The EU-UK Trade and Cooperation Agreement (TCA) of 24 December 2020 made no long term provision for jurisdiction (that is, where a claim should be heard), or the enforcement of court judgments between the UK and the EU following the end of the Brexit transition period on 31 December 2020.
The UK applied to join the Lugano Convention, having previously been a party through its membership of the EU, in April 2020. Lugano would have offered a substantially similar framework to the Brussels (Recast) Regulation, which ceased to apply in the UK on 1 January 2021. Brussels (Recast) had previously provided a consistent, pan-European regime which ensured that parties’ freedom to choose where their disputes would be heard, and that the court judgments they then obtained, would be respected and upheld. Lugano extended a broadly similar regime between the EU and EFTA countries (Norway, Switzerland and Iceland).
Whilst the UK has acceded to the 2005 Hague Convention on Choice of Court Agreements, which provides some protection, that regime is not as beneficial, or as comprehensive, as under Brussels Recast. Hague generally requires any judgment by the court specified in an exclusive jurisdiction clause to be recognised and enforced in other contracting states and exclusive jurisdiction causes in contracts to be respected by the courts of member nations. But, there are a number of limitations and uncertainties around the contracts and jurisdiction clauses to which Hague applies, there must be a written contract with an exclusive jurisdiction clause entered into after 1 October 2015 (or, to be safe, 1 January 2021, given the views expressed within the EU on this point) and Hague does not provide a regime for the enforcement of interim orders (such as injunctive relief).
Many had hoped that, in time, the UK would be allowed to rejoin Lugano in its own right. Lugano would provide a more modern, streamlined and cost effective regime than that now in place under Hague. However, the European Commission has now formally stated that this should not happen. Whilst disappointing to those hoping for a better regime for judicial cooperation in the post-Brexit European landscape, unfortunately this stance is unsurprising, given that things had become somewhat political. Whilst the recommendation is non-binding, and the ultimate decision rests with the European Council (the EFTA states have been consistent in their support of the UK's application), it does mean that the UK is left with Hague and, where it does not apply, we will be left to look at the national laws of each individual country to decide which court has jurisdiction to hear a dispute and whether a court judgment issued in another country can be enforced. In the vast majority of cases, the courts of both the UK and EU member states will respect an express contractual choice of jurisdiction, and enforce the final judgments of the courts of other nations, but access to Lugano would have brought back the certainty and clarity afforded by access to a pan-European rule book.
Lugano would have made access to justice in civil and commercial matters more accessible, both to UK claimants and those in EU (and EFTA) member states who wished to bring a claim against a counter-party in the UK, particularly to those with smaller budgets and without access to specialist lawyers in more than one jurisdiction. Unfortunately, it appears that we will not see the clarity and cost savings that access to Lugano would have brought about, certainly in the near future, which renders access to timely, specialist advice, both when a dispute arises, and on entering into contracts with an EU element, more important than ever. If you are concerned, either when entering into a contract with an EU counter-party, or where a dispute has, or may, arise, then please do feel free to contact me for an initial chat.
Britain should not join a cross-border accord for recognising courts and their rulings, the European Commission recommended on Tuesday, in a move which British business leaders fear could rachet up costs for smaller firms.