Brexit: Choice of law clauses in existing legal relationships and the law applicable to noncontractual

The so-called ROME I Regulation creates the possibility of contract parties from different states specifying the law applicable to their contract themselves, and determines the law applicable in cases in which the parties have not made a choice of law. The so-called ROME II Regulation makes it possible to determine the applicable law for so-called non-contractual obligations, for example in cases of international product liability or for traffic accidents involving parties from differing countries. In Germany and other EU member states, these Regulations will remain applicable even after a possible Brexit.

• From a British perspective however, the ROME I and ROME II Regulations would not apply following a Brexit and would have to be replaced by national rulings in the UK, as the ROME I and ROME II Regulations constitute applicable law only in the member states of the EU. As regards the ROME I Regulation, it can however be assumed that comparable national rulings would take effect, as the UK was already a contracting state of an international agreement containing similar provisions before the said Regulation came into force. It is even conceivable that the UK could take over the rulings of the ROME I Regulation under a national law.
• The situation with the ROME II Regulation is different. For the first time, this implemented harmonized rulings for a series of legal institutions, and overruled a number of special aspects of national legal systems. Consequently, it cannot be assumed that the national British lawmaker would introduce provisions comparable to the ROME II Regulation in all points.
• An authoritative aspect when choosing the application of English law for a contract is the date on which a possible legal dispute is scheduled to be decided by a court, meaning that account must be taken of changes occurring before then (here: triggered by Brexit). Following a Brexit, EU Regulations - that are directly applicable law inside the EU - would therefore no longer be part of English law. By contrast, national rulings, issued in implementation of EU Directives, would remain applicable until such time as repealed or replaced by deviating regulations.
• Given the current uncertainty concerning future changes to the rulings of English law, the attraction of the English legal system in international trade is unlikely to be enhanced, at least temporarily. In many legal areas, English law will be chosen less frequently - at least temporarily.
• Changes to the legal framework conditions of an existing contract can render execution of this contractual relationship uneconomical. Whether this can be seen as a form of frustration of contract that could, for example, constitute a reason for withdrawal from the contract under German law (see Section 313 BGB (German Civil Code)), is a matter that has to be checked on a case-by-case basis.