More than four years after the Brexit referendum the UK finally left the EU on 31 December 2020.
Senior Associate Pia Mithani and Partner Mo Bhaskaran provide an overview of the impact of Brexit on litigants who commence proceedings on or after 1 January 2021. This short note is intended for our colleagues and friends in Europe and beyond.
Access to the English courts in cross-border claims developed over many decades with rules aimed at ensuring that the English courts could try cross- border claims where they were the appropriate forum. From 1968 through to the end of 2020, the English Courts also applied (for disputes with a European connection) harmonised European rules on jurisdiction, as well as the recognition and enforcement of judgments.
The most recent formulation of the original 1968 European rules are the Brussels I Recast Regulation (the Brussels Regulation) which applies as between EU member states, and the Lugano Convention (Lugano) which is applicable between the EU member states and a handful of non-EU states – Switzerland, Norway and Iceland.
The UK left the EU at the end of 2019, but the 2019 EU-UK Withdrawal Agreement (the Withdrawal Agreement) extended the rules to 31 December 2020 to enable further negotiations aimed at avoiding a hard end to the UK’s relationship with Europe.
Whilst a hard Brexit was avoided when the EU-UK Trade and Cooperation Agreement was completed on 24 December 2020, the new agreement is silent on the question of how the UK courts will continue to harmonise with their European counterparts on jurisdiction and enforcement questions in the future. This applies not only to the Brussels Regulation, but also to Lugano.
Existing claims vs new claims
For proceedings commenced before 1 January 2021 the Withdrawal Agreement confirms that both the jurisdiction rules and the recognition and enforcement of judgment rules in the Brussels Regulation will continue to apply on a reciprocal basis. This position is also respected through domestic English case law.
However, there is no similar agreement in relation to the Lugano Convention. Therefore, although the UK has put in place legislation to ensure that the English courts will continue to apply the Lugano Convention to proceedings issued before 1 January 2021, there is no guarantee that other Lugano states will do the same when considering issues of jurisdiction or enforcement, as this is a matter for domestic judicial consideration.
For proceedings commenced on or after 1 January 2021 neither the Brussels Regulation nor the Lugano Convention will apply. Therefore parties will need to consider the impact of this on jurisdiction, service and enforcement where the proceedings are connected to EU or Lugano jurisdictions.
In response to Brexit the UK has acceded to the Hague Convention on Choice of Court Agreements (the Hague Convention) which protects exclusive choice of jurisdiction clauses in the Courts of signatory states. Those states are the EU, as well as Singapore, Mexico, Montenegro and now also the UK in its own name.
The Hague Convention is not a complete replacement for the Brussels Regulation. First, it only applies to exclusive jurisdiction clauses entered into since 1 October 2015 (according to the UK). The EU itself considers that the UK can only take advantage of the Hague Convention for clauses agreed from 1 January 2021.
Second, the Hague Convention applies only to exclusive jurisdiction clauses. Therefore for non-exclusive jurisdiction clauses the UK would apply its common law rules and there remains some uncertainty as to whether the Hague Convention would apply to one-sided/asymmetric jurisdiction clauses.
Finally, in circumstances where UK proceedings involve only EU parties, the Hague Convention would direct any relevant court to apply the Brussels Regulation which generally favours proceedings in the Courts of EU states over non-EU. Now that the UK is a non- EU state, this derogation may prevent any Courts in EU member states from stepping aside in favour of a case before the English Court (unless proceedings in England were commenced first) even if the dispute involves a Hague Convention-compliant exclusive jurisdiction clause.
In the absence of any choice of jurisdiction clause the English Court will apply its common law rules contained in the CPR, enabling the English Court to accept jurisdiction on the basis of relevant connecting factors. These include the location of defendants, connections to anchor defendants, as well as other factors such as choice of law clauses, location of relevant events, and the likely governing law of the dispute. This involves the English Court conducting a balancing exercise and using its discretion as to whether England is the most suitable jurisdiction, when cases are presented to it. This is quite different to the more codified position that had been in existence through the European regime. The English court may also have increased flexibility to issue anti-suit injunctions in appropriate cases.
Service of proceedings
Prior to Brexit English proceedings could be served in the EU without the permission of the English Courts via the EU Service Regulation. An equivalent position was in place under the Lugano Convention as well.
This will now only be the case where the documents were provided to the relevant official service agents by 31 December 2020 (even if service itself had not taken place) or where a Hague Convention jurisdiction clause is relied upon.
For all other proceedings, claimants will have to seek the English Court’s permission before serving any claim form outside the UK, which will involve satisfying the Court on an ex parte application that the claim has merit and that the UK Court has jurisdiction. Care is needed when making such an application to the English Court, particularly when made on an ex parte basis. In particular, litigants must be very careful to consider whether the system of law under which a case is brought has any potential limitation issues. If so, this must be presented to the English Court, or else service of proceedings may be set aside by a defendant.
Enforcement of judgments
As with jurisdiction and service, enforcement of judgments for new proceedings where the Hague Convention applies will proceed under the Hague Convention. Where the Hague Convention will not apply, parties will need to take local advice in the state where enforcement would take place as to how enforcement would proceed.
Accession to the Lugano Convention
Most of the gaps arising as a result of Brexit will be resolved by the UK’s accession as an independent signatory to the Lugano Convention. The UK has applied for accession as an independent signatory, but this has not yet been agreed by the EU (Norway, Switzerland and Iceland have all approved the UK’s accession). A three-month objection period applies before any such accession could take effect, therefore even if the EU now accepts the UK can join, there will in any event be a further delay.
If you or your clients require any further information about legal proceedings in the English courts, please get in touch.
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