Preparing for a no-deal Brexit: jurisdiction and enforcement of judgments

Posted in UK and EU legal framework Dispute resolution and litigation Enforcement

The EU Commission has published a communication, which addresses the effect of a no deal Brexit in relation to issues of jurisdiction and enforcement in civil and commercial matters.

The position prior to Brexit

Currently the UK is subject to the EU-wide regime to determine questions of jurisdiction and recognition and enforcement of judgments (the Brussels Recast Regulation). The Brussels Recast Regulation (and Lugano Convention which applies to EFTA countries) is based on reciprocity, such that even if the UK continued to apply the rules unilaterally after Brexit, the UK’s status as a third country would mean that EU Member State courts would not consider the UK to be covered. Accordingly, in the event of a ‘no-deal’, the UK would revoke the Brussels Recast Regulation and Lugano Convention and other EU-derived legislation concerning the allocation of jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, insofar as they apply to the UK. As we have set out previously, the UK Government has already published a draft statutory instrument to such effect.

EU rules on jurisdiction and enforcement in the event of no deal

The Commission’s paper notes that in the absence of any transition period being agreed, EU rules in the field of civil justice and private international law no longer apply to the UK following the UK leaving the EU. This would have a number of important implications.

With regard to jurisdiction, for proceedings involving a defendant domiciled in the UK, and pending before a EU Member State court on the withdrawal date, the provisions of the Brussels Recast Regulation would continue to be applicable. However, the Brussels Recast Regulation would no longer apply to proceedings issued on or after the withdrawal date.

With regard to recognition and enforcement, the paper provides that where “the relevant instrument foresees exequatur, if a judgment of a UK court has been exequatured in the EU-27 before the withdrawal date but not yet enforced before that date, the judgment can still be enforced in the EU”.  The reference to exequatur, the formal process for recognising a foreign judgment, by the Commission is somewhat curious. This is because the Brussels Recast Regulation, the principal instrument facilitating the enforcement of judgments between EU Member States, sought to abolish the need for exequatur. As a result, in the vast majority of cases, it will have no application (exceptions might include judgments under the previous Brussels Regulation).

The Commission’s paper goes on to state that in the event of no-deal, unless a UK judgment has been exequatured by the withdrawal date, it will not be able to be enforced in accordance with EU rules post-Brexit.  This will be so notwithstanding that the judgment may have been handed down before the withdrawal date or even if enforcement proceedings were commenced before the withdrawal date.

The Hague Convention alternative

In the event that EU rules no longer apply, the default position will be that questions of jurisdiction and enforcement be determined by local law rules. However, any disadvantage arising from such change will be mitigated by the fact that the UK has applied to accede to the Hague Choice of Court Convention (the Hague Convention) in its own right – it is already a party by virtue of its membership of the EU. The Hague Convention is an international agreement pursuant to which the courts of contracting states agree to uphold certain jurisdiction agreements provided that the nominated court is in one of the contracting states and the agreement complies with certain prescribed standards.

The Hague Convention is limited in that it would apply to only certain types of exclusive jurisdiction clauses (it would almost certainly not apply to asymmetric jurisdiction clauses and hybrid arbitration clauses). Nevertheless, to the extent that the parties enter into a qualifying exclusive jurisdiction agreement, it would provide an alternative regime for enforcement of judgments between the contracting states.[1]

On 28 December 2018, the UK filed its instrument of accession to the Hague Choice of Courts Convention. It will come into force on 1 April 2019 in the event of a no deal Brexit (and will be withdrawn otherwise). There is a potential issue as to the continued application of the Hague Convention insofar as the UK will cease to be a contracting state on 29 March 2019 and Article 16 provides that the Hague Convention only applies where an exclusive jurisdiction agreement was agreed after its entry into force for the chosen State and to proceedings commenced after proceedings instituted before its entry into force for the State of the court seised. So far as the UK is concerned, the Civil Jurisdiction and Judgments (Hague Convention on Choice of Court Agreements 2005) (EU Exit) Regulations 2018 will purport to ensure a seamless transition. Whether the courts of other contracting states take the same approach remains to be seen.

In terms of coverage, the contracting states of the Hague Convention comprise the Member States of the EU, Mexico, Singapore and Montenegro – although does not currently apply to EFTA countries such as Norway and Switzerland. It has also been signed (but not ratified) by the USA and China.

 

[1] The Hague Convention does not, however, apply to “interim measures of protection” so, for example, judgments granting an interim freezing order of a defendant’s assets could not be enforced under the Hague Convention.

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