On 14 December 2010, the European Commission published its proposal for the reform of the Council Regulation (EC) No. 44/2001 on jurisdiction and enforcement of judgments in civil and commercial matters (known as "the Brussels I Regulation"). The proposal includes a copy of the amended Regulation, which helpfully shows the proposed deletions and additions.

The Brussels I Regulation (the Regulation) establishes a set of EU rules that determine which court has jurisdiction in cross-border disputes and how court judgments issued in one EU Member State are recognised and enforced in another EU country. The Regulation replaced the 1968 Brussels Convention, and applies to all Member States, including Denmark by way of a separate international agreement.

The purpose of reforming the Regulation is to remedy a number of deficiencies in the current operation of the Regulation. The proposal for reform contains four key changes:

  1. Abolition of the intermediate procedure for the recognition and enforcement of judgments (exequatur) with the exception of judgments in defamation cases and judgments in collective compensatory proceedings.

Under the current rules, a judgment given in one Member State does not automatically take effect in another Member State. Instead it first has to be validated and declared enforceable in a special intermediate court procedure, known as the "exequatur" procedure, which is costly and time-consuming. The exequatur procedure is seen as adding to the complexities of cross-border litigation which deters companies from cross-border trade.

The proposal abolishes the exequatur procedure with the objective of achieving a free circulation of judgments in civil and commercial matters and encouraging more businesses, particularly SMEs (small to medium sized businesses), to engage in cross-border transactions.

With the abolition of the "exequatur" procedure, any judgment obtained in one Member State will be recognised automatically in any other Member State as if it were delivered in the latter Member State itself. This change will benefit businesses as they will save time and money by not having to go through intermediary proceedings to have a judgment recognised and enforced abroad. The reform will maintain procedural safeguards to ensure that a judgment in breach of the right to a fair trial and the right of defence cannot be recognised and enforced.

  1. Extension of the jurisdiction rules of the Regulation involving third country defendants, including regulating the situations where the same issue is pending before a court inside and outside the EU.

The current jurisdiction rules in the Regulation provide that a defendant domiciled in a Member State, should, subject to certain exceptions, be sued in the courts of his domicile. Where a defendant is not domiciled in a Member State, then, again subject to certain exceptions, the Regulation does not apply. Instead the national law of the Member State applies. National rules on jurisdiction for third country defendants vary widely throughout the EU.

The proposal extends the Regulation's jurisdiction to third country defendants. The effect of this change will be to increase the possibilities for companies to sue third country defendants in the EU rather than abroad.

The proposal also contains two additional grounds for jurisdiction in respect of disputes involving defendants domiciled outside the EU. Firstly, a non-EU defendant can be sued at the place where moveable assets belonging to him are located, and the dispute has a sufficient connection with the Member State of the court seised. Secondly, the courts of a Member State can exercise jurisdiction if no other forum guaranteeing the right to a fair trial is available and the dispute has a sufficient connection with the Member State concerned ("forum necessitatis"). The proposal provides that these new rules compensate the removal of the existing national rules. Firstly, the forum of the location of assets balances the absence of the defendant in the Union. Secondly, the forum of necessity guarantees the right to a fair trial of EU claimants, which is important for EU companies investing in countries with immature legal systems.

In addition, the proposal introduces a new discretionary lis pendens rule which allows a court of a Member State to stay proceedings if a non-EU court was seised first, and the dispute concerns the same subject-matter and is between the same parties. The aim of this amendment is to avoid parallel proceedings taking place inside and outside of the EU.

This change will benefit consumers (employees, insured etc), by guaranteeing their access to an EU court in disputes involving defendants from outside the EU. Under the current rules, in a legal dispute between consumers and businesses, the consumer may always choose to go to a court in the EU Member State in which the consumer is domiciled, irrespective of whether or not the consumer brings the action or defends himself. However this principle does not currently apply where there is a third country involved.

The proposed extension of the jurisdiction rules of the Regulation to third country defendants is probably the most controversial reform proposed. Such a reform will limit the common law rules currently applied by the courts of Member States for the purposes of determining whether they have jurisdiction.

  1. Enhancing the effectiveness of choice of court agreements.

The current rules give effect, in principle, to choice of court agreements, but the effectiveness of such agreements suffer, in practice, from abusive litigation tactics. The current lis pendens rule, which aims to avoid the situation where two courts in the EU deal with the same case at the same time, provides that the court second seised of a dispute must stay proceedings until the court first seised has ruled on its jurisdiction. A party wishing to escape the choice of court agreement can currently delay proceedings in the chosen court if it first seises a court in a Member State where the judicial system is comparatively slow (a practice known as "Italian torpedo").

The proposal provides that where the parties have chosen a particular court to resolve their dispute, that court has priority, regardless of whether it is first or second seised. Any other court has to stay proceedings until the chosen court has established or declined jurisdiction.

The proposal also contains a harmonised conflict of law rule on the substantive validity of choice of court agreements, so as to ensure a similar outcome on this matter whatever court is seised.

These modifications reflect the solutions established in the 2005 Hague Convention on the Choice of Court Agreements, thereby facilitating the ratification of this Convention by the EU. This change is aimed at discouraging the use of pre-emptive claims which seek to undermine a valid choice of court agreement. It is likely to be welcomed by businesses as it should eliminate costs and delays incurred by attempts to circumvent choice of court agreements.

  1. Improving the interface between the Regulation and arbitration.

The current rules provide for the exclusion of arbitration from the scope of the Regulation. However problems exist in respect of the relation of arbitration and court proceedings. Currently, a party challenging the validity of an agreement to arbitrate can request the court to rule also on the merits. This can lead to parallel court and arbitral proceedings with the risk of conflicting outcomes where the agreement is held invalid in one Member State and valid in another. The case of Allianz SpA v West Tankers (Case C-185/07) shows that a party can bring court proceedings in a Member State despite the existence of an arbitration agreement and the court may consider the validity and scope of the arbitration agreement.

The proposal obliges a court seised with a dispute involving an arbitration agreement to stay proceedings if an arbitral tribunal or a court at the seat of the arbitration is seised. The aim of this modification is to prevent parallel court and arbitration proceedings, and eliminate the incentive for abusive tactics.  

Next steps

The Commission's proposal will now be sent to the European Parliament and the Council to be adopted under the ordinary legislative procedure. Final approval of the proposal is expected within the next two to three years.