Reed Smith Client Alerts

As the end of the Brexit transition period approaches, a no-deal Brexit remains a possibility. The imminent end to the Brexit transition period has caused some to question the use of English courts, generating uncertainty surrounding what regime, in the absence of a suitable Brexit agreement, will govern the enforcement of EU cross-border security from 31 December 2020. The Brussels Regulation has provided a comprehensive and uniform solution to cross-border security enforcement since its introduction in March 2002, with the current regime being the Recast Brussels Regulation (in effect since January 2015).

Upon expiration of the Brexit transition period, counterparties contracting under English law can no longer rely on the Recast Brussels Regulation to enforce English court judgements across Europe. Currently, several partial solutions are available, some requiring adaptation from current practices to be successfully relied upon. We summarise these below.

Authors: Bronwen Jones Colin Baker Georgie Crossman

2007 Lugano Convention

The United Kingdom submitted a request to accede to the 2007 Lugano Convention (the Lugano Convention) on 8 April 2020, effective from the end of the Brexit transition period. Accession to the Lugano Convention would ensure continuing cross-border judicial consistency, facilitating enforcement of judgements throughout the EU, and European Free Trade Association (EFTA) countries (Iceland, Norway and Switzerland). This regime mirrors most of the current Recast Brussels Regulation regime, and replicates most of the benefits enjoyed under the current system. However, UK accession requires consent from all signatories, which has not been forthcoming.

Despite the Lugano Convention being the most suitable system post-Brexit, it does not provide a perfect solution. Under the current Brussels Recast Regime, exclusive jurisdiction clauses take precedence to hear a dispute, and proceedings in violation of such clauses are stayed irrespective of where proceedings are first commenced. By contrast, under the Lugano Convention the courts first selected are permitted to  determine whether they have jurisdiction to hear a dispute, and all proceedings in other jurisdictions, turning upon the same subject matter, must be stayed in the meantime. It can take time for certain courts to determine whether they have jurisdiction, with the consequence that proceedings could be intentionally commenced, in breach of an exclusive jurisdiction clause, simply to delay the resolution of disputes and the enforcement of cross-border security.

Although the Lugano Convention accession question remains uncertain, on 13 October 2020, Norway and the UK announced the conclusion of a bilateral agreement, to recognise and enforce rulings. Poised to become effective from 1 January 2021 in the event that the UK fails to independently accede to the Lugano Convention, this agreement could signal the future for enforcing EU cross-border security post-Brexit, encouraging the EU to consent to UK accession in their own right.

The Hague Convention on Choice of Court Agreements

If the UK fails to accede to the Lugano Convention (or until it does), the approach to enforcing English Judgements across the EU is likely to rest on the 2005 Hague Convention on Choice of Court Agreements (the Hague Convention). Currently party to the Hague Convention by virtue of its EU membership, the UK will independently accede on 1 January 2021, having deposited its instrument of accession to the Hague Convention on 28 September 2020. Unlike the Lugano Convention, accession does not require the consent of the other parties (Mexico, Montenegro, Singapore and all EU member states).

To rely on the Hague Convention to enforce English judgements, two key criteria must be met after the Hague Convention has come into force in the country whose courts are selected:

  1. The parties must have entered into an exclusive jurisdiction clause after that date.
  2. Proceedings must commence after that date.