As we all know, by midnight on 31 January 2020 the United Kingdom left the European Union. As a result, the United Kingdom is also no longer a party to the European Economic Area (EEA) Agreement. In the Brexit withdrawal agreement[1], a transition period was agreed upon until 31 December 2020. Until then, EU law continued to apply in the UK, and nothing actually changed for citizens, consumers, businesses, etc., in both the EU and the UK. During the transition period, the EU and the UK negotiated their future cooperation and the rules that would apply following the end of the transition period.

The starting point was that if the EU and the United Kingdom failed to reach an agreement on this, the existing arrangements and EU legislation (to the extent that it is not explicitly maintained in the withdrawal agreement) would cease to apply on 31 December 2020. This meant that for unresolved subjects, the EU countries and the UK would have to fall back on older mutual agreements or the provisions of their national law.

The Trade and Cooperation Agreement [2] between the EU and the United Kingdom was finally concluded at the last minute in the last week of 2020. The contents of this agreement have replaced the previously existing agreements and EU legislation as of 1 January 2021. However, this agreement is far from all-encompassing as of yet, and there are many topics that are not covered in the Trade and Cooperation Agreement that need to be clarified

In this article we will discuss the rules that will apply in the area of dispute resolution as of 1 January 2021. There have been European agreements since 1968 in this area- on the recognition and enforcement of foreign judgments, the international jurisdiction of national courts and the agreements that parties can make on the law that applies in their mutual relationship and the court to which they wish to submit their disputes. These agreements have been extended over time.

Fortunately because of these agreements, European citizens and businesses have become accustomed to a large extent, to the fact that a judgment obtained in one Member State is recognised and enforced in the other Member States without (too) much difficulty. In addition, parties are aware that it is largely guaranteed that the courts of a certain country will declare themselves competent to settle a dispute and/or agree to apply a certain law. Following the new Brexit agreement at the end of the transition period, these known presumptions have come to an end. The mutual recognition and enforcement of judgments is not regulated in the Trade and Cooperation Agreement, and it remains unclear for the time being what rules will apply in the long term. For other aspects of international dispute settlement, older international agreements will be invoked (explicitly or implicitly). We will briefly explain this below.

Recognition and enforcement of foreign judgments

From 1 January 2021, a party that obtains a favourable judgment in the Netherlands against a party that is domiciled or established in the United Kingdom cannot simply have this judgment recognised or enforced in the United Kingdom. This was possible under the previously applicable rules of the Brussels I-bis Regulation.[3] This Regulation made it possible for judgments given by the courts of one of the Member States to be recognised and enforced directly throughout the EU without the need for court authorisation. For judgments in cases that were still pending on or before 31 December 2020, these rules of recognition and enforcement of the Brussels I bis Regulation still apply (pursuant to Article 67 of the Withdrawal Agreement).

For cases brought after 31 December 2020, recognition and enforcement in the UK is less straightforward. The basis for this will now have to be found in older treaties.

Both the Netherlands and the United Kingdom are parties to the Hague Convention on Choice of Court Agreements[4]. In the event of an exclusive choice of court for the Netherlands or the United Kingdom, this Convention provides that the judgment of the court designated on this basis shall be recognised and enforced by the other Contracting States. The Convention lists exhaustive grounds on which recognition or enforcement may be refused.

In the event of non-exclusive choice of forum or other jurisdictional arrangements, the 1967 Convention between the Kingdom of the Netherlands and the United Kingdom of Great Britain and Northern Ireland providing for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters[5] may be relied upon for recognition and enforcement. Since the entry came into force prior to European procedural law, this bilateral treaty has only been applied to the recognition and enforcement of judgments between the Netherlands and the English Channel Islands and between the United Kingdom and the Netherlands Antilles, but it has never been formally terminated. The Convention governs the recognition (of which more follows below) and enforcement of judgments. As far as enforcement is concerned, it only governs the enforcement of judgments under which a sum of money is due. Many judgments also contain other (non-monetary) obligations, for example obligations to do or refrain from doing something. This is an important limitation compared to the rules in the Brussels I-bis Regulation and the Hague Convention on Choice of Court Agreements.[6]

The consequence of this limitation to the enforcement of monetary claims is that (when the Hague Convention on Choice of Court Agreements - see above - is not applicable either) for the enforcement of non-monetary claims, parties have to rely on their own national rules of private international law. For a Dutch party seeking the enforcement of an English judgment in which a non-monetary claim is awarded, this means in principle that the case will have to be judged again on its merits by a Dutch court. However, this will not necessarily lead to a full 'retrial', as long as the Dutch judge can ascertain that - put concisely - the English judgment was rendered by a competent judge, in a procedure surrounded by sufficient safeguards and not contrary to the Dutch public order or a Dutch judgment with the force of res judicata between the same parties on the same dispute. However, the regime is much more cumbersome than the one existing before 1 January 2021.

Due to the distinction in enforcement, it is important to know whether there is a claim in which a sum of money is due under the bilateral convention. There is very little known case law in this area. In 2011, the Court of Appeal of Amsterdam ruled that an order to pay the costs of the proceedings, without mentioning those costs as an amount, does not qualify as a monetary claim within the meaning of the bilateral convention of 1967.[7] Should this line of judgment be followed, enforcement under the Convention is almost exclusively possible in judgments awarding a definitively determined sum of money. An order to pay a sum of money which has yet to be determined by a further calculation will not be sufficient. It remains to be seen how exactly to deal with, for example, orders to pay statutory interest on an amount that has otherwise been definitively determined. It is also currently unknown how to deal with an order to pay a penalty for non-compliance with a main order. The Brussels I-bis Regulation and the Lugano Convention (see below) contain a specific rule to the effect that penalty payments can only be enforced when the amount has been finally determined by the court of origin. It would not be illogical to follow this approach when it comes to the enforcement of penalty payments under the bilateral 1967 Convention, but this is not yet a done deal.

The system of recognition of judgments is more generous in the bilateral convention of 1967: recognition takes place in all civil law cases (subject to certain grounds for refusal, which will have limited application). For example, declarations of law, such as whether a wrongful act has taken place, whether a contract has been terminated, whether obligations have been fulfilled or not, etc.

Under both the Hague Convention on Choice of Court Agreements and the 1967 Bilateral Convention, some form of judicial authorisation will still have to be sought for the enforcement of a foreign judgment. In any event, this will involve the submission of various documents and certified translations, and will obviously lead to a certain amount of delay. A further complication is that it is unclear whether the Hague Convention applies to contracts (with such a choice of forum) concluded after 1 October 2015 (as the UK assumes) or only to contracts concluded after 1 January 2021 (as the EU assumes).

The United Kingdom has also requested accession to the Lugano Convention[8]. This is relevant as accession to this Convention would ensure that the EU rules on jurisdiction and recognition and enforcement of judgments continue to apply, albeit at a slightly lower level than that of the Brussels I bis Regulation (namely, at the level of the old Brussels I Regulation[9]). The immediate enforcement of a judgment from the courts of another Member State is also lacking here. The requested permission for accession has not yet been granted by the EU (which is a party to this Convention). At the moment it is also unknown when the EU will decide their position on this.

What are the practical consequences of all this? It is clear that for the time being it will become more difficult to have a judgment obtained in the Netherlands enforced in the United Kingdom and vice versa. For that reason alone, it may be wise to litigate where the other party is domiciled or has assets, in order to avoid any problems with recognition and enforcement. Such problems can also be avoided by opting for arbitration, which is discussed further below.

Choice of law and applicable law

The rules on choice of law and applicable law will not change after 1 January 2021 between the Netherlands and the United Kingdom. The United Kingdom has chosen to retain the rules on the law applicable to contractual obligations (from the Rome I Regulation[10]) and the rules on the law applicable to non-contractual obligations (from the Rome II Regulation[11]) in its national law.

Choice of forum and choice of arbitration

The aforementioned Hague Convention on Choice of Court Agreements (already in force) and the Lugano Convention (not yet in force between the UK and the EU) also deal with the rules on selecting a choice of court - and the consequences thereof. In order to determine whether a valid choice of forum has been or can be made, it is important to ascertain which Convention applies and what relevant provisions it contains. The choice of forum in an agreement between commercial parties can be used strategically to avoid future problems of recognition and enforcement. The location of the debtor's relevant assets may play an important role in that strategy.

Following on from the above, a choice can be negotiated in the contract. –For example, the parties may choose to have the contract governed by Dutch law with the UK court as forum, if the other party is domiciled or has its assets there. It must be noted that it can be very complex to present Dutch law before a foreign court, and that litigation in the United Kingdom is much more complex and expensive than it is here in the Netherlands. If the other party has assets (also or mainly) in the Netherlands, the parties may wish to make the opposite choice: for example a choice for the law of England and Wales, with the Dutch court as forum. A specific choice for the Netherlands Commercial Court (NCC) of the District Court of Amsterdam may in such a case remove many practical objections of the English counterparty. The proceedings at the NCC are conducted entirely in English and the parties can make arrangements to adapt the proceedings to align with common law regulations, for example, in the field of gathering evidence. The result, however, remains a Dutch judgment (or, on appeal to the Netherlands Commercial Court of Appeals, a Dutch judgment), so that there will be no problems with recognition or enforcement.

However, as mentioned above, when a contract is created or after a dispute has arisen, a choice can also be made to settle any dispute by arbitration, rather than in the public courts. More than 150 countries worldwide have now acceded to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so the recognition and enforcement of arbitral awards, including those from distant countries, is generally simpler than in the case of awards from a government court. As there are (among other advantages) also disadvantages to arbitration, such as often higher costs, it is important to seek legal advice before entering into the arbitration agreement as part of the intended contract, or after the dispute has arisen but before entering into an arbitral compromise.