UK applies to join Lugano Convention from end of Brexit implementation period

On 8 April 2020, the UK submitted its application to accede to the 2007 Lugano Convention on jurisdiction and the recognition and enforcement of judgments, in accordance with the UK government’s previous statements of intention.

Lugano currently applies as between the EU (including the UK, until the Brexit transition period comes to an end – most likely on 31 December 2020 if the UK government’s recent statements on the point are taken at face value) and EFTA countries Iceland, Norway and Switzerland. The UK’s involvement in Lugano will however cease at the end of the transition period unless the UK accedes in its own right.

If the UK were to accede to Lugano, assuming no other agreement on jurisdiction and enforcement of judgments is concluded between the UK and the EU, Lugano would then apply as between the UK and the EU (as well as between the UK and other signatories). The result would be that there would be little change from the current regime in relation to jurisdiction and enforcement, so that English court judgments would continue to be readily enforceable throughout the EU and in EFTA countries, and English jurisdiction clauses would largely continue to be respected by those countries, and vice versa. (The Lugano Convention does have some disadvantages compared to the current regime, as it does not include the improvements made when the Brussels Regulation was “recast” for proceedings commenced from January 2015, as outlined here – but in broad terms the provisions are similar.)

The wrinkle, however, is that the UK will be able to accede to Lugano only if it has the unanimous agreement of the contracting parties – namely the EU, Denmark as an independent state (it has an “opt-out” of justice and home affairs matters under relevant EU treaties), Iceland, Norway and Switzerland. While Iceland, Norway and Switzerland have indicated their support for the UK’s accession, the EU’s position is not yet clear. It has recently been reported that the Commission at least may be less welcoming – in particular given that all current signatories are part of the EU’s single market or substantially participate in it, but the UK has said it intends to leave the single market once the transition period comes to an end.

If the UK does not accede to Lugano, the position regarding enforcement of English judgments and the effect of English jurisdiction clauses will depend, in part, on whether the 2005 Hague Convention on Choice of Court Agreements applies (assuming the UK accedes to that Convention from the end of the transition period – which it can do without the consent of the EU or any other contracting party). Otherwise, questions of jurisdiction and enforcement as between the UK and the EU will depend largely on local rules in each country. See this blog post for more information.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608

New Brexit podcast – The implications of Brexit for choice of law, jurisdiction and the enforcement of judgments

In the latest episode of our Brexit podcast series, Anna Pertoldi and Maura McIntosh look at the implications of Brexit for choice of law, jurisdiction and the enforcement of judgments, looking first at the position during the transition period to the end of December 2020 and then considering what will happen once that period comes to an end. They also give some thoughts on how commercial parties should approach their decision as to what dispute resolution clause to include in their contracts.

The episode is available to listen to on SoundCloud, iTunes or Spotify.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608

Proceedings time barred where claim form issued but not served during applicable foreign limitation period

The High Court has held that proceedings were time barred where the claim form was issued in the English courts before the expiry of the applicable Greek limitation period, but was not served until after that period had expired: Pandya v Intersalonika General Insurance Company SA [2020] EWCH 273 (QB).

Whether proceedings had been brought within the limitation period was a matter for the applicable law, not a matter of evidence and procedure of the English court. Under Greek law it was necessary for proceedings to have been both issued and served to stop the limitation period running. As that had not happened, the claim was dismissed.

The clear message is that, where a foreign law applies to a claim, it is important to check not only what the limitation period is under that law but also what steps are needed to bring proceedings before it expires. Merely issuing proceedings will not be sufficient to stop time running if something more is required under the applicable law.

Although the present case was decided under Rome II, the EU Regulation which governs the law applicable to non-contractual obligations, the position will not change even after the Brexit transition period comes to an end. The English court will continue to apply the same rules, both as a result of transitional provisions in the UK/EU Withdrawal Agreement and because the UK intends to incorporate Rome II into English law as from the end of the transition period. Continue reading

Jurisdiction and enforcement after Brexit transition – latest developments re UK’s accession to Hague and Lugano Conventions

As noted in our previous blog post, where English legal proceedings are started before the Brexit transition period comes to an end, most likely on 31 December 2020, a judgment obtained pursuant to those proceedings will be readily enforceable in the EU under the recast Brussels Regulations. After that, the position depends, in part, on whether the 2005 Hague Convention on Choice of Court Agreements applies and whether any further arrangements are agreed between the UK and the EU before the end of transition. Otherwise, the question of whether and how an English judgment is enforceable in the EU post-transition will depend on local rules in each country. Most (but not necessarily all) EU Member States will enforce foreign judgments even without a specific treaty or convention, although the type of judgment enforced may be more limited and the procedures may be more time-consuming and costly.

In that context, it is worth noting a couple of positive developments regarding the UK’s accession to the Hague Convention and, potentially, the Lugano Convention.

Hague: As anticipated, the UK has not yet re-acceded to the Hague Convention, as it would have done with effect from 1 February if there had been a “no-deal” Brexit on 31 January. The UK’s declaration submitted to the Hague depositary on 31 January notes that it is withdrawing its instrument of accession as, during the Brexit transition period, EU law, including the Convention, will continue to apply to and in the UK. It notes that the UK “attaches importance to the seamless continuity” of the Convention’s application, and states the UK’s intention to “deposit a new instrument of accession at the appropriate time prior to the termination of the transition period”. Assuming an end date of 31 December 2020, this means depositing the new instrument of accession by the end of September.

Where Hague applies, English judgments will be readily enforceable around the EU (and in the other Hague contracting states, currently Mexico, Montenegro and Singapore). However, the Hague Convention only applies where there is an exclusive jurisdiction clause which was entered into after the Convention came into force for the chosen state. As noted in our previous post (linked above) there is some uncertainty as to the Convention’s application to exclusive jurisdiction clauses in favour of the UK courts which were entered into before the UK re-joins Hague following the end of the transition period.

Lugano: The Lugano Convention currently applies as between the EU (including the UK, during the transition period) and EFTA countries Iceland, Norway and Switzerland. If the UK were to accede to the Convention in its own right from the end of the transition period (or thereafter), it would then also apply as between the UK and the EU. The result would be that there would be little change from the current regime in relation to jurisdiction and enforcement, and English judgments would continue to be readily enforceable throughout the EU and in EFTA countries. There would be no need to rely on the Hague Convention (which would continue to apply as between the UK and Mexico, Montenegro and Singapore) or on local laws regarding enforcement of foreign judgments in the relevant countries.

Unlike the Hague Convention, where accession does not depend on agreement with other contracting states, the UK’s accession to Lugano requires agreement from the EU, Denmark (which has an “opt-out” of justice and home affairs matters under relevant EU treaties), Iceland, Norway and Switzerland. It is therefore a positive development that the UK has received statements of support from Iceland, Norway and Switzerland for its intention to accede to the Lugano Convention, as the government announced on 29 January.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608

Brexit under the Withdrawal Agreement: The implications for disputes

It now seems inevitable that the UK will leave the EU on 31 January 2020 at 11pm GMT under the terms of the Withdrawal Agreement concluded between the UK and the EU on 19 October 2019. In this post, we consider the implications for commercial litigation involving the English courts, both during the transition period established under the Withdrawal Agreement (which ends on 31 December 2020) and following the end of the transition period. We have also updated our decision tree on the enforcement of English judgments in the EU post-transition, which you can access here.

Although the Withdrawal Agreement provides that the transition period may be extended for “up to 1 or 2 years” by agreement before 1 July 2020, the UK government has ruled out any extension in the legislation implementing the Withdrawal Agreement which is currently working its way through Parliament (the European Union (Withdrawal Agreement) Bill 2019-2020). That could be changed by further legislation, or a temporary arrangement could be reached between the UK and the EU to similar effect as an extension of the transition period, but for present purposes we have assumed that transition will end on 31 December 2020. At that point, what happens – in relation to disputes and many other areas – will depend largely on what, if anything, is agreed between the UK and the EU in the interim. There are, however, a number of respects in which transitional provisions under the Withdrawal Agreement will continue to affect the position after the transition period itself comes to an end.

It should be noted at the outset that arbitration with a seat in London will not be affected by Brexit. Arbitration is not regulated by EU law, and the UK and all EU Member States are signatories to the 1958 New York Convention. Accordingly, arbitration clauses will remain effective and arbitral awards will continue to be enforceable in the same circumstances as currently. Continue reading

Reference to CJEU as to whether EU-domiciled defendant has right to be sued in its state of domicile and to restrain non-EU proceedings by anti-suit injunction

The Court of Appeal has made a reference to the CJEU, asking for a preliminary ruling as to whether a defendant domiciled in an EU member state has the right, under the recast Brussels Regulation, to be sued in that state and to obtain an anti-suit injunction restraining proceedings in a non-EU jurisdiction. It further asks whether the availability of the injunction extends to a situation where the cause of action in the non-EU court isn’t available in the state of domicile: Gray v Hurley [2019] EWCA Civ 2222.

Previous Court of Appeal decisions have held that an employee has the right to be sued in their EU domicile and to restrain proceedings in a non-EU court. The court in this case considered, however, that those decisions were restricted to employees. Applying the same reasoning in all domicile cases would lead to extreme results and injunctions would be granted in circumstances where, if the Regulation did not apply, an English court would be unlikely to grant an injunction. It concluded, however, that the position was not sufficiently clear (acte clair) and therefore a reference should be made to the CJEU.

It is unlikely that the CJEU will give judgment before the end of 2020, when the transition period following Brexit is due to come to an end (assuming no extension). However, the withdrawal agreement provides that the CJEU will continue to have jurisdiction to give preliminary rulings in cases referred by the UK courts before the end of the transition period, and that such rulings will be binding in the UK.

Although the question arose in this case in the context of an attempt to restrain non-EU proceedings against an English-domiciled defendant, the question will have obvious implications for proceedings brought in the UK courts against EU-domiciled defendants post-Brexit – in particular if the CJEU decides that the Regulation does confer a right on EU-domiciled defendants to be sued in their home courts, rather than a non-EU court as the English court will be post-Brexit. Continue reading

Commercial Court finds asymmetric jurisdiction clause is exclusive jurisdiction clause for purposes of recast Brussels Regulation

The Commercial Court has held that an asymmetric or unilateral jurisdiction clause is an exclusive jurisdiction clause within article 31(2) of the recast Brussels Regulation. The English court was therefore entitled to continue with its proceedings where it was the chosen court but proceedings had been commenced earlier in Germany: Etihad Airways PJSC v Prof Dr Lucas Flother [2019] EWHC 3107 (Comm).

In doing so, the court followed earlier cases, in particular the Commercial Court decision in Commerzbank Aktengesellschaft v Liquimar Tankers Management [2017] EWHC 161 (Comm) (see our post here). It observed, however, that even if there had been no prior authority, it would have had no difficulty in reaching the same conclusion.

Article 31(2) was a new provision in the recast Brussels Regulation, which took effect in January 2015. It was designed to defuse the so-called Italian Torpedo, whereby a counterparty could delay a resolution in the chosen court by racing to commence proceedings first in some other EU state, and the chosen court would then have to stay any proceedings under the “first seised” rule. Under article 31(2), the court chosen under an exclusive jurisdiction clause takes priority. There has however been some uncertainty as to whether an asymmetric clause (which requires one party to sue in the chosen jurisdiction but gives the other greater flexibility) falls within article 31(2).

The present decision will give comfort to parties who have the benefit of an asymmetric jurisdiction clause, as it suggests they will not be susceptible to the Italian Torpedo tactic. However, as the decision is first instance, it may not be the last word on the subject – particularly as the Court of Appeal gave permission to appeal in the Commerzbank case. It is also worth noting that after Brexit (and depending on what is agreed during any transition period) the Italian Torpedo will not be relevant to the English courts in any event, as the Brussels regime will no longer apply. Continue reading

Rule against reflective loss neither a procedural rule nor an overriding mandatory provision of English law, so does not apply to foreign law claims in English court

The High Court has held that the rule against reflective loss is not a rule of procedure, so as to fall outside the Rome II Regulation, and nor is it an overriding mandatory provision of English law for the purposes of article 16 of Rome II. The rule therefore does not bar a Dutch law claim brought in the English court, even if that would be its effect in respect of the equivalent claim governed by English law: KMG International NV v Chen [2019] EWHC 2389 (Comm).

In determining applicable law, the English court (in common with all EU courts) applies the Rome I or Rome II regulation, depending on whether it is dealing with a question of the law to govern contractual or non-contractual obligations. That will remain the case even after Brexit, as the UK government has legislated to incorporate Rome I and Rome II into English law on exit day.

Rules of procedure are excluded from both Rome I and Rome II and, in the English courts, are dealt with under English law. Both Rome I and Rome II also provide for the application of “overriding mandatory provisions” of the law of the forum, even where the substantive claim is governed by a foreign law. The present decision is of interest in confirming that the English law rule against reflective loss will not be applied by the English court where, applying Rome I or Rome II, the applicable law is a foreign law.

The decision is of particular interest as a rare example of the English court considering what amounts to an overriding mandatory provision of English law. The test is, in summary, whether respect for the provision is regarded as crucial for safeguarding a country’s public interests, such as its political, social or economic organisation, irrespective of the law that otherwise applies. The court’s finding that the rule against reflective loss does not meet that test may not be seen as surprising. However, the decision is helpful in confirming that an overriding mandatory provision goes beyond a provision that cannot be derogated from by agreement, or is mandatory in the sense of not discretionary, or is informed by considerations of policy. Continue reading

Court of Appeal holds that UK anchor defendants can be sued for the sole purpose of establishing jurisdiction against foreign co-defendants

The Court of Appeal has held, by a majority, that the jurisdiction rules in the Brussels regime allow a defendant to be sued in a co-defendant’s domicile (rather than their  own domicile) even if the sole object of bringing the proceedings against the “anchor” defendant was to bring the foreign-domiciled defendant within the jurisdiction: JSC Commercial Bank Privatbank v Kolomoisky and Bogolyubov and others [2019] EWCA Civ 1708.

Although the decision was in the context of article 6(1) of the Lugano Convention, the conclusion applies equally to the identical provisions regarding co-defendants in “closely connected” claims in the Brussels Regulation (article 6(1)) and the recast Brussels Regulation (article 8(1)).

Accordingly, provided a claimant has a sustainable claim against an anchor English defendant, which it intends to pursue to judgment, it will be entitled to rely on the relevant EU rules to join a foreign defendant, where the court accepts that the claims are so closely connected that it is expedient to hear them together to avoid the risk of irreconcilable judgments. Jurisdiction will not be refused on the basis that the sole purpose in bringing the action was to sue the foreign defendant in the same proceedings.

The decision is also important for its ruling on the question of whether EU jurisdictional rules can be applied by analogy, or “reflexively”, to circumstances falling outside the rules’ scope. The court held that the Lugano Convention rules as to when a court may stay its proceedings in favour of parallel proceedings in another Convention state (or lis pendens) could be applied by analogy where the foreign proceedings were in a non-Convention state.

The findings regarding reflexive application are of particular interest in the context of a no deal Brexit scenario. In that scenario it is uncertain whether the courts of the remaining EU states will only have a power to stay their proceedings in favour of English proceedings in the circumstances specified in articles 33/34 of the recast Brussels Regulation (ie where the English court was first seised) or whether they will have a residual discretion to do so outside those circumstances, for example where there is an English exclusive jurisdiction clause. Previous High Court authority has taken the view that, given that  articles 33/34 expressly incorporate some degree of reflexive operation, it was not open to find that there is a discretionary power outside of these provisions (Gulf International Bank BSC v Aldwood [2019] EWHC 1666 – see our post).

While the court in this case did not directly consider that question, and the issue is ultimately a matter for the CJEU, the decision may leave open the scope for an argument that there is such a residual discretion. Continue reading

A no-deal Brexit: The implications for disputes

As we approach the deadline of 31 October, it is difficult to predict what will happen. But the prospect of a no-deal Brexit – either then or at some later date – remains a very real possibility. In this blog post we consider the implications of such an outcome for commercial litigation involving the English courts. For these purposes, we assume an exit date of 31 October, but the same issues will arise if there is an extension to the current deadline followed by a no-deal Brexit at a later date.

We have also recorded a webinar which explores the issues in more detail, as part of our series of webinars exploring the implications for business of a no-deal Brexit. The series can be accessed here. Continue reading