Brexit briefing | 20 Jan 2021 |

Jurisdiction and Judgments: Patchwork fills gaps left by Brexit

The end of the post-Brexit transition period on 31 December 2020 has brought with it some changes for those involved in civil litigation with an EU element. Generally, proceedings which are already on foot will be unaffected, whereas litigants involved in new proceedings with an EU element may now face a slightly bumpier procedural ride and some increased cost.

However, the changes should not be overstated, and the attraction of using English law and the English courts to resolve disputes with an EU element remains as strong as ever.

There is also some prospect that, if the UK is permitted by the EU to re-join the Lugano Convention in relatively short order - which may be the case now that the parties have agreed on the shape of their future trading relationship - a new comprehensive regime very similar to the one which existed previously in this area will soon be ushered in.

Where are we now (again)?

Although the UK and EU did succeed in reaching agreement on the text of a new trade and cooperation agreement on 24 December 2020, just prior to the end of the Transition Period, that agreement is largely silent on civil judicial cooperation, only touching on it in limited respects concerning the enforcement of intellectual property rights. In particular, the agreement does not address either allocation of jurisdiction as between English and EU courts, or the mutual recognition and enforcement of judgments of those courts, in civil proceedings. The situation envisaged in our previous briefing on this topic, Jurisdiction and Judgments: where are we now?, has therefore now come to pass. The previous EU regime governing these areas, the Recast Brussels Regulation, has fallen away with no comprehensive replacement in place.

A POSSIBLE REPLACEMENT?

The UK has applied to join the Lugano Convention, which would provide a near like-for-like replacement for the Recast Brussels Regulation as between the UK and both EU member states and Iceland, Norway and Switzerland, but has not yet received the permission it requires from the EU to do so. Furthermore, as the administrative process of accession to the Lugano Convention may take several months from the time unanimous consent is given, the UK may face a substantial gap in coverage even if the EU consents.

As a result, businesses facing new or ongoing legal disputes with a cross-border UK/EU element will now have to contend with a more fragmented body of laws and rules, including transitional provisions for proceedings commenced pre-31 December 2020, and international conventions – such as the 2005 Hague Convention on Choice of Court Agreements (the "Hague Convention") – and domestic rules for new proceedings.

In brief overview:

Jurisdiction

For disputes with an EU element commenced before the English courts prior to the end of the transition period, the previous Brussels and Lugano regimes will continue to apply (where relevant) by virtue of transitional provisions in the Withdrawal Agreement and domestic regulations.

For disputes with an EU element commenced after the end of the transition period, the English courts will now have to apply either the Hague Convention or, where that does not apply, their own common law rules, to determine whether they can take jurisdiction. An important point of contrast with the previous regimes is that the Hague Convention will only apply where a dispute is brought pursuant to an exclusive English jurisdiction clause. Common law rules will apply in all other cases, including where an English jurisdiction clause is present but it is non-exclusive or asymmetrical. However, regardless of the different regimes now being applied, the ultimate outcome in most cases is likely to be the same as it would have been before (i.e. the English courts are likely to take jurisdiction over the same cases as they would have done before).

EU courts will also now have to apply a combination of the Hague Convention and their own local laws to determine whether they have jurisdiction over disputes with a UK element. One potential wrinkle is that, whereas UK regulations treat the Hague Convention as applying continuously in the UK from 1 October 2015 (when it became a party to that Convention by virtue of its EU membership), EU courts may treat the Convention as applying only to exclusive jurisdiction clauses agreed after the UK joined the Convention in its own right, from 1 January 2021. This may in some circumstances lead to parallel proceedings being brought in an EU member state in breach of an English jurisdiction clause, which would not have been permitted under the previous regimes. However, in such circumstances, the English courts will be free to issue anti-suit injunctions to rectify the situation.

WHAT THIS MEANS FOR JURISDICTION IN PRACTICE

The English courts are likely to take jurisdiction over the same civil and commercial cases as they would have done before the end of the Transition Period and where parallel proceedings are brought in an EU member state in breach of an English jurisdiction clause, the English courts will be free to issue anti-suit injunctions.

Recognition and enforcement of judgments

For judgments arising from proceedings commenced before the end of the transition period, the old regimes will continue to apply by virtue of transitional provisions in the Withdrawal Agreement and domestic regulations.

For new proceedings, where jurisdiction is established by virtue of an exclusive jurisdiction clause under the Hague Convention, any judgments arising can be relatively easily recognised and enforced in both the UK and EU member states pursuant to the regime contained in the Convention.

Where the Hague Convention does not apply, both the English courts and EU courts will instead apply their own domestic rules to determine whether each other's judgments should be recognised and enforced.

WHAT THIS MEANS FOR JUDGMENTS IN PRACTICE

English courts will likely continue to recognise and enforce EU civil and commercial judgments in much the same way as previously, albeit that the process by which they do so will be slightly longer. In the round, it is anticipated that EU courts will also generally continue to recognise and enforce UK civil and commercial judgments domestically, although in some jurisdictions, the process may take longer and cost more.

Conclusion

Having obtained the support of Iceland, Norway and Switzerland to its application to accede to the Lugano Convention, the UK's application remains under consideration by the EU with no decision having been made. With the UK and EU having now successfully agreed on the text of a new free trade agreement, and in circumstances where negotiations are ongoing in relation to financial services and the issue of equivalence, the EU may yet permit the UK to re-join the Lugano Convention. If the EU does support the UK's accession, it would have the effect of bringing the two sides, along with Iceland, Norway and Switzerland, back into closer alignment on civil and commercial judicial cooperation and provide greater clarity and certainty for businesses operating between the UK and EU.

Please speak either to us, your usual contact at Travers Smith, or a member of the Dispute Resolution team, for more information.

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