UK accession to Lugano Convention to be decided within weeks

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Uncertainty continues as to post-Brexit processes for enforcing court judgments across borders. 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).

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

Several news outlets have reported in recent days that the European Commission expressed opposition to UK membership at a closed-door meeting on Monday 12 April. The basis of the objection is reported to be that the UK is not a member of the European Economic Area or European Free Trade Association.

However, a statement released by the Commission stops short of expressing opposition to UK accession. Rather, it highlights this consideration:

"The Commission has conducted a thorough assessment of the request and has discussed it with Member States. It will come forward with a Communication in the coming weeks.

It is worth noting, however, that the Lugano Convention is a tool used within the EU-EFTA/EEA context. The UK has chosen to leave the EU, the Single Market and the Customs Union. It has chosen to have a more distant relationship with the EU than EEA-EFTA countries. These choices have to be taken into account when determining the EU's position."

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 this question, 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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