In a worrying recent development, guidance has been issued by the European Commission which suggests exclusive English jurisdiction agreements entered into between October 2015 and exit day may not, in the case of a no-deal Brexit, come within the Hague Convention on Choice of Court Agreements 2005.
English judgments are currently enforced in EU member states under the recast Brussels Regulation, which applies to most commercial judgments and provides for a relatively streamlined and simple process. The Hague Convention contains similar (although not identical) provisions, so the hope has been that by including an exclusive English jurisdiction clause in a contract, there would be little practical change when it came to enforcement, even in the case of a no-deal Brexit.
If Hague doesn’t apply, then an English judgment will need to be enforced under domestic rules on enforcement in each EU member state. Most EU member states will enforce judgments under their domestic rules, but there are exceptions and where enforcement is possible it may take longer, be more complex and allow for more limited types of judgment to be enforced.
The reason there is an issue over the Convention’s application is that Hague applies only to exclusive jurisdiction agreements concluded after its entry into force for the state of the chosen court. It is not entirely clear whether for the UK that means the date the Convention initially came into force, on 1 October 2015 when the EU signed the UK (along with almost all other EU states) up to the Convention, or the date when it comes into force following the UK’s accession as a party in its own right, currently due to be 1 November 2019 if there is no deal in the meantime.
This concern, sometimes termed the “change of status risk”, has been identified as a potential issue, but there hasn’t been a great deal of prominence given to it. That may well be due to change with the recent guidance. So what exactly does the guidance say?
Notice to stakeholders
The starting point is the Notice to Stakeholders published by the European Commission on 18 January 2019. That notice makes clear that if the UK withdraws from the EU without a deal, then the EU rules in the field of civil justice and private international law will no longer apply to the UK. So far as enforcement of judgments is concerned, that means that unless a formal enforcement procedure has been completed before exit day (an exequatur proceeding), an English judgment will not be enforced in the EU under the rules in the Brussels regime. This is so even where judgment was handed down, or the enforcement proceedings were commenced, before the withdrawal date.
The notice goes on to say that where English proceedings are commenced after the UK’s withdrawal, recognition and enforcement will be governed by national rules of the member state in which recognition/enforcement is sought.
The notice adds, however:
“In some instances, international conventions, such as the conventions developed by the Hague Conference on Private International Law apply, provided that both the EU/EU Member States and the United Kingdom are parties to the Convention.”
It concludes the enforcement section by saying that all stakeholders are advised to take the comments made on enforcement into consideration when assessing contractual choices of international jurisdiction.
So, nothing there which causes immediate concern: the notice appears on its face to be an express acknowledgment that the Hague Convention might apply on enforcement post-Brexit, and there is no mention of any issue over when a jurisdiction clause was entered into.
April 2019 guidance
The story doesn’t stop there though. On 11 April 2019 the European Commission published a Q&A document, giving further guidance on its earlier notice. So far as enforcement of judgments is concerned, it clarifies a number of points, regarding for example authentic instruments and the effect of certificates issued by the English court before exit. It has this to say, however, about jurisdiction agreements:
“3.3 What about recognition and enforcement of a UK judgment given by a court designated in a choice of court agreement?
Proceedings initiated as from the withdrawal date in the EU Member States
On 28 December 2018 the United Kingdom signed and ratified the 2005 Hague Convention on Choice of Court Agreements. It will apply to the United Kingdom when the United Kingdom withdraws from the EU without a withdrawal agreement.
However, according to Article 16(1) of the Convention, it will only apply to exclusive choice of court agreements concluded after its entry into force for the United Kingdom, ie after the United Kingdom has become a party to the Convention.”
A footnote refers to the UK’s initial date of accession having been 1 April 2019 and that this was later extended.
This is not entirely clear but it seems to suggest, particularly when read with the footnote, that the European Commission is taking the view that exclusive English jurisdiction agreements are within the Hague Convention only if they are entered into post-Brexit. Now, that’s not, of course, conclusive; it could be that national courts in the EU27 and ultimately the Court of Justice of the European Union (CJEU) will adopt a different interpretation. On the face of it, it’s not easy to see why the UK’s change of status (from member of Hague by virtue of EU membership to member of Hague in its own right) should affect Hague’s application to jurisdiction clauses that fell within the Convention at the time of the agreement. The Commission’s view is obviously unhelpful, though, if you are entering into exclusive English jurisdiction clauses now, or have done so since 1 October 2015, and may have to enforce any judgment in the EU27 post-Brexit.
So what should parties do? In light of this development, where enforcement in an EU country may be necessary and you have or are considering an English exclusive jurisdiction clause, it would clearly make sense to check whether an English judgment will be enforced there under domestic law in the event that Hague does not apply.
If there are concerns, and the contract has not been entered into, then there are a number of options to consider, such as including a non-exclusive clause or an arbitration clause in the contract. This could possibly be combined with an agreement to replace the clause with an exclusive English jurisdiction clause post a no-deal Brexit, so that any judgment would be enforceable under Hague.
Where the contract has already been entered into, the clause could be amended now if all parties agree. Alternatively and perhaps more likely in most cases, you might decide to wait and see whether there is a no-deal Brexit and re-evaluate at that stage, bearing in mind that no deal has, so far at least, been categorically rejected by the UK Parliament as an option. If there is no deal, then the exclusive jurisdiction clause could be restated by agreement once the UK is a member of Hague in its own right, thereby avoiding the change of status risk.