The impact of Brexit on the enforcement of judgments between the UK and EU Member States post-Brexit

by Hogan Lovells
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The impact of Brexit on the enforcement of judgments between the UK and EU member states is increasingly at the forefront of businesses' minds. This blog describes how the current system of reciprocal enforcement of judgments operates throughout the EU and considers the positions expressed by the EU and the UK on what may happen post-Brexit.  There are a number of options that the EU and UK Government could take to ensure that there is a coherent regime of reciprocal enforcement post-Brexit, and both sides have intimated their desire for coherence, however, neither have yet detailed how such a regime could work in practice.  If no deal is reached, a number of procedural hurdles could be imposed on businesses wishing to enforce a UK judgment in an EU Member State and vice versa. It is not possible to state definitively how Brexit will impact the ability of companies to enforce English judgments in EU Member States and EU Member State judgments before the English courts, however, there are a number of steps that companies can take to help mitigate any uncertainty surrounding how English judgments will be enforced post-Brexit.

The current EU regime set out in Regulation (EU) No.1215/2012 (the "Recast Brussels Regulation") explicitly recognises that an English judgment[1] can be enforced in another Member State's court and vice versa. After Brexit, the UK will cease to be a Member State and will cease to be part of this regime and bound by the Recast Brussels Regulation. If no alternative regime is put in place, companies will have to rely on domestic recognition regimes in the UK and the EU Member States. This will likely introduce additional procedural steps before a foreign judgment is recognised which would make enforcement more time-consuming and expensive.

The EU and UK Government are currently negotiating a transition period. Based on the current terms being negotiated, the Recast Brussels Regulation would continue to apply during this period. However, the content of these negotiations has yet to be finalised. Therefore, it is, at present, too early to say with any certainty what the outcome of the negotiations will be. However, it is likely that, following a transition period, an alternative arrangement replacing or reproducing the Recast Brussels Regulation will be agreed.

The current position under EU Law

Enforcement of judgments between EU Member States is governed by the Recast Brussels Regulation. This applies to "civil and commercial matters"[2] and provides that:

"A judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without any declaration of enforceability being required".[3]

This includes the enforcement of "protective measures" such as freezing injunctions.[4]

For the purposes of enforcement in a Member State of a judgment given in another Member State, the applicant must provide the competent enforcement authority with:

a.)  a copy of the judgment; and
b.)  a certificate …, certifying that the judgment is enforceable and containing an extract of the judgment as well as, where appropriate, relevant information on the recoverable costs of the proceedings and the calculation of interest.

Additionally, EU Member States, Mexico and Singapore are all signatories to the Hague Convention on Choice of Court Agreements 2005 (the "Hague Convention"). This states that where there is an exclusive jurisdiction agreement between the parties to the dispute, all the contracting states are required to recognise and enforce any judgment made by the specified court. After Brexit, the Hague Convention will cease to apply to the UK, which is currently only a contracting state as a result of the EU being a signatory.

Current EU and UK positions on what will happen post-Brexit

On 28 June 2017, the EU set out in a position paper to the EU27 its desire that the Recast Brussels Regulation should continue to apply to judgments entered before the UK leaves the EU.[5] The paper was silent on the position after that date.

In response, on 22 August 2017, the UK Government published a position paper entitled, "Providing a cross-border civil judicial cooperation framework." This set out its desire for close and comprehensive civil judicial cooperation on a reciprocal basis, with a post-Brexit regime that closely models the current EU regime.[6] The paper also deals with winding down ongoing judicial cooperation in the event that no agreement for the future has been reached on the day of withdrawal. With respect to enforcing judgments, it proposes that the existing EU rules should continue to apply to judicial decisions given before the withdrawal date, and to judicial decisions given after the withdrawal date in proceedings which were instituted before that date.

However, the UK Government paper identified a number of issues that could hinder this, such as the continued jurisdiction of the CJEU in deciding the applicability and interpretation of the Recast Brussels Regulation. A proposal is put forward which mirrors Protocol 2 of the Lugano Convention[7] which requires courts to "pay due regard to the principles laid down by any relevant decisions of the courts of the other states concerning provisions of this Convention." It is unclear whether the EU would accept a system where the CJEU is not the final arbiter on the meaning of the Recast Brussels Regulation.

Neither paper set out in detail the substance of the post-Brexit regime.

If no deal is reached

In the event that the UK leaves the EU with no form of agreement regarding the future relationship, the Recast Brussels Regulation would cease to apply in the UK or in the EU as regards the UK.[8]

In the absence of alternative solutions, the position would revert back to reliance on the domestic law on enforcement of jurisdiction clauses and foreign judgments. In the UK, there are common law rules on the enforcement of foreign judgments. These require an applicant to institute a debt claim in the UK courts and fresh proceedings must be issued by filing a claim form and particulars of claim. The foreign judgment forms part of the evidence in support of that action. The conditions for enforcement are, therefore, more rigorous and there are more procedural hurdles.

Despite these hurdles, the domestic law in relation to the enforcement of foreign judgments in the UK, and in each of the European jurisdictions, is well developed. Given this, and that within the EU the Recast Brussels Regulation will continue to apply between the remaining Member States, it is likely that jurisdiction clauses that are clearly drafted will continue to be recognised and applied in most cases, and that judgments of the English courts will continue to be enforced in member states (and vice-versa), albeit perhaps with additional procedural hurdles to cross, and therefore with greater expense and less speed.

In addition, the UK Government's 22 August 2017 paper confirms the UK's intention to continue to participate in those Hague Conventions which it currently participates in by virtue of its membership of the EU (such as the Hague Convention on Choice of Court Agreements 2005). Similarly the UK intends to continue to participate in the Lugano Convention, which currently forms the basis for the reciprocal enforcement of judgments as between the UK and Norway, Iceland and Switzerland (see below).

Potential solutions

The UK's Bar Council[9], Commercial Bar Association[10] and the London Solicitors Litigation Association[11] have all proposed that:

a.) The UK enters into a treaty with the EU to remain bound by the Recast Brussels Regulation, similar to that agreed by Denmark.[12]
b.) The UK becomes a signatory and ratifies the Hague Convention in its own right.
c.) The UK becomes a signatory to the Lugano Convention, which would exist alongside the Recast Brussels Regulation, and is necessary to ensure the continued application of a reciprocal regime between the UK and EFTA states.[13]

These actions would ensure that a coherent regime of enforcement would continue post-Brexit.

If no treaty with the EU is forthcoming, the UK could ratify the Hague Convention and rely solely on that regime for the enforcement of judgments.[14] However, there are a number of limitations to this approach:

a.) The Hague Convention is limited in scope. Most notably, it only applies to agreements where there is an exclusive jurisdiction clause. Further, it does not cover interim measures or contracts concerning the carriage of goods.
b.) It is unclear whether, even if the UK was to become a signatory to the Hague Convention, it would apply to jurisdiction clauses entered into before the Convention came into force with the UK as an independent signatory.

Alternatively, domestic action could be taken to address the recognition of foreign judgments in the UK. However, this is unlikely to ensure reciprocity with other Member States such that they would not be obliged to enforce English judgments in their courts.

Position during the transition period

The EU and the UK Government are currently negotiating a transition period that would begin the moment that the UK ceases to be a Member State. On 28 February 2018, the Commission published a draft Withdrawal Agreement[15] that is currently being negotiated by the EU and UK Government. This draft states that:

a.) The transition period shall end on 31 December 2020.[16]
b.) In the UK, as well as in the Member States in situations involving the UK, the Recast Brussels Regulation shall apply in respect of the recognition and/or enforcement of judgments given.[17]

The length of the transition period will be heavily negotiated. The UK Government stated in a position paper published on 21 February 2018 that the transition period’s duration should be determined simply by how long it will take to prepare and implement the new processes and new systems that will underpin the future partnership. They refused to set a specific date.

Based on the status of the current negotiations, the Recast Brussels Regulation would continue to apply during a transition period.

Mitigating against this uncertainty

There are a number of steps that companies could take to help mitigate any uncertainty surrounding how English judgments will be enforced post-Brexit:

a.) Parties could agree on a non-exclusive jurisdiction clause which would allow for proceedings to be commenced and judgment enforced in the same jurisdiction.
b.) Arbitration could be chosen over litigation, where appropriate. Without the existing enforcement framework, parties may increasingly turn to international arbitration over domestic court proceedings, as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which the UK already is and will remain a party, provides a framework for the enforcement of arbitral awards to 156 contracting parties, including all of the EU Member States.
c.) Parties could include a clause ensuring that they review the jurisdiction agreement following Brexit.

Conclusion

The majority of stakeholders from the EU and UK that have commented on how Brexit will impact the enforcement of judgments have indicated that it is vital for post-Brexit cross-border commerce between the EU and UK that there is an efficient regime for reciprocal enforcement of judgments. There is widespread agreement that the EU and UK need to agree a system that strongly resembles the current regime whereby judgments in other Member States' courts can be enforced without unnecessary procedural hurdles.

The question of enforceability of English jurisdiction clauses and the enforcement of English judgments in foreign courts is something that is central to the current negotiations between the UK and Brussels. It is at present too early to say with any certainty what the outcome of the UK/EU negotiations will be. We would expect that there will be at the very least a short term process put in place by which English law judgments can be enforced in European courts post-Brexit. Following that, a likely option is that the UK will join the Hague Convention and/or the Lugano Convention, or that some other bespoke agreement replacing and reproducing Recast Brussels Regulation-type arrangements will be agreed.

In the absence of any of these alternative solutions, the position would revert back to reliance on the domestic law on enforcement of jurisdiction clauses and recognition and enforcement of foreign judgments. Companies would then have to rely on domestic mechanisms to enforce foreign judgments. These mechanisms are well developed within the national laws of the UK
and the other EU Member States, although this would undoubtedly introduce procedural hurdles and would make enforcement more time-consuming and expensive.

 


[1] A judgment of the Courts of England and Wales. The same currently applies in relation to the enforcement of judgments of the Scottish and Northern Irish Courts; however, this note focuses on the enforcement of judgments of the English Courts.
[2] Article 1(1) of the Recast Brussels Regulation
[3] Article 39 of the Recast Brussels Regulation
[4] Article 40 of the Recast Brussels Regulation
[5] Position Paper transmitted to the EU on Judicial Cooperation in Civil and Commercial matters (view here)
[6] Paragraph 19 of the UK Position Paper (view here) states that the "UK will seek an agreement with the EU that allows for close and comprehensive cross-border civil judicial cooperation on a reciprocal basis, which reflects closely the substantive principles of co-operation under the current EU framework."
[7] The Lugano Convention governs the enforceability of judgments between EU Member States and Iceland, Norway and Switzerland.
[8] Article 50(3) of the TEU states that "the Treaties" cease to apply at the end of the two-year period. Thus, Article 288 of the TEU, which provides that regulations have direct effect
in Member States, would cease to have effect such that the Recast Brussels Regulation would no longer be binding in the UK. Nor would Member States have to enforce an
English court judgment in accordance with the provisions of the Recast Brussels Regulation, since the UK would not be a Member State.
[9] The Brexit Papers: Civil Jurisdiction and Judgments dated June 2017 (view here)
[10] Commercial Bar Association Brexit Report Conflict of Laws Sub-Group Report dated 5 January 2017 (view here)
[11] LSLA: The impact of Brexit for London Litigation dated 15 November 2016 (view here)
[12] Denmark opted out of the justice and home affairs competence of the EU. They nevertheless concluded a separate treaty with the EU to ensure reciprocity in the enforcement of judgments.
[13] Norway, Iceland and Switzerland
[14] The UK Position Paper published on 22 August 2017 at paragraph 21 sets out the UK Government's intention to continue to participate in the Hague Convention.
[15] This can be accessed here
[16] Article 122
[17] Article 63(3)(a)

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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