Enforcement of judgments UK/EU: Practical advice, June 2021

2nd June 2021

Enforcement of judgments UK/EU: Where are we now?

The EU-UK Trade and Cooperation Agreement [1] is silent on the topic of judicial cooperation in civil and commercial matters.  The UK has applied to join the 2007 Lugano Convention [2] but, on 4 May 2021, the European Commission recommended to the Council of the EU that the UK’s accession application be refused.  With the exception of ongoing proceedings, pre-Brexit arrangements regarding jurisdiction and the mutual recognition and enforcement of judgments between the UK and EU no longer apply, so where does that leave commercial parties wishing to pursue court proceedings and enforce judgments between the different jurisdictions?

In this briefing, Walker Morris’ Gwendoline Davies, Nick Lees and Nick McQueen, who specialise in the resolution of commercial and cross-border disputes, provide up-to-date practical advice.

A partial solution

As a partial solution, the UK has acceded in its own right to the Hague Convention on Choice of Court Agreements, which gives effect to exclusive jurisdiction clauses and provides for the recognition and enforcement of resulting judgments.

However, while the UK intends to apply the Hague Convention to exclusive jurisdiction clauses agreed from 1 October 2015 [3], the European Commission has indicated its belief that Hague will only apply to exclusive English jurisdiction clauses agreed from 1 January 2021.

Where Hague does not apply (for example, in some situations involving consumers or other non-corporate parties, or in cases involving ‘one-way’ or ‘asymmetric’ jurisdiction clauses [4]), or where parties are EU-domiciled, there is a risk that exclusive jurisdiction clauses in favour of the English courts may not be effective if proceedings are commenced in the EU first.  For further information and advice on this issue (and the possible resulting ‘race’ to be the first to issue proceedings to gain a jurisdictional advantage), please see our earlier briefing.

When deciding whether to uphold a non-exclusive jurisdiction clause and enforce any resulting judgment, EU member state courts will apply the laws of that individual member state.  In the majority of cases enforcement will still be possible, but will most likely involve additional time and cost.

In relation to asymmetric jurisdiction clauses, some EU member state courts have refused to uphold them at all.  It is possible that there will be an increase in jurisdictional challenges as a result.

Practical advice

Commercial parties may wish to note the following practical advice:

• It may be sensible to undertake a review of any commercially critical agreements ahead of time (instead of in the heat of the moment only after a dispute has arisen) so as to ensure that the nature of any jurisdiction provisions is fully understood in the post-Brexit world.
• Where possible, it is likely to be preferable for commercial parties to adopt exclusive jurisdiction clauses instead of non-exclusive or asymmetric clauses.
• Where a contract contains a jurisdiction clause in favour of the English courts, it will be advisable to include a provision obliging that party to appoint a process agent here to accept service, to minimise the scope for any issues associated with service out of the jurisdiction [5].
• Arbitration can be an attractive alternative to court litigation as a formal method of resolving commercial disputes. Since arbitration is not regulated by EU law, Brexit does not affect the recognition and enforcement of UK-seated arbitral awards in EU member states or EU member state-seated awards in the UK.
• The benefits of choosing English law to govern parties’ contractual arrangements are unaffected by Brexit. Where the parties have chosen English governing law, EU member state courts are likely to continue to respect that choice.

How we can help

Walker Morris’ Commercial Dispute Resolution specialists are experienced and expert in resolving cross-border disputes – whether that be in the context of international litigation, arbitration (two of our partners are Fellows of the Chartered Institute of Arbitrators) or commercial negotiation.  Walker Morris also has excellent working relationships with firms in all key jurisdictions across the EU and globally.

If your business trades or operates internationally and if you would like any further information, assistance or advice in relation to your commercial contract arrangements and/or any dispute resolution options or strategy, please contact Gwendoline Davies, Nick Lees or Nick McQueen, all of whom will be very happy to help.

[1] which was applied provisionally as from 1 January 2021 and entered into force on 1 May 2021

[2] which broadly replicates the pre-Brexit regime for jurisdiction and enforcement of judgments between the UK and the EU

[3] the date on which the EU – then including the UK – acceded to the Hague Convention

[4] that is, clauses which require one party to litigate in a specific jurisdiction but allow the other party to bring claims wherever they wish

[5] service of proceedings on an EU-based party remains possible, but is now likely to be less efficient and more costly