The European Commission has recommended that the UK should not continue to enjoy the benefits of the EU's rules on jurisdiction and the enforcement of judgments in cross-border disputes. We look at what this means in practical terms, and the extent that claimants in international disputes with a European dimension can fall back on global and more local rules.
On 4 May 2021 the European Commission formally recommended that the EU should not allow the UK to re-join the Lugano Convention 2007 on jurisdiction and the enforcement of judgments in civil and commercial disputes. The Commission does not have the last word on the matter, but the European Parliament and Council are expected to follow its lead.
In the current climate the news is not surprising, and is certainly not a disaster for litigants (or would-be litigants) in the English courts, but it is disappointing nonetheless. It means that parties that are concerned about parallel litigation in England and the EU may have to rely on an English court issuing an anti-suit injunction to suppress foreign proceedings where those are breach and English jurisdiction agreement, and any judgments issued in England will have to be enforced under local, bilateral or global rules, where these apply. The days when English judgments could be easily enforced in EU Member States under the 'Brussels regime' now seem to be over, and the process could take longer and be more expensive than previously, and will sometimes be more unreliable too.
Just how difficult the enforcement process will be depends on what alternative laws are relied on. The new global rules, which fortunately bind EU Member States as well as the UK, are set out in the Hague Convention on Choice of Court Agreements 2005, which is now in force for those countries as well as for Mexico, Montenegro and Singapore. These rules only apply, though, where the judgment arises from a straightforward exclusive jurisdiction agreement in favour of the courts of a contracting state, and (in the Commission's view, at least) only if the agreement was concluded no earlier than 1 January 2021 - the day after the Brexit transition period ended. These facts, and the limited scope of the 2005 Convention (it does not cover e.g. most tenancies, employment contracts, and many insurance matters where the UK or EU is concerned), mean that its provisions will be of limited use in the short term. However, alternative bases for enforcement are usually available: old bilateral arrangements between the UK and individual EU Member States, where these are still in force, or local rules on enforcement such as Section 328 of the German Code of Civil Procedure (Zivilprozessordnung).
All this may seem rather messy, but is not unusual in the global context. US judgments are routinely enforced in England under common law principles, for example, and judgments from courts in the EU could be enforced in future in the same way, so there is no absolute need for a Convention or bilateral arrangement to be in place. What it does mean, though, is that claimants in disputes involving the EU should think carefully before issuing proceedings in the UK, and plot a 'route to enforcement' before investing any money in their claim. By contrast, those parties who have chosen arbitration rather than the courts in their pre-2021 commercial agreements will be in a privileged position, since arbitral awards can be enforced across borders under the New York Convention 1958, which is not affected by Brexit and not subject to all the limitations of the 2005 Convention. However, this does not mean that arbitration is necessarily the better option in new commercial agreements, agreed after the Brexit transition period ended - there are pros and cons to each kind of dispute resolution clause. For advice on this question, pls speak to your usual contact at Clyde & Co.