knowledge | 7 May 2021 |
UK Application to Join Lugano Convention following Brexit: An Update
The UK faces opposition from the European Commission in its bid to join the Lugano Convention. As discussed in an earlier article,1 with the exit of the United Kingdom from the European Union, neither the Brussels I Regulation (recast)2 nor the Lugano Convention applies to the UK. Consequently, significant disruptions to cross-border litigation may arise.
On 8 April 2020, the UK formally applied to accede to the Lugano Convention. However, the UK’s accession to the Lugano Convention requires unanimous support from the contracting parties to the Convention. The parties to the Lugano Convention include the EU, Denmark (in its own right), Iceland, Switzerland and Norway. Although the non-EU parties to the Lugano Convention have voiced their support for the UK’s accession, on 4 May the European Commission formally communicated to the European Parliament and the Council of the European Union that it opposes the UK’s application.3
In its communication the European Commission noted that the Lugano Convention “is not aimed at all third countries” but only those “which have a particularly close regulatory integration with the EU”. By “close regulatory integration” the European Commission means those countries that form part of the European Economic Area (the “EEA”) and the European Free Trade Association (the “EFTA”), because those countries “participate, at least partly, in the internal market”. However, the UK is not a part of the EEA or the EFTA. Moreover, the European Commission noted that the UK’s accession to the Lugano Convention was not mentioned in the Political Declaration on the framework for the future relationship between the European Union and the United Kingdom of 17 October 2019 nor in any other joint EU/UK document on the framework of the future relationship. On those bases, it formed the view that:
However, the European Commission’s communication is a non-binding recommendation. The ultimate decision on whether the EU will support the UK’s accession lies with a qualified majority of the EU member states acting through the Council of the European Union.4 Some EU member states have indicated that they are in favour of the UK’s participation (e.g. the Netherlands) whereas others have indicated their opposition (e.g. France) with others indicating they have yet to decide (e.g. Germany).5 It remains to be seen whether enough EU member states will share the Commission’s view that the UK does not have a “special link” to the internal market to deny the UK accession to the Lugano Convention.
What happens should the UK’s accession to the Lugano Convention be refused?
As regards choice of courts, in the event that the UK does not become a party to the Lugano Convention, it may be possible to rely on the 2005 Hague Convention on Choice of Court Agreements (the “Hague Convention”) to which the UK acceded in its own right on 1 January 2021. However, the Hague Convention only applies where an exclusive jurisdiction clause has been entered after the Hague Convention’s entry into force in relation to the state whose courts are granted exclusive jurisdiction. There is a difference of opinion as to the application of the Hague Convention to exclusive jurisdiction clauses in favour of UK courts entered into between 1 October 2015 and 1 January 2021, when the UK was a party to the Hague Convention by virtue of its EU membership.6 In the absence of any judicial authority on the issue from the courts of any contracting party that might be treated as of binding or (given the terms of Article 23 of the Hague Convention) of persuasive value, it remains unclear what approach might be taken to this issue by any such court.
In the event that neither the Lugano Convention nor the Hague Convention is applicable to a dispute encompassed by a UK choice of court provision or a related judgment, the applicable domestic laws of any jurisdiction in which enforcement is sought would need to be considered on a case by case basis. The Irish courts would apply Irish common law rules to determine the enforceability of that provision and whether to recognise and enforce any related judgment. Whereas the applicable Irish rules are well established, the need to address these issues on a jurisdiction-specific basis and the process involved would introduce inefficiencies, compared with reliance on Brussels I Regulation (recast), the Lugano Convention or the Hague Convention.
The position regarding the recognition and enforcement of judgments of UK courts throughout the EU may, of course, change again, if the UK and the EU were both to sign and ratify the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. No state has yet ratified, and neither the UK nor the EU has yet signed, that Convention but the European Commission has indicated that it plans to propose EU conclusion of the 2019 Hague Convention in the near future.7
How can we help?
The Disputes Group at McCann FitzGerald can assist clients in addressing all of the regulatory and/or litigation issues business may face in response to Brexit. Alternatively, your usual contact in McCann FitzGerald will be pleased to provide further information.
Also contributed by Darragh Caldwell.
- McCann FitzGerald, ‘UK Application to Join Lugano Convention may not be Smooth Sailing’ (29 April 2020), available here.
- Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters OJ L 351, 20.12.2012, p. 1
- See ‘Communication - Assessment on the application of the United Kingdom of Great Britain and Northern Ireland to accede to the 2007 Lugano Convention dated 4 May 2021’, available here.
- Article 218(8) of the Treaty on the Functioning of the European Union.
- In the United Kingdom’s instrument of accession to the Hague Convention in its own right, it is stated that “Whilst acknowledging that the Instrument of Accession takes effect at 00:00 CET on 1 January 2021, the United Kingdom considers that the 2005 Hague Convention entered into force for the United Kingdom on 1 October 2015 and that the United Kingdom is a Contracting State without interruption from that date.” (see here.) Whereas the European Commission has stated in section 3.3 of its Notice to Stakeholders dated 27 August 2020 that the Hague Convention “… will apply between the EU and the United Kingdom to exclusive choice of court agreements concluded after the Convention enters into force in the United Kingdom as party in its own right to the Convention.” (see here).
- See the European Commission’s communication, at note 3 above.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.