European Commission’s Notice to Stakeholders confirms its view Hague Choice of Court Convention will apply to exclusive English jurisdiction clauses only if they are entered into after Brexit transition period ends

On 27 August 2020, the European Commission published a Notice to Stakeholders setting out the rules that, in the Commission’s view, will apply in the field of civil justice and private international law once the Brexit transition period comes to an end on 31 December 2020 – assuming no other agreement is reached.

At that point, the current reciprocal regime that governs jurisdiction and the enforcement of judgments between the UK and the EU, under the Recast Brussels Regulation (and related instruments), will no longer apply – unless proceedings were started before the end of the transition period.

Where there is an exclusive jurisdiction clause in favour of a UK or EU court, the position may fall within the 2005 Hague Convention on Choice of Court Agreements. However, the 2005 Convention applies only if the exclusive jurisdiction clause was entered into after the Convention’s entry into force for the state of the chosen court. The 2005 Convention originally entered into force for the UK on 1 October 2015, when the EU acceded on behalf of all Member States (apart from Denmark, which acceded separately from 1 September 2018). Pursuant to the UK/EU Withdrawal Agreement, it was agreed that the UK would be treated as an EU Member State for the purposes of international agreements, including the 2005 Convention, until the end of the transition period. And the UK’s intention is to re-accede to the 2005 Convention in its own right from 1 January 2021, so that the 2005 Convention continues to be in force for the UK after that date.

EU Commission’s position

However, the Commission’s Notice makes clear its view that, in these circumstances, the 2005 Convention will apply to exclusive English jurisdiction clauses only if they are concluded after 1 January 2021. The Commission had hinted at this view (at least) in previous communications, but the recent Notice sets out its view in much starker terms. The Commission’s view will not of course bind the courts that will decide this question in future, and it is not clear to what extent it is shaped by the ongoing negotiations between the UK and the EU regarding their future relationship.

We believe the better view is that the 2005 Convention should apply to exclusive English jurisdiction clauses entered into from 1 October 2015 onwards, as the 2005 Convention first entered into force for the UK on that date, has remained in force since that date, and will continue to be in force after the end of the transition period. We do not see why a change in the basis on which the 2005 Convention has been in force (first by virtue of EU membership, then under the Withdrawal Agreement, and finally by way of the UK’s accession in its own right) should make any difference to that basic position.

Position as it applies in the UK

As far as the UK’s own application of the 2005 Convention is concerned, the position is clarified by amendments introduced to the Private International Law (Implementation of Agreements) Bill during its transition through the House of Lords. This is the legislation which will provide that the 2005 Convention has the force of law in the UK from the end of the transition period. The Bill provides (at paragraph 7 of Schedule 5) that for the purposes of the 2005 Convention as it has the force of law in the UK, the date of the 2005 Convention’s entry into force for the UK is 1 October 2015. This will not, however, affect how the 2005 Convention is interpreted and applied by other contracting parties, including the EU.

Clauses entered into after 1 January 2021

Regardless of how this debate is resolved, it is important to remember that, on any basis, the 2005 Convention will apply to exclusive English jurisdiction clauses entered into on or after 1 January 2021, once the UK has acceded in its own right. In general terms, therefore, EU Member State courts will have to respect such clauses and enforce judgments given pursuant to them. Parties to existing contracts who wish to have the certainty associated with such clauses may want to consider restating their jurisdiction clause, with the counterparty’s agreement, after 1 January 2021 in such a way that it will unquestionably fall within the 2005 Convention.

Of course, the 2005 Convention will be less significant, as between the UK and the EU, if the UK is able to accede to the Lugano Convention either from 1 January 2021 or a date shortly thereafter. However, this requires the EU’s consent which, to date, has not been forthcoming.

Anna Pertoldi

Anna Pertoldi
+44 20 7466 2399

Maura McIntosh

Maura McIntosh
Professional support consultant
+44 20 7466 2608

Court of Appeal gives wide interpretation to “damage” for the purposes of the common law jurisdictional gateway for tort claims

The Court of Appeal has held, by a majority, that direct damage in the jurisdiction is not required in order for a claim to come within the tort jurisdictional gateway in the CPR: FS Cairo (Nile Plaza) LLC v Christine Brownlie [2020] EWCA Civ 996. In doing so it followed obiter comments made by the majority in the Supreme Court in an earlier judgment in the case (see our post on that decision here).

The test under the common law is, therefore, different from the test under the recast Brussels Regulation (and the Lugano Convention) where direct damage in the jurisdiction is a requirement.

Given the divergent views expressed on this issue by numerous higher court judges, it remains ripe for further consideration in the Supreme Court. While arguments that the common law gateway does or should mirror the test in the Brussels regime may diminish post-Brexit, there is still the underlying question of principle to be decided: what amounts to a sufficient connection to the jurisdiction to justify tort proceedings being brought in England and Wales against a foreign defendant? Continue reading

High Court holds claim against anchor defendant must satisfy merits test if it is to be used to establish jurisdiction against co-defendants under recast Brussels Regulation

The High Court has held that the English court will only have jurisdiction against a co-defendant under article 8(1) of the recast Brussels Regulation where a merits test against the anchor defendant has been satisfied: Senior Taxi Aereo Executivo Ltda v Agusta Westland S.p.A [2020] EWHC 1348 (Comm). In doing so, it largely followed obiter comments by the majority in a previous Court of Appeal decision (Sabbagh v Khoury [2017] EWCA Civ 1120, considered here).

Under article 8(1), co-defendants domiciled in EU member states can be joined to proceedings commenced in England against an English domiciled defendant (the anchor defendant) where the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

There is no merits test in respect of the case against the co-defendants, but it has been unclear whether that is also the case in respect of the case against the anchor defendant. The majority in Sabbagh considered that there was such a test, but Gloster LJ gave a strong dissenting judgment, leaving the position in doubt. The judge in this case (Waksman J) held there is such a test, preferring the reasoning of the majority, although clearly the issue is ripe for consideration by the Court of Appeal or CJEU.

Although the recast Brussels Regulation will no longer apply in the UK after the end of the transition period following the UK’s departure from the EU (save in respect of proceedings started before the period ends), the decision will remain of relevance if the UK joins the Lugano Convention, as the Convention contains the same provision regarding co-defendants as the Regulation.

If the UK does not join the Lugano Convention, the decision will cease to have relevance, as the common law jurisdiction rules will apply to co-defendants. Under those rules, a merits test clearly does apply to the claim against the anchor defendant. Continue reading

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
+44 20 7466 2399

Maura McIntosh

Maura McIntosh
Professional support consultant
+44 20 7466 2608

Cross-Border Litigation: Latest update published

We are pleased to release the latest issue of our periodic publication “Cross-Border Litigation”, designed to highlight legal and practical issues specific to litigation with an international aspect.

Topics covered in this issue include:

  • Spotlight on recent developments
  • The new Hague Judgments Convention: A potential gamechanger (eventually)
  • Obtaining evidence from US-connected entities: US court widens the scope
  • Will an English judgment be enforceable in the EU27 post-Brexit?
  • The new Singapore Convention on mediated settlements: Some practical issues to consider now
  • Jurisdiction and governing law: Recent decisions

To download the publication, click here.

To read the previous issues, click here.

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
+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

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

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

High Court finds England proper forum to hear claim against further party where claimant had no real choice over where to sue anchor defendants

The High Court has held that England was the proper forum to determine a dispute against an additional defendant, so as to avoid multiple proceedings and the risk of irreconcilable judgments. The defendant was a necessary or proper party to the claims made against the anchor defendants and the claimant had no real choice where to sue the anchor defendants as the claims against them came within English exclusive jurisdiction agreements: ED&F Man Capital Markets Ltd v Come Harvest Holdings Ltd and others [2019] EWHC 1661 (Comm).

The court rejected an argument, based on the Supreme Court decision in Lungowe v Vedanta plc [2019] UKSC 20, that the claimants could have sought to have all claims determined in Singapore, and therefore could not establish that the English court was the proper forum based on the risk of multiple proceedings and irreconcilable judgments. In Vedanta the court held that the risk of irreconcilable judgments was not a “trump card”, as the risk arose purely from the claimants’ choice to proceed against one defendant in England rather than, as was available to them, against both defendants in Zambia. This was particularly so in circumstances where the dispute was overwhelmingly Zambian in focus and nature.

The facts in ED&F differed substantially, as the claimant was bound to sue two of the defendants in England under exclusive jurisdiction clauses; there was no evidence to suggest that the anchor defendants would have been willing to give up those rights; and the concept of choice in Vedanta could not be stretched so as to require a party to act in breach of contractual promises as to jurisdiction and then seek to persuade the English court not to grant an anti-suit injunction restraining Singapore proceedings.

Overall, the High Court considered that the claims in this case required a single forum for their resolution and England was the only place where that could be achieved.

This case demonstrates that the risk of irreconcilable judgments, while not decisive post Vedanta, may still be a very important factor in determining the appropriate forum, particularly where the claimant has no real choice over where to sue the anchor defendant. Continue reading