Brexit has many consequences. One of those that is significant to every day legal relations between the UK and the EU is the concept of a “hard Brexit” in international civil procedural law. Indeed, many key procedural issues falling under the broad subject of UK-EU judicial cooperation, including service, jurisdiction and enforcement (which were, pre-Brexit, covered by the Brussels regime) have simply not been addressed in the EU-UK Withdrawal Agreement, and at this stage a prompt resolution is not in sight. Civil litigators (and, indeed, those negotiating transaction documents) in the EU and the UK must therefore become adept at navigating the complex, and moving, cross-border rules at play.
In recent decades, the EU has created a vast system of regulations in the field of international procedural law. However, the EU-UK Withdrawal Agreement, applicable following the end of the transition period on 31 December 2020, does not contain any provisions on international private and civil procedure law and is silent on judicial cooperation in that regard. Consequently, it is said that there has been a so-called “hard Brexit” in this sector.
In order to address this, following Brexit, a number of the rules of the EU regime have been incorporated into domestic UK law and, therefore, will continue to apply in substance in the UK. Others will apply only for a limited time (for example in relation to proceedings initiated before the end of 2020). Others still, including those addressing automatic recognition and enforcement of judgments, will (for now) be partially replaced by the terms of the Hague Convention 2005 or other common law rules, pending further decisions to be made at European and UK levels.
In respect of court proceedings initiated before 31 December 2020, Regulation (EU) 1215/2012 (Recast) (the “Recast Brussels Regulation”) on jurisdiction and enforcement of judgments will continue to apply between the UK and EU member states. In those circumstances, it is clear that the EU and the courts of EU member states will continue to play a significant role in UK-EU proceedings for some time yet.
The Hope: the 2007 Lugano Convention (the “Lugano Convention”)
The Lugano Convention governs jurisdiction in cross-border civil or commercial disputes and facilitates the enforcement of judgments between the EU member states and European Free Trade Association states (Iceland, Norway and Switzerland). For the most part, it virtually replicates the Recast Brussels Regulation. It is because of just how closely the Lugano Convention tracks the provisions of the Recast Brussels Regulation that it has long been considered, at least by the UK, as the most desirable alternative jurisdiction/enforcement regime following Brexit.
While the UK applied for accession to the Lugano Convention on 8 April 2020, accession requires unanimous consent of the current members and the pathway there – particularly in the current climate – is not straightforward. Although the non-EU members of the Lugano Convention (i.e. Iceland, Norway and Switzerland) have already backed UK’s accession, to date the EU has not given its approval due to, among other things, difficulties that are often political in nature. In particular, on 4 May 2021 the EU Commission voted against the UK’s accession and, in support of its recommendation, offered the fairly punchy suggestion that, in the Commission’s eyes, the UK is “a third country without a special link to the [EU’s] internal market”.
Still, the ultimate decision on the UK’s accession to the Lugano Convention lies in the hands of the European Council, from which a decision remains pending.
The 2005 Hague Convention (the “Hague Convention”)
The UK acceded to the Hague Convention independently its own name on 31 December 2020, having first acceded in 2015 by virtue of its EU membership. Other countries that have ratified the Hague Convention are Mexico, Singapore and Montenegro.
The Hague Convention serves to give effect to exclusive jurisdiction clauses, in particular by requiring that the courts of contracting states: (i) give effect to exclusive jurisdiction agreements in their favour (Art. 5); and (ii) stay proceedings to which an exclusive jurisdiction agreement in favour of courts of another contracting state applies (Art. 6). However, and critically, it is narrower in scope than the Recast Brussels Regulation or the Lugano Convention, as it does not apply to asymmetric or to non-exclusive jurisdiction agreements. Further, from the point of view of EU member states, there remain certain uncertainties regarding, in particular, its applicability to cases where the relevant jurisdiction clause was agreed prior to 31 December 2020. Moreover, unlike the EU regulations, the Hague Convention provides for several, relevant exceptions of acknowledgement and enforcement of foreign judgments.
The Current Situation and its Consequences
In the case of proceedings which are governed by an exclusive jurisdiction clause in favour of the courts of another contracting state, English courts will apply common law rules on jurisdiction. Although the English courts are likely to recognise jurisdiction under these clauses, it is expected that there may be more frequent challenges in the courts of EU member states to the jurisdiction of the English courts as they will no longer be bound to exercise jurisdiction as they were under the Recast Brussels Regulation (Art. 25) or would be under the Lugano Convention (Art. 23).
The same rules apply to enforcement of judgments. Parties can be reasonably confident that a new exclusive jurisdiction clause in favour of English courts will be respected by courts of EU member states and the resulting judgments will be enforceable throughout the EU under the Hague Convention. Otherwise, it is generally expected that most EU countries will enforce UK judgments even without a specific reciprocal regime, although the procedures for such enforcement may be more burdensome, time-consuming and expensive. In particular, separate enforcement proceedings may be required for the recognition and enforcement of judgments from the UK in EU member states and vice versa: the applicant must bring an action for recognition and seek a declaration of enforceability before the national courts in accordance with the applicable national procedural rules. This may well make the enforcement process substantially more tedious, complex and subject to increased legal uncertainty. As a consequence, parties and their legal counsel should pay close consideration to this aspect when negotiating and agreeing on choice of law and jurisdiction clauses in commercial contracts.
In its decision not to recommend the UK’s accession to the Lugano Convention, the EU Commission referenced the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters of 2 July 2019 (the “Judgments Convention”), a sister instrument to the Hague Convention which currently neither the EU nor the UK are contracting parties to. The Judgments Convention is designed to provide a single global framework for the enforcement of judgments on civil or commercial matters across jurisdictions, requiring that contracting states recognise and enforce civil and commercial judgments handed down in other contracting states. However, while the UK government is considering accession (and the EU Commission has implied that it plans to become a contracting party in the near future) the Judgments Convention is only likely to have any material impact if ratification is both sufficiently widespread and occurs in relatively short order. At this stage, it is impossible to anticipate that for, despite having been in existence for over two years, only three international states have acceded to the Judgments Convention: Israel, Ukraine and Uruguay.
An alternative to the regimes outlined above would be the conclusion of a new treaty between the EU and the UK, or bilateral treaties between the UK and each EU member state. However, again, that option is unlikely to be concluded in the near future.
It remains to be seen if the UK’s accession to the Lugano Convention will be finally approved As of today, as a consequence of the complex cross-border rules at play, counterparties to EU-UK commercial arrangements and their legal counsel should pay close attention to the current rules and their moving parts when negotiating and agreeing choice of law and jurisdiction clauses.