This briefing note explores some of the alternatives to the Brussels I Regime that may be introduced if the UK were to vote to leave the EU.
The law relating to civil jurisdiction and judgments has undergone substantial change in recent years, with the entry into force of the Brussels I Regulation (Recast) (`the Recast Regulation') on 10 January 2015.That Regulation is the latest in a line of European legislative instruments governing both the allocation of civil and commercial jurisdiction among EU member state courts and the recognition and enforcement of their judgments.This regulatory regime, which has been in force in the UK in various guises since 1987, is likely to be significantly modified, if not entirely replaced, in the event of Brexit.
Legal framework for withdrawal
The starting point for an analysis of the potential impact of Brexit on the Recast Regulation is Article 50 of the TEU.That provision sets out the legal consequences of withdrawal from the EU. Article 50(3) makes it clear that the UK would have two years to negotiate a withdrawal agreement, unless the European Council unanimously agreed an extension of time. Upon the entry into force of the withdrawal agreement, or the expiry of the twoyear period, the EU Treaties will no longer apply to the UK.This includes Article 288 of the TFEU, which provides for the direct application of EU Regulations.This means that, as of that moment, the Recast Regulation will no longer be part of English law.
So, what might replace it?
Option 1: Recast Regulation by agreement
The first option is that the UK might seek to agree the continued application of the Recast Regulation, with appropriate modifications to provide for the UK's status as a third state.This option would share similarities with Denmark's 2005 agreement with the EC, which had the effect of bringing the Recast Regulation's predecessor (`the 2001 Regulation') into force in Denmark. This solution would certainly have the benefit of minimising uncertainty as to the English courts' relationship with the courts of EU member states. It would also avoid the hassle and cost of significant legislative amendment.
However, there are several practical difficulties. Most importantly, as the Recast Regulation is founded on the principles of mutual trust and reciprocity, the regime could continue to function in the UK only with the reciprocal agreement of EU member states. One also wonders as to whether sufficient political appetite would exist on both sides for such an arrangement on the UK's part, there may be a distaste for the continued application of EU law (including the acceptance of the CJEU's jurisdiction), without an ability to influence it, and on the EU's part, there may be a disincentive to conclude a special regime with an exiting state.
Option 2: Lugano Convention 2007
The second option is to sign and ratify the Lugano Convention, which is the amended version of the 1988 treaty that was negotiated to extend the Brussels regime to EFTA states. Presently, it applies to Norway, Switzerland and Iceland only.
The key draw-back with this option is that the Lugano Convention was not affected by the Recast Regulation (see Article 73(1)). As a treaty, it requires amendment in order to bring it into line with the Recast Regulation, in accordance with its own provisions (Article 76).This has not yet been accomplished.There is also no indication from either the Convention's Standing Committee or the Convention's Depository,
Switzerland (which has more pressing issues to resolve with the EU following its 2014 referendum), that reform is on the agenda.This means that the changes introduced by the Recast Regulation would no longer apply in the UK. By way of recap, the five most important changes are:
- a new exception to the lis pendens rules for torpedo actions (Article 31(2));
- the clarification of the arbitration exception (Recital 12);
- changes to the rules relating to jurisdiction agreements (Article 25);
- a new discretion to stay proceedings where other proceedings are pending in a third state (Articles 33 and 34); and
- the abolition of exequatur (Article 39).
It is also worth bearing in mind that the UK's signature and ratification of the Lugano Convention would not be a seamless transition.This is because the Convention is open only to EFTA member states and to third states that meet certain conditions (Article 70).The UK is not presently an EFTA member state (nor an EEA member) in its own right, so unless it pursued that route, it would need to meet the Convention's conditions, including obtaining the unanimous agreement of the Contracting Parties (Article 72). As the EU is also a Contracting Party, this means that the EU could have a significant role to play.
Option 3:Another treaty?
A third option is for the UK to sign and ratify another treaty on civil jurisdiction and judgments. In theory, the UK could negotiate a series of bilateral agreements or a new multilateral framework.The more likely avenue would be to introduce an existing treaty regime into UK law.
The most obvious candidate is the Hague Convention on Choice of Court Agreements 2005. This Convention recently came into force (on 1 October 2015) after its ratification by the EU. It has also been ratified by Mexico and Singapore, and signed by the US. However, this Convention is incapable of serving as a comprehensive jurisdiction regime, as it concerns exclusive jurisdiction agreements alone (even though a broader reciprocal declaration may be made under Article 22). Its recognition and enforcement procedure also has disadvantages, including that it allows for exequatur (Article 14).
That said, the Convention does have certain practical benefits. First, the EU has already acceded to it, so there would no need to negotiate on that front. Secondly, the Convention is open for signature by all states, without qualifying conditions (Article 27).Thirdly, as the Convention already applies in the UK due to its EU membership, the legislative regime is already in place (thanks to a 2015 statutory instrument).Whilst it may not be a complete solution, it may be a useful interim or partial measure.
One should also note that a new Hague Convention is presently being drafted under the auspices of the HCCH.A Special Commission has been appointed to prepare a draft Convention. It is meeting for the first time this month, but the project is very much in its infancy.
Option 4: Brussels Convention?
The fourth option is for the UK to rely on its residual framework
instead.The UK remains a party to the Brussels Convention, namely the version that was in force in the UK in 2001 (following the accession of Austria, Finland and Sweden). That Convention became largely redundant following the advent of the 2001 Regulation. It now applies only to Aruba and French overseas territories.
However, it was superseded only to the extent that it governed territories to which the EU Treaties apply (Article 68(1)). So, once the EU Treaties no longer apply to the UK, the Brussels Convention would remerge as the governing instrument, as outdated as it is. If the UK preferred an alternative model, it would need to renounce or withdraw from it.And as the Convention has no specific provisions for renunciation or withdrawal, it would need to look to the rules of the Vienna Convention on the Law of Treaties (Articles 54 and 56).
And if all else fails, the common law would always exist to fill the gap. In circumstances where the common law is diametrically different from the Brussels regime and has not been applied by the English courts to EU cross-border disputes for nearly 30 years, one imagines that its application would be far from straightforward.
If the UK votes to leave the EU on 23 June, the legal landscape for civil jurisdiction and judgments will be uncertain, like so many other areas of English law. Everything will depend on what the EU and the UK are able to agree during the two-year Article 50 negotiating period.Whichever of the above options is pursued (if any at all), it is clear that the current rules will change in important ways, with real consequences for commercial parties.