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Implications of a no-deal Brexit on mortgage possession claims

  • United Kingdom
  • Brexit

23-07-2019

Summary

This article looks at the implications of a no-deal Brexit on new mortgage possession proceedings which need to be served[1] on a defendant living outside the jurisdiction[2]. It concludes that there will be more cases where the court’s permission will be required, and for those cases, the mortgage possession process is likely to become less streamlined with added costs and longer timeframes.

The current position

Currently, the UK is party to a framework of EU regulations (including Recast Brussels Regulation, the Lugano Convention, EU-Denmark and the 2005 Hague Convention[3])  which set out the rules that courts in EU member states apply to proceedings including service (‘the Regulations’). As a consequence of this framework, together with Part 6 of the Civil Procedure Rules (‘CPR’), permission to serve mortgage proceedings out of the jurisdiction is generally not required if the country where the defendant is domiciled is also a party to the Regulations (including the other EU member states).

The position if there is a no-deal Brexit

The government has legislated to deal with the loss of the EU Regime by passing the European Union (Withdrawal) Act 2018. This will repeal the European Communities Act 1972 and adopt into UK law the acquired body of EU law as at Exit Day. Changes will also be made to the CPR[4] to ensure that the rules still work without reference to the existing EU regime.  In the case of a no-deal Brexit, whilst the UK may adopt the Regulations, the remaining EU member states will not be obliged to adopt them in respect of the UK.

What does this mean for new mortgage possession proceedings?

The ability to serve new proceedings out of the jurisdiction without the court’s permission (where currently it is not required by virtue of the Regulations) will no longer be an option, unless the UK has been able to agree reciprocal arrangements.

However, it may still be possible to serve a new possession claim without permission where the court has jurisdiction under the 2005 Hague Convention (“Hague”) or under sections 15B or 15C of the Civil Jurisdiction and Judgments Act 1982. The UK will accede to Hague (in its own right), the day following Exit Day, providing a framework for governing and enforcement between the UK and the EU, until such time as other bespoke arrangements can be made.  Hague requires the parties to have entered into an exclusive jurisdiction clause, which is not always present in mortgage loan agreements.

If there is an exclusive jurisdiction clause, it is expected that permission to serve outside the jurisdiction will not be required between members of Hague (which includes the EU, Mexico, Singapore and Montenegro). Having said that, there is a risk that pre-existing exclusive jurisdiction clauses (entered into whilst the UK was not a party to Hague in its own right) will not be upheld under Hague.

So what will be the practical implications for new cases?

Unless the UK is able to agree reciprocal arrangements in relation to the Regulations or rely on Hague, an application to court for permission to serve will be required.

Furthermore, if permission is granted, the methods of service available will be more limited. The EU Service Regulation will no longer apply, which effectively means that service in the EU will need to be effected in the same way as for non-EU countries. Also, the rules relating to service in the relevant country will be that country’s domestic common law and statutes. This requires an individual assessment at the outset of the matter, and a pathway for service identified before the possession claim can be issued.

The first port of call should be the Foreign and Commonwealth Office, via the Foreign Process Section (‘FPS’). They will assist in identifying whether any treaty or convention is in place with a particular country and the methods of service available in that country. The FPS will arrange for service to be carried out, as long as this is permitted by the laws of the receiving country (“the FCO route”).  The FPS collate the documents for service for a fee (currently £150) and arrange service. Generally, where no treaty or convention is in place, service is effected through the government of the country where service is to be effected (if they are willing to do so) or through a British Consular authority in that country.

Where the FCO route is not available, it may be possible to undertake direct service using a process server in the receiving country (CPR 6.42(3)). Further there is also scope for service via the informal route (under CPR 6.42(2)) which permits service by any other method, as long as it is permitted by local law. This will further increase costs as advice will need to be sought from local lawyers on whether a particular method of service is acceptable in the receiving country. In a no deal situation, interaction with the FPS is likely to increase which will add additional time and cost to the process.      

Comment

Post-Brexit in a no-deal situation,  Hague should alleviate the need to obtain permission of the court to serve new proceedings in many instances. However, as outlined above, there will be cases not covered by Hague, where permission will be required and those proceedings are likely to take longer and be more costly and will require expert advice. Eversheds Sutherlands has an extensive global practice and can assist you with any queries on service outside the jurisdiction or on mortgage possession proceedings generally.

 

[1]                 The process for serving a claim outside of England and Wales is dealt with under CPR 6 and PD 6B      

[2]                 This article deals with the position for mortgage possession proceedings issued in England & Wales.

[3]                 UK is a party to the Hague Convention on Choice of Court Agreements 2005 by virtue of its membership of the EU.

[4]                 See Civil Procedure Rules 1998 (Amendment) (EU) Regulations 2019 which will come into force on Exit Day

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