On 20 November 2012, the European Parliament approved amendments to the European Commission's draft legislative proposals for the reform of the Brussels I Regulation (the “Regulation”) which determines which national court has jurisdiction in cross-border cases and how court judgments in one EU Member State are recognised and enforced in another.

Arbitration has traditionally been exempt from the Regulation, but such exemption was called into question following the controversial decision of the ECJ in West Tankers in 2009 which held that, while an anti-suit injunction concerning arbitration would normally fall outside the scope of the Regulation, an English court could not curtail the jurisdiction of the Italian courts by restraining parallel litigation in order to uphold an arbitration agreement which provided for arbitration in London.

The decision of the ECJ in West Tankers created uncertainty for parties to arbitration agreements where the seat of arbitration is in an EU Member State.  The decision was arguably inconsistent with the principles of the New York Convention, which applies in all EU Member States and over 120 other jurisdictions, and states that if there is a valid arbitration clause, the court is obliged to refer the matter to arbitration.  Commentators have argued that a reform of the law would be required to ensure that businesses continue to choose European arbitration centres to resolve their disputes.

In its draft proposals, the European Commission maintained that arbitration should remain exempt from the Regulation, but has inserted a lengthy new recital that clarifies the extent of the arbitration exception and underlines the fact that the New York Convention should ultimately be given precedence. Among other things, the recital expressly preserves the right of courts of Member States (whether first seised or not) to make rulings on issues such as the validity of arbitration agreements.

Recital 11 of the proposed Regulation states that:

  • the Regulation should not apply to arbitration
  • nothing in the Regulation should prevent a court of a Member State, when seised of a matter in respect of which the parties have entered into an arbitration agreement, from referring the parties to arbitration or from staying or dismissing the proceedings and from examining whether the arbitration agreement is null and void, inoperative or incapable of being performed, in accordance with its national law
  • a ruling given by a court of a Member State as to whether or not an arbitration agreement is null and void, inoperative or incapable of being performed should not be subject to the rules of recognition and enforcement laid down in this Regulation, regardless of whether the court decided on this as a principal issue or as an incidental question
  • where a court, exercising jurisdiction under this Regulation or under national law, has determined that an arbitration agreement is null and void, inoperative or incapable of being performed, this should not preclude that court’s judgment on the substance of the matter from being recognised and, as the case may be, enforced in accordance with this Regulation
  • this should be without prejudice to the competence of the courts of the Member States to decide on the recognition and enforcement of arbitration awards in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards done at New York on 10 June 1958…, which takes precedence over this regulation
  • this Regulation should not apply to any action or ancillary proceedings relating to, in particular, the establishment of an arbitral tribunal, the powers of arbitrators, the conduct of an arbitration procedure or any other aspects of such a procedure, nor to any action or judgment concerning the annulment, review, appeal, recognition or enforcement of an arbitral award.

Now that the European Parliament has adopted a position at first reading, the focus moves to the Council, which is due to meet next month to consider its own position on the proposals. If the Council approves the European Parliament's position without amendments, there will be no need for a second reading, and the text will be published in accordance with EU law. However, if the Council suggests amendments to the European Parliament's position, the proposal will be sent back to the European Parliament for a second reading.