No quickie divorce-the implications of Brexit for intra-EU civil juridsiction and the enforcement of judgments
- After 43 years of marriage the United Kingdom and the European Union are set on course for a divorce or at the very least a form of seperation. Scotland and Northern Ireland voted for a renewal of the marital vows.
- The political debate has focused primarily on issues of immigration control and the economic consequences of a majority vote to leave the European Union. For the legal community the key issue is the effect that Brexit will have on the legal infrastructure that presently defines the UK’s relationship with the European Union.
- Key EU legal instruments such as the Brussels I and Brussels Re-cast Regulations and the Rome I and II Regulations currently define the rules applicable for intra-EU commercial and civil disputes.
- At Europa Law we recognise that the legal structure governing the relationship between the European Union and Non-EU states is as important as the legal structures governing the relationship between the EU 28 themselves.
- In this sense the outcome of the EU referendum is not about terminating the UK’s relationship with the EU. Rather it is about redefining the infrastructure that will govern that relationship in the future.
- Practitioners will need to keep themselves fully availed of the consequences of the Brexit vote on the relationship between the UK and the EU in civil and commercial disputes.
The current regimes
- The regulation of civil and commercial disputes having a relevant EU connection before the Courts of EU member states is currently subject to the following Regimes: - For the EU 28 the Brussels I and Brussels Re-Cast Regulations together with their sister Regulations Rome I and II - For EFTA states (Norway Iceland, Switzerland) the Lugano Convention 2007.
- Where a case is before the Courts of an EU member state which does not have the required EU connection for either regime to apply (generally that one or more of the parties is domiciled in an EU or EFTA state) the court will apply its own domestic rules of private international law to deal with issues as to jurisdiction and applicable law.
The Brexit vote has no legal effect in itself
- It is a trite point that in itself the vote has no effect upon the status of the United Kingdom as a member state of the European Union. The result of the referendum is no more than a manifestation of desire on the part of those who participated in the referendum.
- The result also effectively acts as an instruction to the Government by the electorate to take the necessary steps to give effect to the desire expressed by the result.
No quickie divorce
- The legal instruments which govern the United Kingdom’s membership do not provide a mechanism for a quickie divorce. Post-Brexit the UK and the EU may remain the best of friends in the manner of Gary Lineker and Dannielle Bux. Unlike them, the UK and the EU cannot resolve their legal status simply and quickly.
- As everyone including their grandmother now knows, Article 50 of the Treaty on European Union (‘The Lisbon Treaty’) requires a member state to give 2 years notice of its intention to leave the EU. The timeline starts to run from the point in time at which the UK Government informs the European Council of the decision to withdraw from the EU.
- Despite the acceleration of the process for installing a new PM it remains unclear when Article 50 may be triggered and how long a negotiated exit will take. For lawyers advising their clients, therefore, the key point to note is that a prudent estimate is that probably until 1st January 2019 the status quo will be preserved. This is in line with comments made by the newly appointed Secretary of State for Exiting the EU. The last occasion on which such an issue-specific ministerial appointment was made was, arguably, that of Dennis Howell as Minister for Drought in the infamous summer of 1976. During the period of Article 50 negotiations courts in England and Wales will continue to apply the rules in the Brussels I or the Brussels I Re-cast Regulations and the Rome I and Rome II Regulations to disputes having the requisite connecting EU elements.
- The only scenario in which this would not be the case is if parliament took legislative steps to depart from the status quo prior to the completion of the full exit process. It is difficult to envisage this as being likely to occur.
- Similarly a judgment issued by a Court in one of the EU 28 states would continue to be enforceable in England and Wales under the enforcement regimes in those instruments and others, such as the European Order for Payment regime.
- In addition to the 2 year notice period under the Lisbon Treaty, the European Communities Act 1972 would have to be repealed or amended. In theory a majority of the House of Commons could vote against a repeal of the Act. Indeed some commentators have spoken of a looming constitutional crisis with a democratically elected parliament which wishes the UK to remain in the EU confronting an equally democratic national vote in favour of leave.
- The 2 year notice period is one during which the terms of the United Kingdom’s relationship with the European Union will be the subject of negotiation. In the event that no terms of Agreement are reached the EU treaties will cease to apply in the United Kingdom.
- There may, of course be significant consequences for various specialist areas of law such as competition, intellectual property and employment law. Lawyers whose practices involve these specialist areas and others, such as data protection, will need to keep a very close eye on developments during the 2 year period in their specialist practice areas.
Consequences for cross-border transaction and litigation
- Within the 2 year period (or longer if extended) one of the matters for negotiation will be the relationship of the UK and the EU in relation to civil and commercial disputes and the enforcement of judgments.
- It is possible that the United Kingdom might seek to strike a Denmark-style Agreement with the EU to the effect that the current regime for civil jurisdiction and judgments remain in place.
- Denmark, although a member state, has a general opt-out from Article 65 of the EC Treaty on adopting measures on judicial cooperation in civil and commercial matters. It, therefore, negotiated a free-standing Agreement with the EU on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. This gave effect to the Brussels I Regulation in Denmark.
- However, for a non-EU member state to conclude an Agreement which would allow it the benefit of the reciprocal arrangements under the Brussels Regime would be without precedent. It is also difficult to envisage that the EU would wish to confer the benefits which the Brussels regime affords on jurisdiction to a state which has choesn to exit the EU. In this respect the position of the UK and Denmark is decidedly different.
- More likely it seems is that the UK will seek a deal giving continued access to the single market with Norway or Switzerland providing the working model. This might pave the way for the UK to sign up to the Lugano Convention 2007 which is a parallel to the Brussels Regime though with some important differences. Significantly the Lugano Convention does not incorporate changes introduced by the Brussels I Re-cast Regulation. There are thus some important changes to the rules on jurisdiction for intra-EU litigation which the UK would be excluded from if the Lugano Convetion route was chosen.
- To sign up to the Lugano Convention the UK would need to either have EFTA or EEA membership or the unanimous agreemment of the contracting parties, one of which is the EU itself.
- There is a possibility that if the EU treaties ceased to apply in the UK and no alternative deal was agreed that the Brussels Convention 1968 would revive to feel the gap. That would place the UK in the unlikley position of being the only state aside from Aruba and the French Overseas Territories to apply the Brussels Convention.
An independent free-standing Agreement on jurisdiction and the recognition and enforcement of judgements
- The UK has reciprocal treaties for the enforcement of foreign judgments with a number of countries which are given effect by the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933.
- There is no reason in principle why a free standing Agreement on jurisdiction and the enforcement of judgments could not be negotiated with the EU which might for example, afford reciprocal arrangements less than those contained in the Brussels Regime.
- The reality is, however, that no such free-standing Agreements on civil jurisdiction and judgments have been made between the EU and non-EU states.
No reciprocal arrangements between the EU and the UK in matters concerning civil jurisdiction, applicable law or the enforcement of judgments
- This is the least likely of all the potential exit scenarios, in which the UK reverts to the application of the common law to disputes involving parties in EU member states and the enforcement in the UK of judgments from the courts of EU member states.
- For individuals and business in the UK this would mean that any dispute with a party located in another EU member state would fall to be resolved by the local rules of the forum state. This would, for example, see a return to the courts of England and Wales being able to exercise ‘exorbitant jurisdiction’ over EU nationals on the basis of their presence in the UK at the time of suit.
- In short, there is no doubt that the UK courts including those of England and Wales would recover sovereignty in jurisdictional matters which have an EU element. Just one practical example of many that might be given, is that anti-suit injunctions aimed at preventing the commencement or continuation of litigation in a foreign court, would be obtainable in respect of proceedings before a court in an EU member state.
- In terms of the Court of Justice 'hate list' anti suit injunctions sit at the apex. Protestations by the UK that such injunctions do not infringe the principle of mutual trust and confidence as they merely reflect in personam jurisdiction over the parties, have unsuprisingly attracted little sympathy from the Court.
- Two cases from the Court of Justice, Turner v Grovit  ECR I-03565 and Allianz SpA v West Tankers [2009[ ERC I-00663 combined to drive a stake through the heart of the anti suit injunction as far as the Court of Justice is concerned.
- In a post-Brexit world in which the courts of England and Wales recovered complete sovereignty in civil jurisdiction matters anti suit injunctions would return as part of the litigation toolkit in intra-EU proceedings. Thus, for example, if proceedings were commenced before a Court in Germany in breach of an Agreement between parties located in Germany and the UK to refer disputes to the Courts of England and Wales, a party might apply to a Court in England to injunct the German proceedings. Under the Brussels Regime currently in place such injunction would be impossible to obtain. Clearly the mutual trust and confidence which currently raises an insurmountable obstacle to the anti suit injunction in intra-EU proceedings would in that event no longer pose such obstacle.
- The price of recapturing judicial sovereignty in intra-EU disputes would be the loss of the uniformity and predictability that the current regime seeks to provide. The enforcement of UK judgments in any one of the remaining EU member states courts would also become a much more difficult and less predictable process.
- The exit process also has crucial effects for the current arrangments between the UK and the other EU member states on the governing law for both contractual and non-contractual obligations. These are subject to the Rome I and II Regulations respectively. There are various possibilities to consider in terms of the post-exit infrastucture on governing law. There is no merit in speculation at such an embryonic stage of the exit process. We shall monitor developments as they occur in the period to 2019 and respond through our programs and other services.
- Whatver regime ultimately results from the Article 50 exit negotiation process, there will presumably be the need for transitionary provisions for claims issued prior to the date on which the UK formally exits the EU. This may result in the current EU regimes on jurisdiction and the enforcment of judgments and on choice of law continuing to be applied by courts in England and Wales beyond the UK exit date.
- The vote in favour of Brexit marks not the end of the United Kingdom’s legal relationship with the European Union but rather a process which will re-define the infrastructure which regulates important aspects of the UK’s relationship with the EU.
- The future infrastructure governing civil and commercial disputes will depend on which exit option is ultimately agreed upon. These range from an outcome which maintains the current regime more or less in place, the position if the UK left the EU and instead became a contracting state to the Lugano Convention, through to a situation in which the United Kingdom has no Agreement in place and operates with the EU as an independent third party state. In that eventuality the common law rules of private international law would apply.
- What is clear is that for the next 2 years or more practitioners will need to be aware of the continuing application of the EU infrastructures to disputes having an EU element and the application of the Brussels regime to such disputes.
- Cleary, despite the outcome, a huge amount of trade will continue to flow between the United Kingdom and the member states of the EU. Contracts have the potential to be affected by a future exit option and provision to deal with this would need to be built in.
- Whatever the wider arguments, the current regime provides a uniform system for civil jurisdiction and judgments and brings an element of certainty and reliability for those doing intra-EU business.
- Practitioners in the UK will need to keep themselves fully availed of the consequences for the legal infrastructures governing civil and commercial disputes in Europe and the effect on various aspects of cross border contracting with EU states.
Europa Law Editorial
If you would like to learn more about the key law & practice issues which arise in intra-EU civil & commercial transactions and disputes and from the enforcement in England & Wales of judgments from EU and non-EU member states the following live programs may be of interest;
Enforcing Foreign Judgments-from the eurozone and beyond
Location, Location, Location - EU cross border litigation - dealing with jurisdiction issues
Commercial Cross Border Claims in the EU-Appling the correct law
Crossing Borders - EU cross border travel claims
Please visit our EU Cross Border Litigation Law & Practice programs page