On 19 June, the UK and EU negotiators published a joint statement outlining the progress made on the draft Withdrawal Agreement since it was last published in March 2018. The joint statement confirms that agreement has been reached in principle on the provisions relating to jurisdiction and enforcement of judgments, under article 63 of the draft Withdrawal Agreement. This means that, assuming the Withdrawal Agreement is ultimately finalised and put into effect, current rules on both jurisdiction and enforcement will apply where proceedings are commenced before the end of the transition period (31 December 2020).
Disappointingly, however, there is no provision for the current rules on either jurisdiction or enforcement to apply where a jurisdiction agreement was entered into before the end of the transition period, if proceedings are commenced only after that date.
This is particularly surprising in relation to the rules on jurisdiction. Previously published drafts of the Withdrawal Agreement (including the version published on 19 March 2018, here) had contained a specific provision (article 63(2)) which stated that, where jurisdiction was based on the parties’ agreement, the current jurisdiction rules would continue to apply so long as that agreement was entered into before the end of the transition period. That reflected the position of both the EU and the UK in their respective position papers last summer (see our blog posts here and here). It is not clear why the wording agreed in the recent joint statement has rowed back from that.
In relation to enforcement of judgments, the UK’s position as set out in its August 2017 position paper had been that current rules should continue to apply where the jurisdiction agreement underlying the judgment was entered into before the relevant date. The EU had accepted, in the 19 March 2018 draft, that current rules should apply where proceedings were commenced before the end of the transition period, but had not gone further than that.
Assuming the joint statement represents the last word on these issues, what impact does this have on the effectiveness of English jurisdiction clauses agreed now, and the enforceability of judgments obtained pursuant to those clauses? That depends on a number of factors:
- Where proceedings are issued before 31 December 2020 there should be no difficulty; current rules will apply.
- Where proceedings are issued only after that date, then again there should be no difficulty if this point is dealt with as part of any arrangements put in place to replace the Brussels Regulation – ie for the UK to accede to the Lugano Convention and/or reach a bespoke deal with the EU, as the government is seeking (see here).
- If nothing else is agreed, the position in relation to exclusive jurisdiction agreements is likely to be governed by the Hague Convention on Choice of Court Agreements, which the UK intends to sign up to in its own right post-Brexit. There is however some potential uncertainty as to the application of Hague post-Brexit in relation to jurisdiction clauses agreed at the time the UK was a member of Hague only by virtue of EU membership (as opposed to being a member in its own right).
- If no agreement or convention applies, then questions of jurisdiction and enforcement become more complicated. Overall, it seems likely that most member states would continue to respect exclusive English jurisdiction agreements and enforce English judgments in most circumstances, but there are a number of areas of risk.
For more information please contact Anna Pertoldi or Maura McIntosh or your usual Herbert Smith Freehills contact.