In a highly integrated economy like Europe’s, cross-border litigation is common. Oftentimes, a suit may be brought in a court in one EU country against a defendant with assets in many EU countries, so that a judgment from that court may need to be enforced in many countries. Unfortunately, enforcing foreign judgments can be expensive and difficult. Today, an EU regulation known as “Recast Brussels I” streamlines the process for enforcing a judgment issued from a court in one EU country in one or more other EU countries.[1]

It is doubtful, however, that Recast Brussels I in the future can be used to facilitate the enforcement of judgments (1) from UK courts in EU countries or (2) from courts in EU countries in the United Kingdom. On June 23, 2016, the United Kingdom voted through a national referendum to exit the European Union after more than forty years of membership. This Article analyzes the effects of the so-called “Brexit” on the enforcement of judgments in Europe and recommends strategies that companies should consider in light of this analysis. Significantly, the UK post-Brexit will become a less attractive venue for cross-border litigation in Europe. This result has far-reaching effects, as it applies to many different types of commercial lawsuits.

Cross-Border Enforcement Before Recast Brussels I

A useful place to start an analysis of the enforcement of judgments in Europe is a 1968 treaty known as the “Brussels Convention,” which was established by six European countries to simplify the processes for recognizing foreign judgments.[2] Under the terms of the Brussels Convention, a judgment from a court in one participating country would be enforceable in a second participating country after a standardized legal process produced a declaration that the judgment was enforceable in that second country.[3] Eventually, these proceedings came to be known by their French name: “exequatur” proceedings. The Brussels Convention limited the grounds under which an application for a declaration of enforceability in exequatur proceedings could be refused. Specifically, a declaration could only be rejected if the foreign judgment (1) was contrary to public policy in the enforcing jurisdiction, (2) issued by default following a lack of proper service, (3) conflicted with certain other judgments, or (4) issued from a court that lacked jurisdiction.[4]

While useful, the Brussels Convention only had legal force to the extent that it was faithfully implemented through local law in each participating country. Moreover, by the end of the Twentieth Century, some countries had joined the EU but not the Brussels Convention. As a result, EU lawmakers enacted an EU Regulation in late 2000 that was binding on all EU members and came to be known as “Brussels I.”[5] The regulation was closely patterned on the Brussels Convention, requiring the use of exequatur proceedings to obtain declarations of enforceability and limiting the grounds for denying an application for such a declaration to the same grounds listed in the Brussels Convention.[6] As with the Convention, however, Brussels I allowed each country to determine the procedure for exequatur proceedings in that country.[7] Having addressed many of the same issues as the Brussels Convention, Brussels I explicitly superseded the Convention “as between Member States” to the European Union.[8]

The Streamlined Processes of Recast Brussels I

Although Brussels I substantially harmonized the substantive law applicable in exequatur proceedings in EU countries, the Convention left the procedural details of exequatur proceedings to local law, so that the process of enforcing foreign judgments remained somewhat “time-consuming and costly.”[9] Moreover, exequatur proceedings naturally took place in the official languages of the courts in the countries where enforcement was sought, often requiring litigants to obtain the services of local counsel for exequatur proceedings. As a result, EU lawmakers began to study the cost and efficacy of exequatur proceedings and by 2009 the European Commission issued a report recommending that exequatur proceedings be abolished. The report found that in almost all cases, enforcement proceedings successfully produced declarations of enforceability, so that the expense and delay of those proceedings provided little benefit compared to a system of automatic cross-border enforcement.[10]

Consequently, in 2012 the EU enacted Recast Brussels I largely to eliminate exequatur proceedings. Under the new regulation, a judgment in an EU Member State is enforceable in another EU Member State without any “any declaration of enforceability being required.”[11] Instead, a judgment from a court in an EU country will be enforceable in other EU countries “under the same conditions” that apply to judgments of local courts of those countries. In other words, at least within the EU, differences between the enforcement of foreign and domestic judgments have largely been eliminated. Interested parties in a country where enforcement is sought may apply to a local court to prevent a judgment from being enforced, and the grounds for preventing such enforcement involve the same four issues identified under the Brussels Convention and Brussels I, but the onus is on the opponent of enforcement to initiate judicial proceedings.[12] In the absence of such opposition, a party seeking to enforce a foreign judgment can immediately work with a “competent enforcement authority” to enforce the judgment.

Impact of Brexit on Cross-Border Enforcement

Whether the effects of an EU regulation like Recast Brussels I will survive Brexit is unclear. Almost certainly, EU regulations will cease to be legally binding in the United Kingdom following Brexit. However, the UK Prime Minister, Theresa May, recently announced plans for a “Great Repeal Bill” that would “convert” all EU regulations into UK law.[13] Under this approach, Recast Brussels I would not apply in the United Kingdom as a matter of EU law, but the converted British version of Recast Brussels I would apply as a matter of UK law. Whether the Great Repeal Bill will be successfully enacted is less clear. Indeed, some members of Parliament have already threatened to oppose such legislation.[14] Opposition within Parliament may be additionally difficult to overcome if the power to initiate Brexit rests with the UK Parliament rather with the Prime Minister, as the UK High Court held in early November 2016.[15]

Moreover, incorporating Recast Brussels I verbatim into UK law might produce a nonsensical law. Recast Brussels I explicitly addresses the enforcement of “[a] judgment given in [an EU] Member State” in “other [EU] Member States.”[16] Once the United Kingdom leaves the EU, however, a UK law that repeats the provisions of Recast Brussels I would apply neither to a judgment from a UK court, which would not be a “judgment given in a Member State,” nor to the enforcement of a foreign judgment in the United Kingdom, which would not be an “other Member State.” Similarly, Article 68 of Recast Brussels I states that the regulation will “as between the [EU] Member States supersede the 1968 Brussels Convention.”[17] Under a UK version of Brussels I Recast, the United Kingdom would not be a “Member State,” so that the Brussels Convention would appear to apply rather than the new UK law.

Of course, the UK Parliament could draft appropriate legislation to ensure that the substantive terms of Recast Brussels I apply, but that level of customization may be unlikely. Under EU law, the UK must invoke the departure provisions of Article 50 of the EU’s Treaty of Lisbon to begin the process of withdrawing from the EU. Critically, Article 50 states that the United Kingdom will have only two years to negotiate the terms of withdrawal and that at the end of that period all EU law will cease to apply in the UK.[18] In this timeframe, the UK Parliament is unlikely to customize appropriately the thousands of EU regulations that currently apply in the United Kingdom, particularly given the contentious nature of Brexit.

In addition, even if the substantive provisions of Recast Brussels I were reworked to effectively apply in the United Kingdom, such a law would have no effect on the remaining EU countries. Those countries would be under no obligation to apply the terms of Recast Brussels I to judgments from UK courts. As noted, Recast Brussels I addresses only the enforcement of judgments issued by courts in EU countries. Instead, the remaining EU countries likely will apply to judgments from UK courts the “time-consuming and costly” procedures of exequatur proceedings.

The United Kingdom may ultimately follow the examples of other non-EU countries like Iceland, Norway, and Switzerland by joining the Lugano Convention, which is a treaty that addresses cross-border enforcement. But this treaty largely replicates the terms of Brussels I, including the requirement for exequatur proceedings.[19] As a result, the Lugano Convention will not help the United Kingdom keep the benefits of Recast Brussels I post-Brexit.

Planning for Brexit

Litigants who are considering filing an action in the United Kingdome should therefore consider the additional costs that may arise if it becomes necessary to enforce the judgment in the European Union. In high-stakes commercial litigation like the infringement of a pharmaceutical patent, the added enforcement cost may be comparatively small, but in close cases involving a defendant with resources scattered throughout the European Union, litigating in an EU country may ultimately prove more effective. Filing in the United Kingdom may force a litigant to hire local counsel to initiate exequatur proceedings in many different EU countries. Filing the initial litigation in an EU country may be preferable due to the automatic enforcement regime available under Recast Brussels I. Although Brexit may still be more than two years away, litigants should consider these costs today because Brexit may be finalized before a final judgment issues from a UK court. Likewise, litigants in UK disputes today should enforce their judgments throughout the EU as quickly as possible to take advantage of Recast Brussels I pre-Brexit. Finally, to reduce enforcement costs, parties negotiating contracts should consider including a forum selection clause that identifies an EU country rather than the United Kingdom as the forum for resolving disputes.