The changes to the Brussels Regulations apply to civil and commercial proceedings commenced on or after 10 January 2015 and are applicable in all 28 EU Member States.
The Regulations determine the jurisdiction of commencement of litigation in Courts across the EU and subsequently, the recognition and enforcement of judgments in other EU Member States.
Choice of Court
One of key changes implemented by the Brussels recast has been in the impact upon jurisdictional agreements contained within contracts.
Under the old regime, the Court first seised of the dispute would have jurisdiction, regardless of whether the parties had agreed the exclusive jurisdiction of another Court within the EU. This meant that parties would rush to commence proceedings in whichever jurisdiction that they felt was going to be more favourable to their position, attempting to ensure that their chosen Court was the one first seised. The changes to the Brussels Regulations have sought to prevent this.
Article 25 (previously Article 23) gives effect to exclusive jurisdictional clauses, regardless of domicile, where they are:-
- In writing or evidenced in writing;
- In a form which accords with the practices which the parties have established between themselves; or
- In international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contract of the type involved in the particular trade or commerce concerned.
The clause will be exclusive, unless agreed otherwise.
Thus, where the parties have agreed within the contract for a dispute to be dealt with exclusively by a particular jurisdiction within the EU, for example in England, any proceedings must be issued out of the English Courts.
This alteration to the Regulations has sought to address the “Italian Torpedo” effect whereby historically a party would issue proceedings out of one jurisdiction, regardless of any previous agreement, as the first seised Court would always take precedence.
Now, where an exclusive jurisdictional agreement exists, the nominated Court is to deal with the matter regardless of whether it was the Court first seised or not. All other Courts shallstay their proceedings in favour of the exclusive jurisdictional agreement. Thereafter, if the Court with the benefit of the jurisdictional agreement accepts that it has jurisdiction, all other Courts must decline jurisdiction regardless of whether they were first seised (Article 31, previously Article 27).
If there is a dispute regarding the validity of the excusive jurisdictional clause, it is to be determined by the law of the jurisdiction chosen and not the law of the contract as a whole.
Article 25 is effective regardless of the parties’ domicile. Thus, if one party to the contract is not domiciled within the EU the parties can still agree exclusive jurisdiction of an EU member Court. This means that, under CPR Part 6.33(b)(iii), where a Claimant wishes to commence proceedings within the English jurisdiction, and the contract allows him to do so under an exclusive jurisdiction clause, the Claimant is unlikely to need the Court’s permission to serve a Defendant outside of the UK.
In practice therefore, where the parties want to implement a jurisdictional clause which favours one Court over another it would be best practice to ensure that the clause is exclusive so as to avoid issues regarding jurisdictional confusion.
In instances where the contract does not contain a jurisdictional clause or the clause is vague and/or provides for dual or “hybrid” jurisdictions, the old principles will apply. In effect, the Court first seised will have jurisdiction over another Court within the EU.
Difficulty will arise where there is parallel proceedings in a non-Member State and this is dealt with in Article 33 of the new Regulations.
(See Article 34 for the corresponding provisions where there are related proceedings in a non-Member State.)
Under Article 33, the Court may stay the claim if:
- It is expected that the Court of the Third State will give a judgment capable of recognition and, where applicable, of enforcement in that Member state; and
- The Court of the Member State is satisfied that a stay is necessary for the proper administration of justice.
This ability to stay the proceedings is optional and there is no obligation on the Courts to do so.
In addition, it is only applicable where the non-EU Court is the Court first seised which still leaves the risk that the parties will still rush to litigate outside of the EU, where there is a favourable jurisdiction.
However, the possibility of applying for an anti-suit injunction remains which, if granted, would prohibit the respondent from pursuing the foreign proceedings and frustrating the intended effect of the jurisdictional clause. The possibility of obtaining such an injunction would not be dependent upon proceedings having already been commenced in the EU in accordance with Ust-Kamenogorsk Hydopower Plant JSC v Aes Ust-Kamenogorsk Hydopower Plant LLP  UKSC 35.
Further, Article 33 does not provide any real guidance as to the implementation of sub-paragraphs (a) and (b) which could result in a lack of uniformity as to the application of the Regulations.
For example, sub-paragraph (a) requires the judgment in the Third State to be enforceable however, it is unclear whether this means that it must have already been established that a judgment in that particular State would be enforceable for example, due to a reciprocal enforcement treaty, or whether it would simply be sufficient to show that it is usuallypossible to enforce judgments from that particular state.
Sub-paragraph (b) requires the Court to be satisfied that the proposed stay is necessary for the administration of justice and some minor clarification is given in Recital 24. The Member State Court needs to assess “all the circumstances of the case before it” which may include connections between the facts of the case and the parties and the Third State concerned, the stage to which the proceedings in the Third State have reached and whether the judgment is expected to have been given within a reasonable time.
Given the many factors to be taken into account it is anticipated that there will be satellite litigation regarding the Courts’ interpretation of Articles 33 and 34 .
Critically, the Regulations have failed to address what the Courts should do where the EU Court is the Court first seised. It is unclear whether the Member State Courts can still defer to a non-EU Court where appropriate, for example where there is a jurisdictional agreement which favours an non-EU state.
When enforcing a judgment obtained within the EU, new Articles 36 and 39 abolishes the need for the enforcing party to obtain a “declaration of enforceability” from the enforcing Court.
CPR Part 74 has been amended accordingly and now the procedure for enforcement only requires:-
- A copy of the judgment that satisfies the conditions to establish its authenticity;
- The certificate of origin in accordance with Article 53; and
- A translation of these documents, if required by the competent judicial authority of the required Member State.
This new enforcement procedure is likely to save time and costs for parties in the future however, as the new Regulations only came into force on 10 January 2015 any proceedings commenced before that date will be the subject of the old Regulations and therefore the old enforcement procedure. The benefit from this amendment will not be realised quickly.
Article 1(2)(d) of the new Brussels Regulations makes it clear that arbitrations are excluded from their scope.
Recital 12 allows the Courts of a Member State to refer the parties to arbitration, to stay or dismiss the proceedings or to examine whether the agreement to arbitrate is void or incapable of being performed.
A ruling given by a Court in a Member state as to whether an arbitration agreement is void etc, will not be binding upon Courts in other Member States. This removes the previous incentive for a Party to an arbitration agreement to issue Court proceedings in one Member State in the hopes that a declaration as to the validity (or lack thereof) of the agreement is obtained and thereafter be binding on other Member States.
It should be noted that even if a Court has decided that the arbitration agreement is void and the Court thereafter passes judgment on the substantive matter in dispute, it would not prevent a Member State recognising the validity of the arbitration award in accordance with the New York Convention. Further, the New York Convention is to take precedence over the Brussels Regulations.
Whilst the stated primacy of the New York Convention is a positive step, there is little guidance as to how this will operate in practice. For example, if a Court of a Member State is asked to enforce an arbitration award given in one jurisdiction and also a conflicting judgment given in a third, will the Court favour the award or the judgment? We are unlikely to get an answer to this soon as it will be a question of enforcement and the changes will only apply to judgments entered in proceedings commenced after 10 January 2015.
It seems on first reading that litigation within the EU has now been made simpler.
The changes to the Brussels Regulations do go some way to clarifying jurisdictional confusion which may influence contracting parties’ approach to litigation. Arguably, it is likely that parties will now increase their usage of exclusivity clauses which will provide even more certainty.
In addition, service outside of the jurisdiction, but within the EU, has become simpler which will reduce costs and time associated with litigation.
However, the changes to the Regulations have not gone far enough when dealing with non-EU Member States which may result in tactical litigation outside of the EU. We may be faced with the “American torpedo” effect in the future as against the Italian one…albeit this could be combatted through the use of an anti-suit injunction.
Further, and rather unhelpfully, we must also wait for confirmation as to the priority given to competing judgments and arbitration awards given in differing Member States.
In conclusion therefore, it seems that the Brussels Regulations Recast solves some but not all European litigation problems and appears to be rather a mixed bag.