK Trade and Cooperation Agreement. The ‘watering down’ of employment rights is only prohibited if there is an impact on trade/investment. The basis of this commitment was to ensure the UK did not become a low cost, low employment rights state undercutting the EU’s profitability, rather than an attempt to safeguard UK worker rights as such.

There will most likely be more litigation because of this uncertainty and employers and employees (and in some cases those who fall into the worker category) will need to be prepared for this. The removal of the EU Charter of Fundamental Rights means the right to an effective remedy for breach of EU law provided by article 47, will no longer apply in the UK. The lack of certainty this creates may persist until judgments are made in the Court of Appeal or Supreme Court.

The Supreme Court’s willingness to depart from pre-Brexit CJEU rulings will be tested by three cases concerning the controversial area of the calculation of holiday pay due to be heard later this year.

Post-Brexit CJEU judgments

Pursuant to section 6(1) EUWA, UK courts and tribunals are not bound by any principles laid down, or any decisions made, on or after 31 December 2020 by the CJEU. However, section 6(2) EUWA provides that a court or tribunal may have regard to anything done on or after 31 December 2020 by the CJEU “so far as it is relevant to any matter before the court of tribunal”.

Interestingly, the original formulation of section 6(2) in the bill was that a UK court could have regard to such EU jurisprudence, if it considered it appropriate to do so. This was criticised by members of the judiciary who felt that the word “appropriate” gave insufficient guidance to the courts and “relevance” is felt to be preferable to “appropriateness”. Nonetheless, the extent to which a court can have regard to post-exit CJEU case law is still largely left open to the discretion of the UK courts and tribunals.

As a failure to follow a potentially relevant CJEU judgment may make a judgment appealable and significant divergence could lead to a breach of the non-regression principle, it is expected that UK courts and employment tribunals will take a cautious approach and follow post-Brexit CJEU judgments in most situations. This can be expected to lead to longer and more complex judgments as courts may feel obliged to give fuller explanations of why regard has or has not been given to new CJEU case law.

Overall, section 6(2) EUWA is likely to cause an increase in employment litigation and appeals to higher courts on new and potentially relevant post-Brexit CJEU judgments, as it will always be open for one party to submit that the employment tribunal should pay no regard to such judgment, while the other party will be arguing for conformity.

The jurisdiction question

Where a particular employment relationship has a foreign element, a jurisdiction question may arise as to whether the claim can be brought before the UK courts. Prior to Brexit, jurisdiction was previously governed by the Brussels Recast Regulation (EU) No 1215/2012 and the Lugano Convention 2007. Pursuant to article 67(1)(a) of the Withdrawal Agreement, the Brussels Recast Regulation applies to legal proceedings instituted before 31 December 2020 and from then, the Brussels regime will cease to apply in the UK. Although the UK has applied to accede to the Lugano Convention 2007, the permission of the EU is required to do so, and this has not yet been provided.

What is the position post-Brexit? Issues relating to jurisdiction will now be determined under common law rules and the Hague Convention. Since the convention expressly excludes choice of law clauses in employment contracts, the common law rules will be most relevant.

Regulation 26 of the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019/479 added a new section 15C into the Civil Jurisdiction and Judgments Act 1982 (CIJA) which created a special jurisdictional regime for matters relating to individual employment contracts. Section 15C(3) CIJA provides that the employer may only sue an employee domiciled in the UK in the part of the UK in which the employee is domiciled. Section 15C(2) CIJA provides that the employer may be sued by the employee in one of three places:

  • the courts for the part of the UK where the employer is domiciled;
  • the courts for the place in the UK where the employee “habitually carries out the employee’s work or last did so”; or
  • where the employee did not habitually work in one part of the UK or any one overseas country, in the courts for the place in the UK where the business which engaged the employee is or was situated.

The covid-19 pandemic has caused an increasing number of employees to work remotely in overseas countries, often as they may have family situated there, or it is their home nation. Certain countries, such as Barbados, have offered a tempting one-year visa for working remotely which you can apply for online before you travel.

With the shifting sands of what it means to “work from home”, questions of jurisdiction, such as where the employee habitually carries out their work, will become particularly pertinent. Businesses would be well advised to keep apprised of whether an employee is routinely carrying out their work outside of the UK.

In each individual case involving an employment relationship with a foreign element, attention should be given as to whether potential claims arising out of such a relationship could be brought before the English courts. Consideration should be given at the outset of such a relationship and regularly reviewed as the covid-19 pandemic continues to reshape employment relationships.

Sara Ibrahim and Hannah Fry are barristers at 3 Hare Court Chambers