European Commission opposes UK accession to Lugano Convention

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Uncertainty continues as to post-Brexit processes for enforcing court judgments across borders, with the UK's intention to join the streamlined enforcement procedures of the 2007 Lugano Convention suffering a setback this week.

In January, we reported on the effect of the end of the Brexit transition period on the available procedures for enforcing judgments of the UK courts in EU member states and judgments of the courts of EU member states in the UK (see our article).  

On Tuesday 4 May, the European Commission published its assessment of the UK's application to accede to the Lugano Convention in a Communication to the European Parliament and Council (available here), concluding that UK membership should be refused. The Commission's stance is clearly unhelpful to the UK, although it is as expected. Attention now turns to whether the EU's decision-maker, the Council, representing the government of EU member states, is in agreement. 

The current position

In January, we highlighted the need for contracting parties to include an exclusive jurisdiction clause in a contract in order for the contracting parties to benefit from streamlined procedures for enforcing judgments in the 2005 Hague Convention on Choice of Court Agreements, should litigation subsequently arise. We also noted that the position may change in the coming months as the UK awaits the EU's decision on its application to join the Lugano Convention, an agreement on jurisdiction and enforcement which currently operates between the EU and Iceland, Norway and Switzerland. The three non-EU Lugano signatories have already consented to the UK's accession request, so EU consent is now the only obstacle.

UK accession to the Lugano Convention is a significant issue because membership would enable more judgments to be swiftly recognised and enforced across borders. The Lugano Convention is wider in scope than the Hague Convention, the main difference being that the Lugano Convention applies to contractual relationships governed by non-exclusive and asymmetric (one-sided) jurisdiction clauses, as well as exclusive jurisdiction clauses.

The European Commission's stance

On 4 May 2021, the European Commission issued its assessment of the UK's application to join the Lugano Convention. As anticipated in news reports last month (on which, see our article here), the European Commission has recommended that the EU does not approve UK accession to the Lugano Convention.   

The basis of that conclusion is that the UK is not a member of the European Economic Area or European Free Trade Association. The European Commission's assessment concludes 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 United Kingdom is a third country without a special link to the internal market. Therefore, there is no reason for the European Union to depart from its general approach in relation to the United Kingdom."  

It is a debate which goes to the heart of the function and status of the Lugano Convention: is the Convention an internal EEA/EFTA instrument? Or is it an international agreement open to "third countries"? Individual EU member states are reported to have differing views on these questions, while the non-EU members of Lugano (Iceland, Norway and Switzerland), having all expressed support for UK accession, do not appear to see it as inherently a single market instrument.

The EU's position on UK accession will ultimately be determined by the Council, representing the governments of the member states, and is likely to be decided in the coming weeks. With member states reported to be divided on the issue, it is not possible to say at this stage which way the Council is likely to go. UK accession to the Lugano Convention would benefit both UK businesses trading in the EU and EU businesses trading in the UK.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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