Brussels Regulation Recast: What’s changed?

The Recast Brussels Regulation (EU 1215/2012) came into force on 10 January 2015. It has been designed to remedy some of the perceived defects in its predecessor regulation, the Brussels Regulation (EC 44/2001). While certain provisions such as the default domicile rule remain, others have been amended in a way that appears to signal a shift towards judicial discretion to interpret matters according to the common law as opposed to statutory construction. It should be noted that the Recast Regulation applies to legal proceedings commenced on and after 10 January 2015. Proceedings commenced prior to 10 January 2015 will continue to be governed by the predecessor regulation, Brussels I. This note summarises the key changes of the Recast Regulation.

Abolishment of exequatur - facilitating the process of enforcement of judgments across member states

In order to enforce a judgment obtained in one member state in another member state, it will no longer be necessary for a judgment creditor to obtain a declaration of enforceability from the enforcing member state court. Instead, it will be necessary simply to present a copy of the judgment and a standard form certificate for the enforcement process to begin. The removal of an additional procedural hurdle, and the associated costs, should come as a welcome relief to those dealing with cross-border disputes.

Exclusive jurisdiction clauses override lis pendens – primacy of exclusive jurisdiction clauses

Under Brussels I the court "first seised" of proceedings would be entitled to deal with a matter, notwithstanding any prior agreement by the parties. This led parties to issue proceedings in alternative jurisdictions tactically, clearly undermining the agreement already reached between the parties. Under the Recast Regulation, when there is a jurisdiction agreement, any member state court other than the member state court specified in the jurisdiction agreement must stay its proceedings until the chosen court has decided whether it has jurisdiction. If the chosen court has jurisdiction, all other member state courts must decline jurisdiction. This is irrespective of which member state court is first seised of proceedings and is a welcome change, remedying one of the worst potential abuses of the former regime under Brussels I.

Extension of lis pendens to "third state" proceedings – limited discretion to stay in favour of non-EU state proceedings

If EU proceedings involve the same parties and the same cause of action, or relate to proceedings taking place outside the EU, in a "third state", member state courts have a limited discretion to stay proceedings in favour of such third state proceedings. The limited discretion applies if:

• The third state was first seised
• The judgment in the third state would be capable of recognition or enforcement in the country considering whether to grant a stay
• The member state considers that a stay is necessary for the administration of justice

The guidance given in the Recast Regulation regarding the exercise of the member state court’s discretion refers to factors that are similar to those that would apply to an application for a forum non conveniens stay, such as the level of connection between the dispute, the parties and the third state and the stage in the proceedings already reached in the third state.

Clarification of arbitration exclusion – West Tankers revisited

In West Tankers the ECJ decided that it was not consistent with Brussels I for a member state court to make an order to restrain a person from commencing or continuing proceedings in another member state on the ground that such proceedings are in breach of an arbitration agreement. Therefore, the member state court agreed upon by the parties under the arbitration agreement had to stay proceedings in favour of the member state court that was first seised. The Recast Regulation expands on the ambit of this exclusion to clarify the way in which it might be circumvented and, partially, to mitigate the impact of the decision reached by the ECJ in West Tankers.

The Recast Regulation now makes it clear that a party to an arbitration agreement can go to a member state court other than the court of the seat of the arbitration and request that it determine whether the arbitration clause is valid and, if it is not valid, the dispute itself. However, the other party can still refer the matter to arbitration in accordance with the arbitration clause. If such arbitration proceedings result in an award requiring enforcement, the member state court in which enforcement is sought will not be bound by the earlier member state court’s determination regarding the validity of the arbitration clause. If faced with two competing decisions, precedence should be given to the award as per the priority of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) above the Recast Regulation.

It remains to be seen how this will play out in circumstances in which the arbitration has not been concluded by the time of the competing member state proceedings as the New York Convention only applies once an arbitration award has been released.

Comment

The Recast Regulation provides some welcome changes to Brussels I. It will be interesting to see how the member state courts will apply the new provisions, particularly in those areas in which potential gaps remain (for instance in relation to the arbitration exclusion outlined above).

Despite that, it is worth bearing in mind that many provisions remain unchanged. This firm was successful in the Court of Appeal in Sherdley v Nordea Life and Pensions SA - a jurisdiction case. The case concerned the Sherdleys’ argument that as policyholders of a contract of insurance with Nordea, they were entitled to bring a claim where they were domiciled. The crux of the issue revolved around where they were domiciled at the time proceedings were issued, which was Spain rather than England and Wales, where the proceedings had been issued. Importantly, the Recast Regulation does not alter the ability of policyholders to bring a claim against insurers in the member state court in which they are domiciled, rather than that of the insurer, and thus even if commenced after January 2015, the result would remain the same.