The UK ceases to be an EU member state at midnight (CET) on 31 December 2020. Earlier in the year, The Lawyer interviewed International Injury Partner Christopher Deacon and Commercial Litigation, Fraud and Securities Litigation Partner Marc Jones about the impact this will have on the UK’s alignment of EU law and the Lugano Convention. A summary of the article is outlined below.
Once the clocks strike midnight on 31 December 2020, for all intents and purposes, the UK will cease to be treated as though it is a member state.
This means that, unless they have been incorporated into domestic law before that point in time, all the regulations and directives will fall away. The UK’s membership in a number of treaties and conventions, acquired by virtue of being an EU member state will also end that night.
The Lugano Convention, briefly put, is a convention between the EFTA States and the European Union. It contains most of the Brussels Regulation (predecessor to the current Brussels recast regulation). The UK is for the moment being treated as though it is still a member of the convention by virtue of being an EU member state. However, once the transition period expires, the convention will cease to apply between the UK and the rest of the EFTA states, signalling a return to common law and private international law for the UK.
Key to everything is the fact that re-joining the Lugano Convention is not a fait accompli.
Unanimous approval from all signatory states is needed, and there is a six month ‘reflection period’ during which approval may be rescinded. The EU Commission has expressed reticence towards giving its approval for the UK to join Lugano after Brexit, citing level playing field concerns.
At the moment the UK’s accession to the convention is part of a set of political negotiations and trade-offs, which could endanger cross-jurisdictional co-operation and have severe repercussions for individuals and consumers both in the UK and in the EU.
Larger companies and corporates are less likely to be as severely impacted by the possibility that the UK will not accede to the Lugano Convention in time.
Why fight for accession to Lugano?
Joining the convention would preserve UK citizens’ ability to sue in their home courts where a defendant is domiciled in another EU member state (and vice versa) – eliminating the problem posed by forum non conveniens and preserving access for justice in areas where litigation involves mainly individuals, like consumer protection, serious injury or employment.
Although preserving the status quo might not seem particularly crucial for big-ticket corporate litigation, it is crucial for individuals and SMEs, who will lose the reciprocal protections afforded by the current regime once the transition period expires.
Impact on Personal Injury
Stewarts partner Christopher Deacon makes a compelling case for consumer protection and personal injury where the stakes for clients are much higher.
He says: “Under the current European regime there are huge protections for consumers who are seriously injured overseas or indeed for consumers who might want to sue a defendant that’s based in another member state for some other reason; for example in a sale of goods or supply of services context, an example of which might be sub-par holiday accommodation.”
Crucially, the current European regime also allows the consumer to bring proceedings directly against an insurer and to join the insured to those proceedings in certain circumstances.
Where there is a consumer contract, they can sue the other party to the consumer contract in their home courts. Additionally, under both the current regime and the Lugano Convention, a claimant can bring a foreign defendant into their home courts (ie the UK courts) in certain circumstances where an anchor defendant is already domiciled there.
These protections and advantages are replicated by the convention for the most part.
These are potentially areas of growth, according to Christopher.
“The European regime carves out exceptions to the default rules on jurisdiction for the protection of the weaker party to a dispute,” he says. These exceptions allow the consumer (including victims of a serious accident in the EU27/EFTA states) to bring proceedings directly against an insurer and to join the insured to those proceedings in certain circumstances.
Where there is a consumer contract, they can sue the other party to the consumer contract in their home courts, that’s a really valuable benefit to individuals, including serious injury victims, and is used increasingly as a basis for jurisdiction – it’s also potentially a growing area with COVID-19 and the reliance on e-commerce the pandemic has created.”
Christopher adds “The Lugano Convention would preserve the important protections for the weaker party to a cross-border dispute, there are some differences, but by and large – as far as consumer protection, and protection for seriously injured claimants; Lugano would bridge the gap in protections which we would otherwise lose when the transition period ends”.
On the other hand, should the UK fail to join the Lugano Convention in time for the end of the transition period, those are the areas which will be hit especially hard.
Impact on Commercial disputes
Commercial disputes are less likely to be as adversely impacted by a failure to join the Lugano Convention according to Stewarts partner Marc Jones, because even if the UK doesn’t join Lugano in time, the UK government has expressed an intention to accede to the 2005 Hague Convention on Choice of Court agreements.
This would give commercial parties the certainty that their choice of court clauses would be respected and brushes away the issue of challenges to those clauses.
This certainty would not however be afforded to consumers or serious injury claimants under the 2005 Convention, which explicitly excludes these contracts (often asymmetric) from its scope.
Consumer contracts and serious injury claimants would therefore be completely dependent on the rules of jurisdiction in place in whichever State an accident or dispute arises.
As Marc explains, claimants involved in consumer or serious injury disputes would therefore be faced with a return to private international law; meaning they would have to “contend with the private international laws of each State, and potentially each State that views itself as having a sufficient connection under its own rules could take jurisdiction.”
This would eventuality lead to prolonged jurisdiction challenges (reflecting in the costs and procedural complexity involved) and erode certainty for claimants involved in such disputes, especially where quantification of damages is involved (mainly due to the ‘loser pays principle’ in common law.)
Christopher adds that in this sense, “the stakes are too high for serious injury claimants. As a complement to the rules on jurisdiction, the European regime provides for reciprocal and (largely) automatic recognition and enforcement of judgments.
“If you haven’t got the clout of some sort of enforcement procedure (when suing an overseas defendant in the UK courts), it does increase the uncertainty to a potentially unacceptable level.”
On the subject of access to justice, Christopher is vehement: not joining the Lugano Convention would limit access to justice for many claimants.
He says, “I think it will limit access to justice for serious injury claimants who need to pursue a defendant based in the EU27/EFTA states.
“Again, it highlights the importance of making sure there isn’t this gulf, and we make sure that these protections are maintained.”
The increased complexity – different limitation periods, service and witness and disclosure rules involved in losing the capacity to sue defendants in their home courts – would not only pose considerable difficulties to individual claimants but would also result in higher costs associated with pursuing those claims.
It may also result in higher costs for insurers, which would then be passed down onto consumers in terms of higher insurance premiums.
Additionally, whilst damages and enforcing orders for damages are not necessarily crucially important in big-ticket commercial disputes, they can be hugely important in the consumer and serious injury context, further highlighting just how important joining the Convention and avoiding a gap in protections is for this practice area.
What will the impacts on practitioners be if the UK doesn’t join the Lugano Convention in time?
If the Lugano Convention is not adopted, the former pre-Brussels Regulation private international law rules will apply. So if a claimant has an accident abroad, a lawyer in the relevant jurisdiction may have to be instructed to deal with it.
UK-based practitioners would therefore see their roles change and find themselves acting as go-between’s between the clients and the foreign lawyers with the increased language and cultural barriers which that would bring when drawing together the documents and steps necessary for the claim to be issued or defended abroad.
The prevailing view among practitioners seems to be that joining the Lugano Convention would provide a net benefit to the industry, whilst protecting those areas which, like personal injury and consumer protection law, have the most impact on everyday people’s daily lives.
Those who will bear the brunt of a sudden gulf between the UK and the EU if the UK is not permitted to join the Lugano Convention will be individual claimants across both the UK and the EU.
The full article in the Lawyer’s Litigation Tracker Q2 2020 publication can be accessed here (subscription required) –
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