The Impacts of Brexit on the Recognition and Enforcement of Judgements in the UK (Mar 2021)

Introduction

The Trade and Cooperation Agreement of 31 December 2020 between the UK and EU contained no provisions on judicial cooperation in civil matters. As from 1st January 2021 the UK is no longer bound by the Brussels I Recast Regulation (1215/2012) (the Brussels Regulation) dealing with the recognition and enforcement of judgements, so how will these issues be dealt with in the UK?

We consider below the position that applied pre-Brexit, the impact of the Brussels Regulation no longer being applicable and offer some insight into the potential options available post-Brexit.

Choice of Law

Pre-Brexit: The UK was bound by the rules for Choice of law set out in the Rome I Regulation (593/2008) (with respect to contractual obligations) and in the Rome II Regulation (864/2007) (with respect to non-contractual obligations), together known as the “Rome Regulations”. The Rome Regulations allow parties to select their own governing law. Where no valid choice of law is made by the parties, the Rome Regulations provide a general rule as to the applicable law (the law of the place where the injury occurs in the case of non-contractual obligations, and the law of the country with which the contract is most closely connected for contractual obligations).  

The UK approved the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) regulations 2019 (the “Regulations”) in February 2019. These Regulations were introduced under section 8(1) of the European Union (Withdrawal) Act 2018 to address failures of retained EU law and correct other deficiencies following withdrawal of the UK from the EU. The effect of the Act was to ensure that Rome I and Rome II would largely continue to apply (with some relatively minor exceptions) post Brexit. It is worth commenting that Rome I largely reflects the position in common law with respect to the choice of law in any event.
Post-Brexit: Rome I and Rome II will continue to apply although it is quite possible that over a period of time the UK may look to diverge from the standard EU position.

Choice of Jurisdiction

Pre-Brexit: The UK was bound by the Brussels I Recast Regulation (1215/2012) (the Brussels Regulation) in relation to rules for the choice of jurisdiction. This provides that parties should be sued in the courts of the EU Member State where they are domiciled. However, where the parties have agreed that the courts of a particular EU Member State have exclusive jurisdiction, only those courts will have jurisdiction. If proceedings were to be brought in the courts of another EU Member State, then those courts should stay proceedings pending determination of jurisdiction by the chosen court.

Post-Brexit: As an EU Regulation the Brussels Regulation was directly applicable in the UK and so it ceased to apply following the repeal of the European Communities Act 1972. It is also inherently reciprocal. Given that the UK ceased to be covered by the Brussels Regulation post Brexit, a new reciprocal arrangement will need to be negotiated with the EU-27 with respect to the choice of jurisdiction. In the absence of any such agreement and save for specified circumstances set out in the Brussels Regulation, it will be for the domestic laws of each EU Member State to determine whether or not they would give effect to a clause giving jurisdiction to a UK court and for UK domestic law to determine whether or not a clause giving jurisdiction to an EU court would be effective.

One option for the UK might be via the Hague Convention on Choice of Court Agreements (the Hague Convention). The UK was previously a party to the Hague Convention as a Member of the EU but the UK did deposit an Instrument of Accession on September 28, 2020, acceding in its own right to the Hague Convention. Under Article 31 of that Convention, entry into force for the UK therefore occurred on 1st January 2021 (being “the first day of the month following the expiration of three months after the deposit of its instrument of ratification, acceptance, approval or accession”.)

The Hague Convention is an international agreement under which the courts of contracting states agree to uphold exclusive jurisdiction agreements provided that the nominated court is in one of the contracting states and the agreement complies with certain standards. It is limited in that it would apply to only certain types of exclusive jurisdiction clauses and so it will not apply to any other kind of jurisdiction clauses, i.e. non-exclusive or asymmetric clauses, in other words where one party is limited in bringing proceedings in one court but the other is not.

In terms of coverage, the contracting states of the Hague Convention comprise the Member States of the EU, Mexico, Singapore and Montenegro. It has been signed (but not ratified) by the USA and China. It does not currently apply to EFTA countries such as Norway and Switzerland. Note also that technically the Hague Convention would only apply to agreements entered into on or after 1 January 2021 and there is no certainty as to the regime that would be applied to contracts signed before that date under either the Brussels Regulation or under the Hague Convention itself. Whilst the UK tried to ensure a smooth transition by introducing the Civil Jurisdiction and Judgements (Hague Convention on Choice of Court Agreements 2005) (EU Exit) Regulations 2018 it is unclear at present how other EU Member States will treat the matter. Will courts of EU Member States recognise exclusive jurisdiction clauses entered into during the period of the UK Membership of the Hague Convention as an EU Member (i.e. since 1st October 2015 as the UK has proposed) or only after 1st January 2021?

Whilst judgements handed down in line with such clauses must be recognised and enforced, the scope is narrower than the Brussels Regulation although it does go some way to ensuring that jurisdiction clauses are followed and enabling the enforcement of judgements within contracting states.  

A text has been agreed for a 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgements in Civil or Commercial Matters that would set up an international framework for the recognition and enforcement of judgements. However, in all likelihood the ratification process will take some time - the 2005 Hague Convention for example took ten years to come into force. As such, whilst this may assist in the future, it does not assist parties facing litigation in the short to medium-term.

A further option is that the UK accedes to the Lugano Convention to which Norway and Switzerland are party and this seems at present to be the favoured approach of the UK government. This broadly parallels the Brussels Regulation. The Lugano Convention is an international agreement between the EU and EFTA countries. States which are members of neither the EU or EFTA can accede to the Lugano Convention with the agreement of all parties and so in principle this route is available to the UK. Although acceding to the Lugano Convention would replicate the general jurisdictional arrangements of the Brussels Regulation, it does differ in that the Lugano Convention would not require a court in a contracting state to give precedence to an agreement to give exclusive jurisdiction to the courts of another state. As such, the Lugano Convention does not provide that, where proceedings are commenced in an EU Member State court in an apparent breach of an exclusive jurisdiction clause, that court is required to stay its proceedings to allow the chosen court to rule on jurisdiction. This increases the risk of delay. The UK submitted its application to accede to the Lugano Convention on April 8, 2020. However, accession to the Lugano Convention involves a four-step process, step one being the UK`s application to accede, step two requiring the EU (along with the other contracting parties) to approve the UK’s application to join, followed by step three with the UK depositing the instrument of accession. Step four is a three-month period, during which the EU (or any other contracting state) may object, in which case the convention will not enter into force between the UK and that party. Only after that three-month period has expired does the convention enter into force. The UK`s application to accede has been approved by all other parties to that convention except the EU and there is no indication at present whether and if so when the EU will grant its approval. Until then it seems likely that the courts of England and Wales will revert to the Hague Convention and the common law regime.

Alternatively, the UK might enter into bilateral or multilateral arrangements for the allocation of court jurisdiction and the recognition and enforcement of judgements.

It is worth noting that in relation to existing contracts which incorporate a submission to the UK courts, the Withdrawal Agreement, provides that the Brussels Regulation will apply to all legal proceedings commenced before January 1, 2021. Jurisdiction will be determined in those cases according to the Brussels Regulation – even to the extent that proceedings started after January 1, 2021 that relate to earlier proceedings may be stayed in favour of those proceedings according to the Brussels Regulation rules. In other words, the UK courts might be obliged to stay a claim brought in the UK courts in 2021 or later in favour of a claim in a foreign court that was instituted before January 1, 2021.

We have already seen an example of how one UK court has treated this issue in the recent (5 February 2021) case of Jamieson v  Wurttemburgische Versicherung AG. This concerned a claim originally brought in 2018 for personal injury by a UK national against a German Insurance company. Despite a German court ruling that on the facts it was a UK court that had been “seized” first under Article 29 (1) of the Brussels Regulation and therefore the German court proceedings should be stayed in favour of the UK courts, the UK High Court Master did not feel able to determine the question of “first seizure” and ruled that this issue should be determined through the German Courts. It seems that the reluctance to resolve the issue before him, was based on the principle of comity (the legal doctrine under which courts recognise and enforce each other’s legal decisions as a matter of courtesy or based on the need for reciprocity) rather than the rules of the Brussels Regulation.

Enforcement of Judgements

Pre-Brexit: Judgements from civil and commercial claims were also governed by the Brussels Regulation. One of its principal aims is that judgements made by EU Member State courts should be easily recognisable and enforceable in other EU Member States. Under the Brussels Regulation (Articles 35 and 39) a judgement given in an EU Member State is recognised and enforceable in all other EU Member States without any special procedure or declaration of enforceability being required. There are few defences available which could impede enforcement – essentially limited to issues including public policy; failure of service of the claim; or where the judgement is irreconcilable with an earlier judgement.

‍Post-Brexit: in order to preserve the reciprocal enforcement of the judgement regime created by the Brussels Regulation an agreement will need to be reached with the EU regarding enforcement of judgements.  
Acceding to the Hague Convention will provide an alternative regime for the enforcement of judgements between the contracting states. However, as discussed above the enforcement regime is more limited than that provided under the Brussels Regulation. Notably the Hague Convention does not apply to “interim measures of protection” so (for example) judgements granting an interim freezing order of a defendant’s assets could not be enforced under the Hague Convention. In addition, the enforcement of judgement regime will only apply to the extent that the parties have entered into a qualifying exclusive jurisdiction agreement as outlined above.

In the absence of the Brussels Regulation or another reciprocal regime (i.e. the Hague Convention) for the enforcement of judgements, enforcement of a non-EU judgement in an EU Member State is a matter for the local law in the enforcing state.  

Under the common law system, enforcement of foreign judgements (where there is no reciprocal enforcement treaty) requires the judgement creditor to commence a fresh cause of action against the judgement debtor in the courts of England and Wales with the foreign judgement being the cause of action. This will generally be slower than the enforcement of judgements from EU Member State courts, but not so much as to make enforcement of such judgements impossible. For example, judgements from US courts are regularly enforced in the courts of England and Wales without undue difficulty, despite the fact that the UK and the US have no reciprocal enforcement agreement.

Similarly, for example, Germany and France have procedures under their own domestic law for the recognition and enforcement of judgements from third countries so that, although it may take longer than enforcement under the Brussels Regulation, enforcement should not be unduly difficult. In both jurisdictions, the concepts underpinning the principal bars to enforcement are not dissimilar to those under the Brussels Regulation including where the judgement is incompatible with public policy/essential principles of domestic law or where the original court did not have jurisdiction.

The Withdrawal Agreement does provide that the Brussels Regulation would apply to judgements given after the end of the transition period provided that the proceedings were originally started before January 1, 2021.
In England and Wales, the enforcement of judgements from different jurisdictions including from EU Member States is covered by the Civil Procedure Rules. CPR Rule 74 sets out the procedure which includes an application for registration of a foreign judgement.

Arbitration

The New York Convention sets out a common global regime for the recognition of arbitration agreements, and the recognition and enforcement of foreign arbitral awards.

The UK is party to the New York Convention in its own right and that of course remains the position post Brexit. All EU Member States are also signatories to the New York Convention. The UK’s withdrawal from the EU has no impact on the validity or enforcement of UK arbitration agreements nor on the recognition and enforcement of UK-seated arbitration awards in EU countries (or elsewhere) and vice versa. Arbitral awards can still be enforced by UK courts.  

In Summary

We currently wait to see whether the UK`s preferred route to adopt the Lugano Convention carries the day or whether the UK continues with the default position of the Hague Convention. In relation to accession to the Lugano Convention itself, there remains a possibility that the EU will not approve the application. There is also the possibility of approval but with a gap prior to implementation or there might be approval with retrospective effect to cover the period from 1st January 2021 onwards.

But in any event, as we have discussed above, neither option exactly replicates what we had previously under the Brussels Regulation. So, for example there is a limitation on the applicability of “interim measures” (i.e. freezing orders) under the Hague Convention. Additionally, whilst exclusive jurisdiction clauses will be respected for the most part they may not be respected in their entirety.  Likewise, whilst the Lugano Convention route is more closely aligned to the situation under the Brussels Regulation, it is not an exact replication and for example as the Convention text currently stands would not reflect changes made to the Brussels Regulation.  

Failing either option we fall back to the local laws. As we have set out above in the case of England and Wales, the Civil Procedure Rules do recognise the powers of the courts of England and Wales to enforce foreign judgements. The process requires an application by the “judgement creditor” against the “judgement debtor” with the foreign judgement being the cause of action. Whilst this potentially might be slower under the current system it is unlikely to be a major issue in practice.

It is also worth noting that both the original Brussels Regulation and Lugano Convention contain a rule for parallel proceedings and give priority to the court “first seized” (i.e. the court where proceedings were first commenced is to be the court to decide who has jurisdiction) and that if proceedings were started in two member states the second in time is required to stay its proceedings until the first in time has ruled on jurisdiction. Under the Recast Brussels Regulation, the member state court named in the exclusive jurisdiction clause is given priority regardless of which claim was started first. The Lugano Convention retains that simple “first in time” rule for parallel proceedings, so if the UK`s application to join the Lugano Convention is unsuccessful then we fall back to the risks of parallel proceedings running at the same time as parties will go to their own courts to issue proceedings with neither party having any obligation to stop and there will be risks of contradicting judgements coming out of different courts.

At this juncture we also need to consider questions as to whether UK courts are likely to be comfortable in recognising and enforcing judgements of certain EU courts in any event, in member states where in the past questions have been raised about the independence and impartiality of the relevant legal system.  

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Castletown Law
01/03/21