CIENTÍFICO-PEDAGÓGICAS.

As long as the UK keeps a liberalised and open market (which guarantees liquidity), NBP will most probably remain one of the major energy trading hubs in Europe. However, the exit of the UK could further strengthen the importance of TTF and other Continental trading hubs at the expense of NBP. This is underpinned by an exchange rate risk and a reduced liquidity at the NBP which could lead to higher volatility compared to the TTF reducing the overall attractiveness of NBP.177

175 _{ACER (2015).}

176 _{Avis (2016).} 177 _{Bros (2017b).}

7.4 Future of the UK as a legal venue for the EU

7.4.1 Arbitration

London is chosen in many energy contracts as the seat of arbitration, which is particularly true for contracts concluded between parties from weak legal systems. The UK withdrawal is unlikely to affect the good reputation of English courts and law. The UK Arbitration Act of 1996 will continue to be regarded as accessible, user-friendly and modern as before, and the immense body of English law especially in the commercial field will ensure predictability.178

As the UK and all EU Member States are parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) of 1958179_{, arbitration awards issued by tribunals are enforceable in any of the 158 states that}

are party to the New York Convention and awards issued by an arbitration tribunal seated in any of the other EU Member States will still be enforceable in the UK. Thus, the withdrawal of the UK from the EU is unlikely to affect London’s position as seat of arbitration.

7.4.2 Place of Jurisdiction

Beyond arbitration, English courts are often chosen as place of jurisdiction (combined with a choice of English law) in commercial contracts.180 _{The Brussels Regime}181 _{generally allows}

jurisdiction clauses in contracts, which preserves the right of parties to reach agreement at the time of contracting as to which court should be (exclusively) competent to decide should govern any dispute. It also ensures the automatic recognition and easy enforceability of UK court rulings in all EU Member States. Regarding judgments by courts from third countries (such as the UK after Brexit), the national law of each member state will govern the recognition and enforceability of English judgments which will, in principle, lead to somewhat more procedures and a more restricted enforceability depending on the relevant state law in which enforcement is sought.182

In case the UK decides to join EFTA, it would gain the possibility to accede the Lugano Convention183 _{of 2007 which governs issues of jurisdiction and enforcement of judgments}

between the EU Member States and the EFTA members.

The UK may also decide to join the Hague Convention184 _{on (exclusive) Choice-of-Court}

Agreements of 2005 to which the EU, but not the Member States, is a party. This would lead to a far-reaching (but nor automatic) recognition of judgments of English courts, based on an exclusive choice-of-court agreement, in the Member States of the EU. These judgments would also be enforceable. However, national (perhaps burdensome) procedures on the recognition of judgments would still be applicable. To this extent, London may somewhat suffer as a place of jurisdiction at the expense of other EU jurisdictions.

178 _{Ambrose & Naish (2016).} 179 _{New York Convention (n.d.).} 180 _{Batsaikhan & Schoenmaker (2017).} 181 _{Regulation (EU) No 1215/2012.}

182 _{The applicability of the Brussels Convention of 1968 to guarantee enforceability is disputed.} 183 _{Official Journal of the European Union, L 339, 21 December 2007}

7.4.3 Applicable Law

The so-called Rome I Regulation185_{, deals with the applicable law concerning international}

contracts. Under Rome I the contracting parties have the freedom to decide the law under which contracts are governed. All courts in the EU apply Rome I, and, therefore, respect a choice-of-law clause by the parties.

After Brexit, EU Member State courts will continue to respect choice-of-law clauses in contracts to which UK companies and persons are partners. English law may be chosen, and, if chosen, courts of the Member States will apply English law in the same manner as they do at present. In contrast, UK courts will no longer be able to apply the Rome I Regulation where the choice-of-law is to an EU Member State. However, although the Rome I Regulation is exclusive to EU Member States, the Parliament of England may ‘incorporate’ Rome I as English law (on a 1:1 basis), thereby acknowledging the freedom of the parties to choose the applicable law. If this does not happen (in the foreseeable future), it can be expected with near certainty that English courts will turn back to traditional rules of English private international law, thereby accepting choice-of-law clauses just in the same way as under Rome I.

In the end, parties will be able to choose English law for their contracts, and this choice will be respected by courts in England and in the Member States of the EU.

7.4.4 Conclusion

The UK could decide to join the Hague Convention to achieve mutual recognition of court decisions. Yet, it is argued that joining this agreement might not be sufficient to calm businesses' concerns, as timing as well as details are uncertain. However, the same problems would arise in case the UK decides to negotiate a bilateral treaty with the EU to clarify mutual recognition of court decisions. In consequence, the UK (and hence London) could suffer as place of jurisdiction in expense of other European countries as enforceability of UK court rulings will to some extent more burdensome after the UK has left the EU. Several Continental EU countries (and cities) have already started to build up legal capacities and adopted English speaking procedures to increase their chance to be chosen as a place of jurisdiction. However, the UK withdrawal could also lead to an increased use of arbitration clauses in private contracts strengthening London as legal venue in the end. 7.5 Critical issues and options

Several European energy companies are severely exposed to regulatory changes in the UK energy market. As future UK legislation is not bound to EU state aid regulations (and WTO rules are less strict), future revenues could be impacted by special UK state aid rules. Potential home bias of UK regulatory decisions and competition policy could pose another threat to EU companies. They should also consider that enforcement of prospective UK court rulings might be more burdensome.

Regarding energy trading, we expect that Continental trading hubs might gain an advantage from Brexit as liquidity might shift. Even if UK decides to retain the status quo, (short-term) legal uncertainty could increase trading business on the Continent.

The same holds true for UK as a legal venue. Continental venues could benefit when companies decide to move place of jurisdiction to Continental sites.

185 _{Regulation (EC) No 593/2008.}

Table 29: Rules applicable to energy companies in countries under different arrangements

Market rules Financial regulation _{of energy trading} Legal jurisdiction _{and enforceability}

EU Member State

(e.g. France) EU IEM legislation + EU state aid rules EU legislation

Full enforceability (Brussels Regime) Full choice of law (Rome I) EEA (e.g. Norway) EU IEM legislation + EU equivalent state aid/competition rules

‘Passport’ clauses for certain regulations ‘Equivalence’ clauses for certain regulations (+ International rules) Enforceability possible (Lugano Convention) Energy Community (e.g. Ukraine) EU IEM legislation + UK state aid rules + WTO subsidy rules

‘Equivalence’ clauses for certain regulations (+ International rules) Bilateral and international treaties (The Hague Convention possible) Bilateral Treaty

(e.g. Switzerland) national state aid rules + WTO subsidy rules

‘Equivalence’ clauses for certain regulations (+ international rules) Enforceability possible* (Lugano Convention) WTO

(e.g. Morocco) national state aid rules + WTO subsidy rules

‘Equivalence’ clauses for certain regulations (+international rules) Bilateral and international treaties (The Hague Convention possible) Source: Bruegel.

CHAPTER 8. IMPACT OF THE UK WITHDRAWAL FOR