European Commission recommends that EU Member States reject the UK’s application to join the Lugano Convention
The European Commission has finally released its long-awaited Communication recommending that EU Member States oppose the UK’s request to accede to the Lugano Convention on jurisdiction and the recognition & enforcement of judgments. Until alternative arrangements are put in place, the cross-border enforcement of judgments will be determined in accordance with the 2005 Hague Convention and the Civil Procedure Rules.
The 2007 Lugano Convention (the ‘Convention’) is an international treaty negotiated by the EU on behalf of its member states (and by Denmark separately because it has an opt-out) with Iceland, Norway and Switzerland. It provides a streamlined procedure for the recognition and enforcement of a wide range of civil and commercial judgments between European Economic Area (EEA) and European Free Trade Association (EFTA) states. The Convention enables judgments to be swiftly recognised and enforced in its signatory jurisdictions.
The Convention has important practical consequences because it provides certainty on which country’s courts may hear a civil or commercial cross-border dispute and ensures that the resulting judgment can be recognised and enforced across borders. It helps prevent multiple court cases taking place on the same subject matter in different countries and reduces the costs and expenses for the parties involved. This is an important convention for UK businesses, the legal services sector, individuals and families (due to the inclusion of family maintenance arrangements within its scope).
Prior to Brexit, the UK was a party to the Convention by virtue of being an EU Member State. Following the end of the transition period on 31st December 2020, the UK formally applied to accede to the Convention on April 8th 2020 as an independent member now that it has left the EU. The Convention requires contracting parties to give their decision on any accession applications within one year. The UK has received statements of support from Norway, Iceland and Switzerland, however, the EU is not so welcoming.
Following the release of the EU Commission’s Communication, the EU Council will take the final decision in the coming weeks, meaning that at least 15 out of the 27 EU Member States must agree to the UK’s request.
The Commission’s recommendation
The Commission’s opposition appears to be predicated on the fact that the UK is neither a member of the European Economic Area (EEA) nor the European Free Trade Association (EFTA). The Communication states that although the Convention is “open to accession of ‘any other State’…..it is not the appropriate general framework for judicial cooperation with any given third country.”
The Communication goes on to say that the Convention supports the EU’s relationship with third countries which have a particularly close regulatory integration with the EU, and that “for the European Union, the Lugano Convention is a flanking measure of the internal market and relates to the EU-EFTA/EEA context. In relation to all other third countries the consistent policy of the European Union is to promote cooperation within the framework of the multilateral Hague Conventions.” The Communication also noted that the UK’s intention to join Lugano was not stated in the Political Declaration on the UK-EU future relationship. It has led some to consider this is a political view motivated by wider issues with the UK-EU relationship as it has no practical upside to any involved jurisdiction for the UK to remain outside the Convention.
Service of proceedings outside the jurisdiction
The service of proceedings outside the originating jurisdiction can be costly, time consuming and complex. In the regime that existed before Brexit, the Court’s permission was not required to serve a claim outside the jurisdiction if the English Court had jurisdiction under the Recast Brussels Regulation, the Lugano Convention or the 2005 Hague Convention. Seeking the court’s permission in England before serving on a defendant elsewhere in Europe has therefore become an issue and vice versa. The need to ask for a court’s permission is resulting in procedural delays and additional costs for claimants.
In order to improve the position the English courts have amended their procedure. The amendment is to rule 6.33 of the Civil Procedure Rules. The changes were implemented by The Civil Procedure (Amendment) Rules 2021 (SI 117/2021), which came into effect on 6th April 2021. Rule 6.33 (2B) (b) now states that a claimant may serve a claim form outside the jurisdiction where a contract contains a term to the effect that the court shall have jurisdiction to determine that claim.
This significant amendment means that the permission of the English Court is not required to serve defendants outside the jurisdiction in relation to claims based on a contract where there is a contractual choice of jurisdiction of the English Courts. This applies not only to defendants resident in EU member States, but also to defendants resident anywhere around the world so long as there is a valid jurisdiction agreement covering the claim. This is a pragmatic procedural change. Furthermore, there is no prejudice to defendants when the parties would have agreed jurisdiction when entering into the contract in the first place.
Clearly, the Commission’s recommendation is a significant setback to the UK’s accession request. The UK remains keen to agree, as do the non-EU members, and it is possible that a wider agreement on political matters with the EU can overcome this objection. The Commission’s recommendation is also interesting in relation to the purpose of the Convention. Although the Communication states that the Convention is “open to accession of ‘any other State’,” following the Commission’s recommendation, are any third countries realistically able to join, or is the Convention, in fact, an internal instrument of the EEA/EFTA trading area?
The alternate path may be the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, which is currently being negotiated. Once in force it may provide an improved international mechanism for the recognition and enforcement of judgments. However, this currently has only three signatories (Israel, Ukraine and Uruguay) and may take many years to finalise and come into force.
We will continue to provide updates in due course. This is a complex and changing area of procedural law. If you have any questions please contact your Venner Shipley contact or James Tumbridge.
The full text of the Commission’s Communication can be read here.