With the imminent passing of the European Union (Withdrawal Agreement) Bill, the UK is set to leave the EU on 31 January 2020 at 11.00 pm GMT under the terms of the revised withdrawal agreement of 19 October 2019 negotiated by Boris Johnson. That agreement provides for a transition period until the end of 2020, with the potential to extend the period for up to two years by agreement before 1 July 2020, but such an extension is effectively ruled out in the UK legislation. That could be changed by further legislation, but unless and until that happens the default position is that there will be no extension beyond 31 December 2020.
So what does that mean for enforcement of English judgments in EU member states (and vice versa) after the UK has left the EU? There is certainty in some situations, but unfortunately uncertainties remain in others, as explored in this post.
Proceedings commenced before the end of the transition period
The position here is clear. Under Article 67 of the withdrawal agreement, the current rules on enforcement (and on jurisdiction) will generally continue to apply, so UK judgments will continue to be enforceable in EU member states, and vice versa, in the same way as at present.
So, for example, an English judgment against a Russian defendant will be enforceable in EU member states, as at present, under the rules in the Recast Brussels Regulation. That will be the case regardless of whether the English court’s jurisdiction derived from the Recast Brussels Regulation (for example, if the court took jurisdiction under an English jurisdiction clause) or otherwise (for example, if jurisdiction was established at common law due to the defendant’s temporary presence in England).
Proceedings commenced post-transition, no exclusive jurisdiction clause
Again the position is clear. Absent an agreement between the UK and EU (for example, for the UK to join the Lugano Convention in its own right), enforcement of judgments will depend on the domestic rules on enforcement in the UK and in each EU member state. Most (but not necessarily all) EU countries will enforce foreign judgments under local rules, although the types of judgment which will be enforced will vary, and the procedure is likely to be more lengthy and costly than under the rules in the Recast Brussels Regulation.
So, for example, if a Spanish court took jurisdiction based on, say, a non-exclusive Spanish jurisdiction clause, or because the defendant was domiciled in Spain, the English courts would apply common law rules on enforcement. That means the successful claimant could sue on the judgment as a debt, but only if it was a money judgment. Equally, if an English court took jurisdiction based on a non-exclusive English jurisdiction clause, the French courts would apply domestic law rules to determine whether the judgment could be enforced in France.
Proceedings commenced post-transition, exclusive jurisdiction clause entered into post-transition
This should also be relatively straightforward, assuming the UK accedes to the 2005 Hague Convention on Choice of Court Agreements with effect from the end of the transition period. The Convention provides for relatively straightforward enforcement of judgments in a similar, although not identical, way to the Recast Brussels Regulation. But it applies only where both:
- There is an exclusive jurisdiction clause concluded after its entry into force for the state of the chosen court (assuming the clause is within the scope of the Convention, so, for example, it does not apply to employment and consumer contracts).
- Proceedings were commenced after its entry into force for the state of the court seised.
By way of background, the UK has been a member of Hague since 1 October 2015 by virtue of the EU signing up to Hague on behalf of all EU member states (other than Denmark, though Denmark has since joined separately). The other contracting states are Mexico, Singapore and Montenegro. In December 2018, the UK deposited its instrument of accession to Hague, with the intention that it join in its own right from April 2019 if it exited the EU without a deal on 29 March 2019. It has since suspended its accession to take account of the various extensions to Article 50 TFEU. The UK’s “note verbale” which accompanied its instrument of accession provided that, if a withdrawal agreement was entered into, the UK would withdraw its instrument of accession, since for the period of transition the UK would be treated as an EU member state and the Hague Convention would continue to have effect accordingly.
It is to be expected, therefore, that the UK will now withdraw its December 2018 accession but will accede to Hague once again in September 2020, so that the UK joins the Convention in its own right immediately following the end of the transition period, on 1 January 2021. Assuming no other agreement is entered into (for example, for the UK to join the Lugano Convention) Hague will then apply between the UK and the EU member states.
So, for example, a French judgment in proceedings brought post-transition, pursuant to a French exclusive jurisdiction agreement entered into post-transition, will be enforced in England under Hague. An English judgment in proceedings brought post–transition, pursuant to an exclusive English jurisdiction clause entered into post-transition, will be enforced in France.
Proceedings commenced post-transition, exclusive jurisdiction clause entered into before the end of transition
This is where it all gets rather more complicated. Judgments may be enforceable under Hague where the clause was agreed after 1 October 2015 but before the end of the transition period, but there are some uncertainties. It is therefore important to consider whether, if Hague does not apply, the judgment will still be enforceable under domestic rules in the UK or the relevant EU member state(s). As noted above, most (but not necessarily all) EU countries will enforce foreign judgments even without an applicable international treaty, but the type of judgment enforced may be more limited and the procedures involved more time consuming and costly. If you may need to enforce a judgment as between the UK and the EU, and there are doubts as to whether Hague can be relied on, it is important to understand the position under domestic rules in the relevant country or countries.
When considering exclusive jurisdiction clauses entered into before the end of the transition period, it is necessary to give separation consideration to two scenarios, firstly where there is an exclusive English jurisdiction clause and the resulting judgment is to be enforced in the EU, and secondly the reverse situation.
Scenario one: Exclusive English jurisdiction clause
There is some uncertainty regarding the application of Hague to such clauses due to what we have termed the “change of status” risk: in other words, whether EU member state courts will treat Hague as having been in force for the UK since 1 October 2015, when it became party to Hague by virtue of its EU membership, or only from 1 January 2021, when it rejoins Hague in its own right. Guidance issued by the European Commission in April 2019 suggested that it was taking the view that Hague would only apply when the UK re-joined Hague in its own right. That guidance is not of course binding on the courts that will decide this question in future, and it was given in the context of a no-deal exit rather than the position where we have a withdrawal agreement and a transition period. However, the position remains unclear.
Where the exclusive jurisdiction clause was agreed during the transition period, there may be an additional source of uncertainty, given that the UK will not actually be party to Hague during that period. However, the UK and EU have agreed that it will be treated as if it were an EU member state for the purposes of international conventions, and so arguably the UK should be in no worse position as regards clauses agreed during this period. But equally, it is unlikely to be in a better position: if EU member states do not treat clauses agreed before the UK’s exit on 31 January 2020 as subject to Hague, it would seem odd to treat clauses entered into during the transition period any differently.
Scenario two: Exclusive jurisdiction clause in favour of EU member state
So far as the UK is concerned, there is also some uncertainty as to whether Hague will be applied to the enforcement of EU judgments given pursuant to an exclusive jurisdiction clause entered into pre-Brexit, or before the end of the transition period.
Under the transitional provisions in Hague itself, as noted above, contracting states should apply the Convention to enforce judgments pursuant to exclusive jurisdiction clauses in favour of other contracting states, so long as the Convention was in force for the chosen state at the time the clause was entered into. It should not matter whether, at that time, the Convention was in force for the country of enforcement, so long as it is in force by the time the enforcement proceedings are brought. To that extent, there is an element of asymmetry in the Hague Convention: a new contracting state must apply it retrospectively to clauses in favour of existing members, so long as the clause was agreed after the Convention came into force for that country, whereas existing members will only apply Hague prospectively so far as clauses in favour of the new country are concerned.
However, there is some uncertainty as to whether the UK will implement the Convention in that way as regards exclusive jurisdiction clauses in favour of EU member states, given the terms of the UK’s Hague Exit Regulations, which were intended to govern the application of Hague on a no-deal exit. The regulations are ambiguous; however, when read with the government’s explanatory memorandum, their effect appears to be that, for clauses agreed before the UK rejoins Hague, the UK would only apply the Hague rules where it would previously have done so; that is, where there is a judgment pursuant to an exclusive jurisdiction clause in favour of Mexico, Singapore or Montenegro. This was on the basis that Hague had been largely inapplicable between the UK and the EU member states, as jurisdiction clauses in favour of any EU member state are covered by the rules in the Recast Brussels Regulation, and separate provision would be made in a related statutory instrument dealing with the EU and the application of the Brussels regime. That related SI provided that where proceedings were commenced in an EU member state before exit, the resulting judgment would continue to be enforced in the UK under, effectively, the rules in the Recast Brussels Regulation. It made no special provision where an exclusive jurisdiction agreement was entered into in favour of an EU member state court prior to exit, but proceedings were commenced only after exit, so that the recast Brussels Regulation would not apply.
It is to be hoped that the UK government will consider the application and effect of the Hague Exit Regulations and the Brussels SI, and make changes to ensure that it is clear that the UK will apply Hague to judgments given by EU member states pursuant to exclusive jurisdiction clauses entered into between 1 October 2015 and 31 January 2020 (and indeed during the transition period), not least as failing to do so may mean that the UK would not be complying with its obligations under the Hague Convention 2005. Until it does so, however, uncertainty remains. If Hague does not apply, it will still be possible to enforce an EU member state judgment in the English court by suing on the judgment as a debt, but this will, of course, only apply to money judgments.
If you are entering into a contract before 1 January 2021 and have concerns regarding enforcement of a judgment under an exclusive English jurisdiction clause, in light of the uncertainties outlined above, there are a number of possibilities.
You may want to think about alternatives to an exclusive clause. Depending on the circumstances, you may decide to go for non-exclusive English jurisdiction, or arbitration, or a jurisdiction clause in favour of an EU member state court. All of these alternatives have advantages and disadvantages, as considered in Anna’s previous blog post, Choosing a jurisdiction clause with Brexit on the horizon. And any of them could be combined with a requirement (perhaps at your option, if that can be negotiated) to replace the clause with an exclusive English jurisdiction clause after 1 January 2021 so as to get the benefit of Hague, weighing up the advantages of enforcement against any downsides, for example a reduction in flexibility if you are moving from a non-exclusive or unilateral clause.
If you decide to stick with an exclusive English jurisdiction clause from the outset, again, it could be combined with a requirement (or option) to restate the clause after that date. And even if the contract has already been entered into it may be possible, with the counterparty’s agreement, to restate the clause after 1 January 2021.