Brexit “no deal” notice on jurisdiction and enforcement of judgments

As part of its second batch of “no deal” technical notices, the government has today published a guidance notice entitled: Handling civil legal cases that involve EU countries if there’s no Brexit deal.

The notice contains little that was not already obvious. If no deal is agreed, there would be no agreed EU framework for ongoing civil judicial cooperation between the UK and EU countries. The UK would retain the Rome I and Rome II rules on applicable law, which generally do not require reciprocity to operate, but the rules governing jurisdiction and enforcement of judgments between EU member states (under the Recast Brussels Regulation 1215/2012) would no longer apply to the UK. Nor would the Lugano Convention, which currently governs jurisdiction and enforcement between the UK and Iceland, Norway and Switzerland – though, as the notice says, this would not prevent the UK applying to re-join the Lugano Convention in its own right at a later date (and the government has previously indicated that it would seek to do just that).

For rules in these areas, the UK would revert to the existing domestic common law and statutory rules, which currently apply in cross border cases concerning the rest of the world. The guidance adds, not very helpfully:

“Businesses, individuals and legal practitioners would need to consider how these rules interact with the domestic rules of relevant EU countries to determine how jurisdiction in cross-border disputes should be established and whether any judgments should be recognised and enforced. In certain cases, the interaction between these rules may not be clear and certain countries may not recognise judgments from UK courts. Businesses and individuals may wish to take legal advice about how these changes may affect your individual circumstances.”

The paper confirms, as previously announced, that in the event of no deal the UK would take the necessary steps to re-join the 2005 Hague Convention on Choice of Court Agreements in its own right. This Convention currently governs jurisdiction and enforcement of judgments as between the EU, Mexico, Singapore and (as of 1 August 2018) Montenegro, where there is an exclusive jurisdiction clause in favour of one of the contracting states which was concluded after the Convention entered into force for that state. In the event of a no-deal Brexit, it would apply as between the UK and the other contracting states, including all EU member states.

There has however been some uncertainty as to (i) when the Convention would enter into force for the UK, since under its terms it enters into force on the first day of the month following three months after ratification; and (ii) whether the Convention will apply to jurisdiction agreements concluded before it enters into force for the UK in its own right, as opposed to by virtue of EU membership – though the better view would seem to be that it should.

With that in mind, the one piece of helpful information in the guidance notice is that, in the event of no deal, it is anticipated that the Convention would come in to force across the UK by 1 April 2019, though it does not explain how that will be achieved. We presume it would depend on obtaining the EU’s agreement to deposit the UK’s instrument of ratification before it exits the EU, since (as noted above) there is ordinarily a three month period between ratification and entry into force. Nor does the notice venture any guesses as to the implications of the 1 April implementation. It says, simply: “Where appropriate, individuals and businesses would need to consider what this would mean for any existing choice of court agreements made under either the Brussels regime or the 2005 Hague Convention, including the implications of any gap in coverage by the 2005 Hague Convention between 29 March and 1 April 2019.”

One obvious tip – try to avoid agreeing exclusive English jurisdiction clauses on 30 or 31 March.

Article published – Choosing a jurisdiction clause with Brexit on the horizon

With the uncertainties surrounding Brexit, it can be difficult to know what dispute resolution clause to choose to govern commercial contracts that will continue in force once the UK leaves the EU next March, particularly where it may be necessary to enforce any judgment in an EU member state should a dispute arise.

Anna Pertoldi has published a post on Practical Law’s Dispute Resolution blog which considers the main options and their pros and cons. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

New podcast – English governing law and jurisdiction clauses after Brexit

On the new Herbert Smith Freehills Podcast channel, Anna Pertoldi, Maura McIntosh and Tom Henderson discuss what businesses need to know about the impact of Brexit on their continued use of English governing law clauses and English jurisdiction clauses in their contracts after Brexit.  As businesses will be entering into new contracts which remain in force after Brexit, looking at the effectiveness of these clauses in the future will be an important part of any new contract negotiation.

Our podcast is available on iTunes and SoundCloud and can be accessed on all devices. You can subscribe and be notified of all future episodes.

Brexit White Paper reiterates aims for civil judicial cooperation

The UK government has today published its White Paper detailing its proposal for the future relationship between the UK and the EU. The short section on civil judicial cooperation echoes the aims set out in the government’s Framework for the UK-EU Partnership published on 13 June (as outlined here).

The White Paper recognises the benefits of civil judicial cooperation for both the UK and the EU, including that it gives businesses legal certainty in the event of disputes and makes them more confident trading across borders. It says, uncontroversially, that the future relationship between the UK and the EU should protect these advantages.

The paper reiterates the government’s intention to seek to participate in the Lugano Convention post-Brexit, noting however that “while the UK values the Lugano Convention”, some of its provisions have been overtaken (a reference, no doubt, mainly to the stronger protections for exclusive jurisdiction clauses under the recast Brussels Regulation) and it is limited in scope. It adds that the UK is keen to explore a new bilateral agreement with the EU, which would cover a coherent package of rules in civil, commercial, insolvency and family matters.

Agreement reached in principle on Brexit transitional provisions for jurisdiction and enforcement of judgments

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. Continue reading

UK publishes framework for UK-EU partnership on civil judicial cooperation

On 13 June, the UK government published a presentation setting out its proposals for continued judicial cooperation once the UK leaves the EU. The presentation is part of a series produced by the UK negotiating team for discussion with the EU.

Overall the paper is long on aspirational statements and short on specifics, but it does indicate that the UK government is keen to reach a new, bespoke agreement with the EU across the full range of civil judicial cooperation, including business and consumer as well as insolvency and family. It notes that the EU has already signalled its willingness to consider a new form of relationship in respect of family law, and the UK wants to see this extended across the sphere of civil judicial cooperation.

The presentation refers to the Lugano Convention, which currently governs issues of jurisdiction and the enforcement of judgments between the EU, Iceland, Norway and Sweden, but says that the UK wants “a broader agreement that reflects our unique starting point”. None of this is surprising. The UK government stated, as long ago as last August, that it would seek to continue to participate in the Lugano Convention as well as seeking an agreement with the EU which closely reflected the principles of judicial cooperation under the current EU framework (see our blog post on the UK’s August 2017 position paper “Providing a cross-border civil judicial cooperation framework”).

The presentation notes that it is in the UK and the EU’s mutual interest to reach such an agreement, in order to provide certainty as to which country’s court will hear a case, which law will be used and that judgments can be enforced in the UK and the EU. We wholeheartedly agree, but would welcome significantly more detail as to the basis on which the UK will seek to reach such an agreement.

Denmark joins Hague Convention on Choice of Court Agreements

On 30 May 2018, Denmark deposited its instrument of accession to the Hague Convention on Choice of Court Agreements, which means that the Convention will apply to all EU member states from 1 September 2018, as well as to Mexico and Singapore.

The Convention provides that courts of member states must respect exclusive jurisdiction clauses in favour of the courts of other member states, and must recognise and enforce judgments of the courts of other member states given pursuant to such clauses (subject to certain limited exceptions).

While currently the Convention only applies as between Mexico and Singapore and the EU member states (apart from Denmark), it will become more significant if ratified by the other countries that have signed the Convention but have yet to ratify it, namely the US, the People’s Republic of China, Ukraine and Montenegro.

From a UK perspective, the Convention may also become more significant after we leave the EU, and any agreed transition period comes to an end, so that the current rules on jurisdiction and enforcement of judgments under the Recast Brussels Regulation no longer apply to the UK. The UK government has indicated its intention that the UK will sign up to the Convention in its own right post-Brexit. Assuming that happens, it means that English court judgments should continue to be enforceable throughout the EU, where the English court had jurisdiction under an exclusive jurisdiction clause – even if no other arrangements on jurisdiction and enforcement are agreed between the UK and the EU (contrary to the UK’s intention to seek a bespoke agreement on these matters and/or an agreement to join the Lugano Convention).

Dispute resolution clauses: Putting yourself in the best position

All too often, dispute resolution clauses may be treated as part of the boilerplate: the usual wording thrown in, with perhaps little thought for the particular circumstances.

But the question of how a dispute will be resolved – whether by litigation or arbitration, where and under what law – may make all the difference to whether or not you will be able to enforce your rights under the contract. So it is important to think about these matters at the outset. Once a dispute has arisen, it will generally be too late.

In this tenth of our series of contract disputes practical guides, Adam Johnson QC, Alexander Oddy and Nick Peacock consider choice of law and jurisdiction/arbitration clauses, as well as clauses providing for mediation or other forms of ADR, and provide some practical tips on their use. You can click here to download the PDF guide.

Clients and contacts of the firm can also register to access the archived version of our hour-long webinar exploring these issues by contacting Jane Webber. Or if you would prefer a shorter version focusing on key practical tips, Nick has also presented this 15 minute podcast. Continue reading

EU’s revised proposals for enforcement of judgments post-Brexit

On 15 March, the European Commission published a revised version of the draft withdrawal agreement it had previously published on 28 February 2018 (see our summary of the original terms relating to jurisdiction, choice of law and enforcement of judgments here). The revised version contains a significant change regarding continuation of the current arrangements for enforcement of judgments, bringing the EU’s position closer to that of the UK on this issue.

The EU’s initial draft agreement provided that the current rules on enforcement of judgments, under the Recast Brussels Regulation, would apply only to judgments given before the end of any transition period. In contrast, the revised draft provides that those rules would apply so long as the proceedings were instituted before the end of that period.

This is a positive step but, in contrast to the UK’s position, there is no provision for the current rules on enforcement to apply where a jurisdiction agreement was entered into before the end of the transition period, if proceedings were commenced after it. 

A further version of the draft withdrawal agreement has been published today (19 March) indicating which areas of text are agreed and which remain subject to discussion (though as noted in our separate blog post on the key areas of agreement, linked here, nothing is agreed until everything is agreed). Discussions are said to be ongoing in relation to the provisions on jurisdiction and enforcement, in contrast to the provisions on choice of law which form part of the text marked as having been agreed.

Choice of law, jurisdiction and enforcement of judgments post-Brexit: No surprises in EU’s draft withdrawal agreement

So far as choice of law, jurisdiction and enforcement of judgments are concerned, the EU’s draft withdrawal agreement, published last week, is largely consistent with its previously declared negotiating position, as set out in its June 2017 position paper outlined here. (The relevant provisions of the draft withdrawal agreement are summarised at the end of this post.)

An important distinction, however, is that references to the date of the UK’s withdrawal from the EU have been replaced with references to the end of the transition period following the UK’s withdrawal. So, if arrangements for a transition period can be agreed more generally, the existing arrangements relating to choice of law, jurisdiction and enforcement of judgments will continue at least until the end of that period, and beyond in some respects as outlined below.

The draft withdrawal agreement does not reflect the more ambitious terms proposed in the UK’s August 2017 position paper (outlined here) regarding continuation of the current arrangements for enforcement of judgments. Under the EU’s proposals, current enforcement rules would apply only to judgments given before the relevant date (ie the UK’s withdrawal or the end of the transition period); under the UK’s proposals, those rules would apply so long as the proceedings were commenced before the relevant date or the jurisdiction agreement underlying the judgment was entered into before the relevant date. The UK’s proposals would therefore give a much longer tail to the current enforcement rules.

Nor does the draft withdrawal agreement address the question of the future relationship between the UK and the EU in these areas, and the EU’s position on this question remains opaque. Prime Minister Theresa May touched on this question briefly in her speech on Friday (2 March 2018) regarding the UK’s future economic partnership with the European Union, saying the UK would want the agreement to cover civil judicial cooperation, “where the EU has already shown that it can reach agreement with non-member states, such as through the Lugano Convention, although we would want a broader agreement that reflects our unique starting point”.

The UK government’s August 2017 position paper outlined its intentions for the future relationship in a bit more detail, indicating that, in addition to a bespoke agreement with the EU which “closely reflects” current principles, the UK would seek to join the Lugano Convention (which applies between EU member states, Norway, Iceland and Switzerland) and would also participate in the Hague Convention on Choice of Court Agreements 2005 (which currently applies between EU member states, Mexico and Singapore where there is an exclusive choice of court agreement). To join Lugano, the UK would require unanimous agreement of the other contracting states (including the EU), but it can accede to the Hague Convention without any need for consent. Continue reading