The legal infrastructure post-Brexit is one of ease and simplicity we are told. A ‘Great Repeal Bill’ will be the process by which existing EU law will be incorporated into English law thus ensuring it survives the divorce process and providing much needed continuity particularly for businesses. One of the gaping holes in the Brexit campaign was the dearth of any substantive discussion of the effect that exiting the EU would have on the UK’s legal infrastructure and the rights enjoyed by its citizens. In particular save outside the legal community, there was little or no discussion of the rights conferred by the many EU Regulations currently having direct application in the United Kingdom. The oil that lubricates the working of these Regulations are interpretive decisions of the Court of Justice, responsive to Preliminary References from national Courts under Article 177. Obsessed with politically potent issues such as border control, such trivial matters as how important rights in civil and commercial matters would be protected post Brexit were swept aside or simply ignored.
One such Regulation is the Brussels I recast Regulation (aka Regulation 2015/2012). This is the third in a series of legislation from the EU intended to harmonise the rules for civil jurisdiction and judgments amongst the member states of the EU. The purpose of the Regulation is to provide certainty as to where disputes involving parties located in different EU states may be heard. The Regulation also provides in essence a streamlined scheme for the enforcement of intra-EU civil and commercial judgments.
The genesis of the Regulation can be found in the 1957 Treaty of Rome in which the 6 original founder states promised to “enter into negotiations with each other with a view to securing for the benefit of their nationals … the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and of arbitration awards”
The progeny of this was the 1968 Brussels Convention. It laid down detailed rules dealing with the circumstances under which the courts in the member states might exercise jurisdiction and rules addressing specific civil and commercial legal areas including contract, tort and maintenance. the Convention was given legal effect in the United Kingdom by the Civil Jurisdiction and Judgments Act 1982 making it effective from January 1987.
Some years later, in March 2002, the (then) 15 EU Member States, agreed the Brussels I Regulation, which replaced the Brussels Convention. Then, in 2012, following a long period of consultation, further amendments were agreed as part of the negotiation of the current version of the Regulation: the Brussels I Regulation (recast). It could scarcely have been envisaged in 2012 that the application of the Regulation (and indeed all other EU Regulations effective in the UK) would be under threat only 4 years later. That is merely to say that in 2012 no-one seriously envisaged a United Kingdom outside the UK.
Those who argued in favour of the UK’s exit from the EU were vocal in emphasising the need for the UK to regain sovereignty over its law-making process; the impression was that EU laws were a nasty and unwanted interference in the right of Parliament to make its own laws; these imposed laws were not subject to control – they applied whether the UK wanted them or not. In effect there was free movement of laws just like free movement of persons. The UK it was said had become powerless to prevent the inexorable march of EU law and its suffocation of the sovereignty of Parliament.
What was rather overlooked in the political debate was the fact that many of these EU Regulations reflect a good deal of UK influence. The European Union Committee; Brexit Justice for Families, Individuals and Businesses in its report published March 20th has recognised the extent to which Brussels recast was the product of substantial input from UK judges and lawyers. The regulation is the result of a cooperative process which responded to and sought to resolve some of the practical difficulties in the workings of the original Brussels I Regulation.
The Jurisdictional and judgment rules in Brussels I and its recast are the necessary corollaries of a European single market; parties involved in providing cross border services or in selling goods across borders need the assurance that if a contract is breached or a debt arises they will be able to pursue a legal claim with the minimum of obstacles and inconvenience. For a UK based business enforcing a debt due from a Belgian based supplier should be a far easier process than, for example, enforcing against a Russian based supplier. The Brussels I and Brussels I recast Regulations provide a comprehensive set of rules which protect against a plurality of parallel proceedings in different states based on a system of mutual trust and recognition amongst the member states of the EU.
Aside from jurisdiction the regulation provides a far more straightforward and semi automatic system for the enforcement of judgments across the member states of the EU. In broad terms there is a far less scope for a judgment debtor to challenge the enforceability in a UK court of a judgment in a civil or commercial matter issued by an EU member state than is available to a judgment debtor seeking to oppose the enforcement a judgment at common law in England and Wales.
It is an obvious statement that an effective system of cross border judicial cooperation between the UK and the EU post Brexit will be an important aspect of the negotiation process. The benefits arising to a member state from regulations such as Brussels recast and its sister regulations Rome I and II are merely examples of the many benefits that arise from membership of ‘club Brussels’.
What is not clear at this stage is how such judicial cooperation can be maintained to any degree approaching the current system under Brussels I and Brussels recast if the legitimacy and authority of decisions of the Court of Justice as far as UK courts are concerned is to come to an end on Brexit. As stated, these regulations do not exist in a vacuum – what informs the certainty they afford for businesses and individuals alike are the interpretive decisions of the Court of Justice which, of course, have EU wide effect.
The Committee in its report considers some of the issues that may arise should the Brexit negotiations not deliver an effective alternative to the current rules in Brussels I Recast. These may be summarised as;
Loss of certainty in civil and commercial matters
Of course the parties to a commercial transaction are free to reach choice of court and choice of law Agreements which will be recognised and enforced before English and foreign courts. The parties may also of course include an arbitral Agreement to afford their dealings with each other jurisdictional certainty in the event that disputes arise. However these in themselves are no guarantee against proceedings being brought in a foreign court and the existence of costly and difficult parallel proceedings. It is the current applicability of Brussels Recast which protects against such scenarios.
Detrimental effect on London as a leading centre for the resolution of commercial disputes
One of the attractions for parties in agreeing a choice of court Agreement in favour of England and Wales is the knowledge that the courts will apply the uniform rules on civil jurisdiction and judgments in regulations such as Brussels recast. Parties entering into international Agreements during the period of the Brexit negotiations will inevitably have concerns arising from uncertainty as to what legal infrastructure will govern following Brexit. Having said this, practicality would suggest that some form of interim arrangements will need to be in place to provide for agreements entered into whilst the regulations remain operative in the UK.
There are difficult scenarios that may be envisaged. Suppose the day following Brexit the Court of Justice delivers an important ruling on the correct interpretation of Brussels recast. Would an English court be bound to apply such ruling during any interim period before alternative arrangements come fully into effect? Would the continued applicability of Court of Justice judgments post-Brexit be acceptable to any degree?
Inability to enforce judgments
English judgments can obviously be enforced in countries outside the EU. However the entire purpose of Brussels recast is to make the process more straightforward and certain where enforcement is in another EU member state. How do you enforce an English judgment in Upper Volta? Answer; ask a lawyer in Upper Volta; How do you enforce an English judgment in Sweden or Holland or Portugal – consult Brussels recast (though this is not to say that knowledge of the civil procedure of those countries is irrelevant). The Brussels regime effectively provides for the free movement of judgments amongst the EU members states. If that free movement no longer exists enforcement becomes by definition a less straightforward and predictable process. Having said this, the lack of free movement of judgments between, for example the United States and the United Kingdom has never been flagged up as major obstacle to transatlantic trade. Nor have the US and the UK been moved at any stage to enter into a reciprocal judgments enforcement treaty.
However a survey of the case-law will serve to illustrate the difficulties which can arise when seeking to enforce a non-EU judgment in England and Wales and vice-versa. As certain witnesses before the Committee recognised, the loss of Brussels I as the governing legislation for the enforcement of judgments does not leave a gaping hole – the common law ultimately exists to fill that hole though it does not bring with it the reciprocity of Brussels recast.
The Committee at Paragrapgh 53 of its report comments:
The evidence provided to us suggests that the loss of certainty and predictability resulting from the loss of the BIR and the reciprocal rules it engenders will lead to an inevitable increase in cross-border litigation for UK based citizens and businesses as they continue to trade and interact with the remaining 27 EU Member States.
The options post Brexit
Great Repeal Bill
This posits a piece of legislation which will have the effect of continuing to apply EU law in the United Kingdom at that point in time when the UK formally leaves the EU. There are fundamental issues with this as a number of witnesses recognised. Brussels recast is based on a system of mutual recognition and enforcement. Once the UK has exited the EU the basis for that mutual recognition and enforcement no longer exists; one would be exchanging an EU instrument of direct applicability across the EU for a piece of wholly domestic legislation. The issues do not end there. Brussels recast is not a stagnant instrument. It is as noted previously, responsive to development by the member states and to interpretation by the Court of Justice. A piece of wholly domestic legislation would not be appropriate to take account of developments in the operation of the regulation. Whatever the Great Repeal Bill provides it could not provide for the enforcement of English judgments throughout the EU. The Committee correctly concludes that the continued application of Brussels recast can only be on the basis of an Agreement between the UK and the EU providing for the post-Brexit application of the regulation either as part of a transitional arrangement or a permanent Agreement.
Apply the common law to litigation involving parties in EU member states and the enforcement of judgments from EU member states
If the Brexit negotiation process does not produce an agreement on jurisdiction and the enforcement of judgments between the UK and the EU then the common law would necessarily fill the void. A number of witnesses observed that whilst the application of the common law to fill any void would not be a catastrophe it would be a retrograde step; this may simply reflect the fact that leaving the EU is a retrograde step. What is clear is that replacing the application of Brussels recast with the common law would introduce a substantial degree of uncertainty and would have the potential to substantially add to the costs of resolving disputes with parties based in member states. Against this it may be pointed out that the common law scheme for judgment enforcement still plays an important part – there are many important trading nations with whom the UK has no reciprocal greement on judgment enforcement.
The committee in its report observes that ‘A return to the common law rules would, according to most witnesses, be a recipe for confusion, expense and uncertainty. In our view, therefore, the common law is not a viable alternative to an agreement between the EU and the UK on the post-Brexit application of the Brussels I Regulation (recast).’
A form of halfway house between the current situation in which Brussels I recast governs and a reversion to the application of the common law, would be for the United Kingdom to become a signatory to the Lugano Convention. This currently provides for reciprocal arrangements between the EU and 3 EFTA countries (Norway, Switzerland, Iceland). It mirrors for all practical purposes the rules in the original Brussels I (not in its updated and recast form). It does not bring with it all the benefits engaged by the recast regulation however one of the attractions for the UK (at least on a political level) is that Court of Justice decisions are not directly binding on signatories to the Convention, rather they are bound to have regard to its decisions in interpreting the Convention.
Since it appears practically and politically unacceptable that post Brexit the courts in the United Kingdom should continue to be subject to the primacy of the Court of Justice, the Lugano Convention provides a solution. This also deals with an issue referred to earlier in this article, namely that EU legislation is a living organism whose development feeds on interpretive decisions. The Lugano Convention route provides a means to ensure that European Court judgments continue to be taken into account by courts in England and Wales without offending the (glib) demand that ‘Brexit must mean Brexit’.
The Committee noted that the effectiveness of the Lugano route could be supported by the UK becoming a signatory to the Hague Convention on Choice of Court Agreements
Having noted the evidence of witnesses that a Great Repeal Bill is not an appropriate means to try and secure the application of the Brussels I recast regulation the Committee at Paragraph 126 of the Report rather oddly recommends the implementation of the Rome I and II Regulations through a Great Repeal Bill. This is odd because these are sister provisions of the Brussels I and recast regulations dealing with the applicable law in cross-border disputes. They are directly applicable pieces of EU legislation. If, as the Committee concludes, a Great Repeal Bill is not an effective or appropriate means to continue to apply the Brussels I recast regulation post-Brexit, then neither is it an effective or appropriate means to secure the continued application of Rome I and II. The same obstacles arise, namely that post-Brexit the UK would be excluded from involvement in any future development and amendment of these regulations and further that these regulations as with Brussels recast depend for their effective operation on the continuing application of interpretive decisions of the Court of Justice. An attempt to incorporate the provisions in these regulations into UK law by means of a Great Repeal Bill would not overcome these deficiencies
The Committee recognises the importance of the Brussels and Rome regimes to the effectiveness of UK/EU civil and commercial jurisdiction and enforcement of judgments. It recognises the obvious need for an infrastructure that will replace the void currently filled by directly applicable EU regulations once the UK has exited the EU. It recognises that if an agreement on judicial cooperation in these matters is not reached as part of the negotiation process, the common law provides a safeguard any against any vacuum. However it accepts the evidence of its witnesses that a reversion to the common law as a means to fill a post-Brexit void would be a retrograde step and would lack the mutuality inherent in the regulations currently in force.
An agreement that the Brussels I recast would continue to apply in the United Kingdom post Brexit would seem unlikely. These uniform regulations are a major benefit of EU membership and to allow a departing state to retain the full benefit of the regulations would appear unattractive from the EU’s perspective. Further as stated several times, the effective continued operation of the regulation post-Brexit would depend on the continued application of Court of Justice decisions on the effect and operation of the regulation. It is, perhaps, not inconceivable that an agreement might provide that decisions of the Court would not be binding on courts in the UK.
A more viable outcome, as the Committee recognises, would be the UK’s accession to the Lugano Convention, a second-best compared to Brussels recast however a more politically and pragmatically acceptable alternative than an attempt to keep the regulation in full effect. This would also provide a guard against a number of the issues and uncertainties which would arise from a reversion to common law.
As the UK stands with its finger on the trigger of the Article 50 starter pistol and with a long and winding road ahead for the negotiations, both lawyers and their clients can do no more than adopt a ‘wait and see’ approach whilst making appropriate contractual provision.
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