REUTERS | Kacper Pempel

Enforcing judgments in the EU post Brexit

The UK government is going to be rather busy in the next few years, negotiating with the EU over a myriad of Brexit issues.

There will be many areas competing for the government’s time and at first blush it might seem that an agreement on enforcement of judgments is a technical matter which could perhaps be left to be decided upon at a later date.

In my view that would be short-sighted. The choice of English law and English jurisdiction by commercial parties brings substantial amounts of business to this country. Based on statistics from 2015, the legal sector generates some £22.6 billion, or 1.6% of the UK’s gross domestic product, and directly employs over 300,000 people. So it is important that steps are taken to ensure the UK’s attractiveness as a jurisdiction is not diminished because of concerns over enforcement.

The current position

English judgments are currently enforceable in all EU member states. Where judgment is given in proceedings commenced before 10 January 2015 this is under the Brussels I Regulation. Where the proceedings were commenced after that date it is under the Recast Brussels I Regulation.

A wide range of judgments are enforceable, not just money judgments, and there are limited grounds to refuse enforcement, which are fairly strictly applied. Relatively little formality is involved, particularly under the Recast Regulation.

The Brussels enforcement regime applies regardless of where the parties come from, so if the English court gives judgment in a dispute between a Russian party and a US party, it is enforceable across the EU.

The position post-Brexit if no agreement is reached

When the UK leaves the EU it will no longer be subject to the Recast Brussels Regulation (subject to any transitional arrangements dealing with proceedings commenced when it is in force but where judgment is given later).

That means English judgments will be enforceable in other EU countries, if at all, under the rules each country applies to enforcement of non-EU judgments. I have not researched what those rules are, but it is a fair assumption that they will be more restrictive than the Brussels regime. There is the added difficulty of getting to grips with the different regimes in 27 countries.

There are many reasons why commercial parties choose the English courts (the calibre of the judges, the availability of full disclosure and the adversarial system amongst them) but ease of enforcement is also an important consideration and needs to be safeguarded.

So it is important to put in place an agreement which extends across the EU.

What might an agreement look like?

It is difficult of course to say. We could try to stay part of the Brussels regime but that seems unlikely. I’m informed that Switzerland wanted to do so and were told no.

A more likely possibility is that agreement could be reached for the UK to join the Lugano Convention 2007. This applies currently between the EU, Norway, Switzerland and Iceland, and is in broadly the same terms as the Brussels I Regulation. It means that we would be unable to take advantage of the improvements in the Recast version (most notably the defusing of torpedo actions). This would be a shame, not least because the revisions were hard won, but it would mean Europe-wide enforcement was available under a single, familiar regime.

Failing this, we could seek to join the Hague Convention on Choice of Court Agreements 2005, which currently applies between the EU and Mexico. It will apply also to Singapore from 1 October 2016. I have heard one academic describe this as “the consolation prize”, no doubt because it only applies where there is an exclusive jurisdiction agreement in favour of the court giving judgment, so in rather restricted circumstances.

There is also the possibility of negotiating a bespoke arrangement, but the chances of there being either the time or the appetite for that are probably slim, given how many other areas of the UK’s relationship with the EU will need to be sorted out.

The EU approach

What approach might the EU take to this issue? Well, enforcement is a two way street. EU countries will want to be able to enforce their judgments in the UK. Whilst we do, of course, have regimes allowing enforcement of non-EU judgments, under statute giving effect to reciprocal arrangements and the common law, those rules are far more restrictive than those currently in place under the Brussels regime.

So overall, the message to the government is, don’t leave an agreement on enforcing judgments on the back burner for too long.

Herbert Smith Freehills Anna Pertoldi

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