A framework of agreed rules on jurisdiction, recognition and enforcement of judgments allows people to enforce their rights across different legal jurisdictions. It ensures that those involved in cross-border trade and transactions are protected and have access to justice if something goes wrong, regardless of their financial resources.
Just seven days before the Brexit transition period ended, the UK and EU reached a trade and cooperation agreement. However, there was no agreement on civil and commercial judicial cooperation. Effectively, the UK has lost many of the civil judicial cooperation benefits which it enjoyed as a member of the EU. So, what is the practical significance of this?
As a member of the EU, the UK was party to the Brussels Recast Regulation (EU) No 1215/2012 and the Lugano Convention 2007. These laid out a regime clarifying which national courts had jurisdiction in cross-border civil and commercial disputes and ensured that judgments given in such disputes could be enforced across borders.
To enforce EU judgments in the UK (and vice versa), one turned to Brussels Recast; and to enforce judgments from The European Free Trade Association (EFTA) states (Switzerland, Norway and Iceland), or UK judgments in EFTA states, one turned to the Lugano Convention.
Generally, the rules first respected any choice of court agreement that parties had between themselves. In the absence of a choice of court agreement or for tort and other non-contract claims, other rules came into play to determine which courts had jurisdiction to decide a dispute.
Regarding enforcement, under article 39 of Brussels Recast, a judgment given in a member state which is enforceable in that member state shall be enforceable in the other member states, without any declaration of enforceability being required.
Transitional provisions maintained a regime for proceedings commenced after the UK exited the EU on 31 January 2020 and before the transition period ended. It is clear from article 67 of the withdrawal agreement that the rules under Brussels Recast and related EU instruments on enforcement (and jurisdiction) will generally continue to apply in cases where proceedings were issued before 1 January 2021 (but are not yet enforced) so that UK judgments will continue to be enforceable in EU Member States and vice versa.
However, for any proceedings commenced on or after 1 January 2021, the UK no longer benefits from Brussels Recast, as it is only available to EU member states; or from the Lugano Convention, which was not implemented as part of the UK-EU trade agreement. There is no longer a regime for automatic recognition and enforcement of EU or EFTA judgments within the UK.
As things stand, the Hague Choice of Court Convention 2005 (the Hague Convention) will in some cases govern the recognition and enforcement of EU judgments in the UK. The EU acceded to the Hague Convention on behalf of all EU member states on 15 October 2015 (except Denmark who acceded separately at a later date).
Some non-EU countries are also party to the Hague Convention including Mexico, Singapore, Montenegro and now, from 1 January 2021, the UK in its own right.
The Hague Convention covers some of the same ground as Brussels Recast and the Lugano Convention. For the Hague Convention to apply, there must be an “exclusive” choice of court agreement between parties. ‘Exclusive’ in this context means that a group of courts may be chosen provided they are in the same country. Judgments by the chosen court will be recognised and enforceable in all states where the Hague Convention is applicable.
The key difference between the Hague Convention on the one hand, and Brussels Recast and the Lugano Convention on the other, is that those latter instruments also contain rules for allocating jurisdiction in the absence of a choice of court agreement, but the Hague Convention does not.
As well as only applying in disputes where parties have agreed an exclusive jurisdiction clause, the Hague Convention does not apply to certain types of dispute including employment, intellectual property, consumer claims or claims relating to rights in rem in immovable property.
There is also the potential for complications in relation to contracts entered into before 1 January 2021. This is because it’s clear from the European Commission’s (EC) notice to stakeholders (published on 27 August 2020) that the EC is taking the position that the Hague Convention only applies to jurisdiction clauses entered into on or after 1 January 2021, when the UK re-acceded to the Hague Convention in its own right.
The UK takes a different position and is of the view that the Hague Convention applies to jurisdiction clauses entered into on or after 15 October 2015. This could become the subject of litigation itself which will hinder the smooth resolution of disputes.
If the Hague Convention does not apply?
In cases where the Hague Convention does not apply, the enforcement of foreign judgments will be a matter of national common law, according to which a foreign judgment is not directly enforceable in the courts of England or Wales but can be the subject of a fresh action for enforcement in the high court.
This means litigants may now face two sets of parallel court proceedings to enforce their judgment, having to cite an EU judgment in UK proceedings as, for example, proof of a debt. This will likely be a much more costly, time consuming and uncertain process. There is likely to be more litigation and scope for challenge when it comes to jurisdiction and enforcement, which was not previously an issue.
These factors may create a barrier preventing access to justice for those who cannot meet the costs of this more complex litigation. This will likely be felt most by individuals, consumers and small and medium-sized enterprises.
An exception, where it may not be necessary to look to national laws, could be if an old bilateral agreement still exists that provides for a different procedure. However, many such agreements were superseded by EU law; and whether they are still enforceable could become the subject of costly litigation.
Hope for a brighter future
It goes without saying that trade and transactions will continue between EU and UK businesses and consumers. British consumers will still want to buy from EU businesses and vice versa. Having a framework in place to recognise and enforce judgments in cross-border disputes would benefit businesses and consumers on both sides of the border, as well as firms and the legal sector.
On 8 April 2020, the UK applied to accede to the Lugano Convention in its own right. This is the most obvious model for continued judicial cooperation between the EU and UK. It would provide a tried and tested solution for recognition and enforcement of judgments and a route for individuals and businesses to enforce their rights without taking up prohibitively expensive actions in multiple courts.
The UK has the support of Switzerland, Norway and Iceland to join the Lugano Convention but as yet there is no agreement from the EU and Denmark.
While it seems clear that the Hague Convention will apply to all exclusive English jurisdiction clauses entered into on or after 1 January 2021, it will be less significant as between the UK and EU if the UK is able to accede to the Lugano Convention.
Another possible solution for the future could be the Hague Judgments Convention 2019. This was opened for signatures and ratification from July 2019. However, so far it only has two signatories (Ukraine and Uruguay) and is not currently in force. It may take years before it becomes effective.
Even if UK accession to the Lugano Convention is approved, there will be a three-month time lag between approval and the Lugano Convention coming into force, during which time the UK may need to look to the Hague Convention or national laws.
Lauren Cormack is an associate at Russell-Cooke russell-cooke.co.uk...