Few (if any) would argue with the proposition that the law should be certain so that it can be easily enforced and so that businesses can know where they stand. It is for this reason that many have raised concerns about the way in which cross-border disputes will be recognised and enforced across the UK and European Union after Brexit.
To tackle this uncertainty and preserve the worldwide influence of English commercial law, the UK Government intends to implement a Private International Law (Implementation of Agreements) Bill (the Bill). The key elements of the Bill are as follows:
- “Maintain and strengthen the UK’s role as a world leader in delivering justice across borders on civil and family justice issues”.
- “Giving the Government the power to implement further agreements on Private International Law, which will allow the UK to remain at the forefront of delivering legal certainty and access to justice internationally”.
- Implement the “2005 Hague Convention which provides legal certainty in disputes relating to cross-border contracts, ensuring there is no confusion over where a case should be heard, and that any resulting decision can be recognised and enforced in other countries”.
It would however be fair to say that – at the time of writing – the UK Government has provided little detail about the content of the new Bill. For now at least we cannot fully determine how Brexit may impact upon jurisdiction and enforcement of commercial contracts after the end of the transition period. This article will focus on the following questions:
- What are the key rules which will apply to jurisdiction and the enforcement of judgments from 31 January 2020 until the end of the transition period?
- What rules are likely to apply to jurisdiction and the enforcement of judgments beyond the end of the transition period?
- Will the UK maintain and strengthen its role as a world leader in delivering justice across borders on civil matters?
1. What are the key rules which will apply to jurisdiction and the enforcement of judgments from 31 January 2020 until the end of transition period?
It is business as usual, until transition period ends (31 December 2020, unless otherwise extended).
At present, the Brussels (Recast) Regulation (No. 1215/2012) and the European Enforcement Order Regulation 805/2004 will apply to legal proceedings “instituted before the end of the transition period” and judgments “given in legal proceedings instituted before the end of the transition period” (Article 67 of the Withdrawal Agreement). Broadly speaking:
- Jurisdiction: Jurisdiction is concerned with which country’s court should hear a dispute and usually it tends to makes sense for the jurisdiction clause to match the governing law clause.
- The Brussels Recast regime: Provides a set of harmonising rules for determining which country has jurisdiction within the European Union. Subject to some exceptions, if a contract contains an exclusive jurisdiction clause in favour of one member state, then only that member state has jurisdiction. Additionally, a judgment of one member state will be automatically recognised and enforced in all member states, provided the judgment is final and is for a sum of money.
- Enforcement of uncontested claims: The EEO regulation covers the recognition and enforcement of judgments, court settlements and authentic instruments given on “uncontested claims” (default judgments). If appropriate and applicable to a recent piece of litigation that you have been involved in, it may be worth considering whether a so-called EEO Certificate should be applied for in respect of judgments or settlements which have arisen on “uncontested claims” before the end of the transition period.
2. What rules are likely to apply to jurisdiction and the enforcement of judgments beyond the end of the transition period?
Clearly, the Brussels Recast regime in particular gives certainty about jurisdiction and enforcement of judgments. So, what’s the solution in the event that the Brussels Recast regime will cease to apply to the UK when the transition period ends?
For proceedings started after the transition period has ended, in the absence of a new agreement with the European Union, UK parties will have to fall back on the cross-border enforcement rules that apply in each individual jurisdiction. It is however likely that the UK will rely on either the 2005 Hague Convention or the 2007 Lugano Convention.
2005 Hague Convention
This convention provides that if a contract contains a written exclusive jurisdiction clause, then the named court will have exclusive jurisdiction to determine the dispute and that any judgment issued by that court will then be recognised in all other convention states.
Drawbacks of the 2005 Hague Convention: It is limited in scope. It does not cover interim or procedural decisions and there is doubt over whether it will cover asymmetrical jurisdiction clauses.
If the UK were to sign up to this convention, we would see little significant change because, as with Brussels Recast regime, it also provides for mutual recognition of judgments.
Drawbacks of the 2007 Lugano Convention: A significant drawback is that it does not have an effective mechanism to prevent parties deliberately commencing proceedings in the wrong court. Judgements also have to be registered before they can be enforced, unlike under Brussels Recast where recognition is automatic. Additionally, the UK’s accession to Lugano requires agreement from the European Union, Denmark, Iceland, Norway and Switzerland (although the UK Government announced that it has received statements of support from Norway, Iceland and Switzerland for the UK's intention to accede, in its own right, to the 2007 Lugano Convention at the end of the transition period). However, there is currently some uncertainty over whether the remaining EU member states will accept the UK’s application to accede to the convention.
3. Will the UK maintain and strengthen its role as a world leader in delivering justice across borders on civil matters?
The above question is wide in scope, but the UK may not maintain or strengthen its role if it does not replicate the Brussels Recast regime after the transition period ends. The 2005 Hague Convention is limited in scope and, as for the 2007 Lugano Convention, a select committee of the House of Lords surmised that “membership of the so-called Lugano Convention does appear to offer a workable but inferior solution” as it “operates under an earlier and less effective iteration of the Brussels [Recast regime]”.
On the other side of the coin, it is perhaps the case that the new 2019 Hague Judgments Convention could enhance legal certainty in the post-Brexit world. This convention aims to facilitate the cross-border recognition and enforcement of civil and commercial judgments. Certainly the Hague Conference on Private International Law is confident that “an important gap in the landscape of private international law has finally been filled” by the convention.
The 2019 Hague Judgments Convention is the sister instrument to the 2005 Hague Convention, but is wider in scope as it is not limited to judgments based on exclusive jurisdiction clauses. The convention certainly appears to be a leap forward, yet it is likely to be the case that an agreement between the UK and European Union replicating the Brussels Recast regime would provide a better solution.
For further information on this and Brexit issues see our dedicated Brexit page.