Governing law, enforcement of judgments and jurisdiction post Brexit – where are we now? by Anna Pertoldi

Sarah Garvey, counsel at Allen & Overy LLP set the scene. So until 11pm on 31 December 2020 transitional arrangements applied under the UK/EU Withdrawal agreement. Under those arrangements the previous rules on jurisdiction, governing law and enforcement remained in place. From 1 January 202, however, those rules largely fell away, civil justice forming (as anticipated) no part of the UK/EU deal reached in December. 

So far as governing law is concerned, little will change post transition as the Rome I and Rome II Regulations, which set out the rules on determining the governing law in contract and tort, have been incorporated into UK law with minor amendments. The Regulations themselves will continue to apply in EU member states. In practice this means governing law clauses will be respected as before in both the UK and the EU and the reasons to select English law to govern commercial contracts remain valid.  

Anna Pertoldi, partner at Herbert Smith Freehills LLP, then dealt with enforcement of judgments. She explained that where proceedings were commenced before 1 January, the recast Brussels Regulation continues to apply to enforcement of English judgments in the EU (and vice versa), regardless of when that judgment is delivered. Where proceedings are started from 1 January, recast Brussels doesn’t apply. It is possible that the UK will be able to rejoin the Lugano Convention 2007 and if that happens, there will be little change to the rules on enforcement. The Lugano Convention applied until the end of transition between the UK and the EFTA states Norway, Switzerland and Iceland. If the UK is permitted to rejoin Lugano then it will apply between the UK and EU member states as well as Norway, Switzerland and Iceland. Unanimous consent is needed from the contracting states for the UK to rejoin. The EFTA states have agreed, but we are yet to hear from the EU. The UK applied to rejoin Lugano on 8 April 2020 and under the terms of the Convention a contracting state must ‘endeavour to give their consent at the latest within one year,’ so it is hoped there will be some clarity soon. The Convention provides for reciprocal enforcement of judgments in many circumstances, so it enables straightforward enforcement in the UK of judgments obtained by EU consumers and employees as well as businesses, so it is hoped that the mutual benefits of the UK being a party to the Convention will be understood. 

If the UK does not rejoin Lugano, then if the English court took jurisdiction based on an exclusive jurisdiction clause, enforcement in the EU will potentially be under the Hague Convention On Choice of Courts 2005, which provides for straightforward recognition and enforcement of judgments from other contracting states. The UK first became a member on 1 October 2015, when the EU signed up all member states bar Denmark (which joined later) to the convention. Until the end of transition, the Convention applied between the UK and Mexico, Singapore and Montenegro. The UK then rejoined the Hague Convention from 1 January 2021 and the Convention now applies between the UK and EU member states, in addition to Mexico, Singapore and Montenegro. If the English court takes jurisdiction based on an exclusive jurisdiction clause entered into from 1 January 2021, enforcement of the resulting judgment in the EU will be under Hague. Unfortunately, there is some uncertainty if the jurisdiction agreement was entered into before 1 January 2021 (and after 1 October 2015) as the European Commission has suggested that Hague does not apply in those circumstances, although there seems no reason why that should be the case. 

If Hague doesn’t apply, then enforcement of a judgment from the UK will be under national laws in each member state, including any mutual enforcement treaty which may remain in place. Most, but not all,  EU member states will enforce a UK judgment but it is not as straightforward as when recast Brussels/Lugano/Hague apply.  

So far as enforcement in the UK of an EU judgment is concerned, where proceedings are started this year and assuming no Lugano Convention in place, the Hague Convention will apply where the jurisdiction clause was agreed on or after 1 October 2015 (1 September 2018 for Denmark). Failing that there is a statutory system of registration for judgments from certain countries and for other countries, the judgment can be sued upon as a debt. 

Elizabeth Williams, partner at Simmons and Simmons, took over to consider jurisdiction, as well as service and evidence. 

For proceedings instituted before the end of 2020 the jurisdiction rules in recast Brussels continue to apply in both the UK and the EU. Where the proceedings begin now, the Hague Convention will apply in the UK if the jurisdiction clause was entered into after 1 October 2015 (1 September 2018 for Denmark). In the EU, Hague will apply if the English exclusive jurisdiction clause was entered into from 1 January 2021 but, as explained earlier, there is uncertainty where it was entered into after 1 October 2015 but before 1 January 2021. Hague provides that the chosen court must accept jurisdiction and, more importantly, courts in other contracting states must decline jurisdiction, save in very limited circumstances. There is no requirement for permission from the UK court to serve outside of the jurisdiction where Hague applies. 

Where Hague does not apply, jurisdiction will depend national laws, including so called exorbitant laws in each jurisdiction. In the UK there will be a change to court rules in April which will permit service outside of the UK without permission where there is an English jurisdiction clause, even where that clause is not within Hague. 

When it comes to actual service of proceedings in an EU member state, the EU Service Regulation no longer applies, but the UK and all EU member states are parties to the Hague Service Convention, so that will generally be used instead. For evidence, the EU taking of Evidence Regulation no longer applies, but the UK and most EU countries are parties to the Hague Taking of Evidence Convention. 

Sarah Garvey completed the presentations by drawing some of the threads together. She remarked that during transition there had been no general shift in market practice. English law and courts had remained popular with commercial parties, although there had been shifts where an enforcement risk had been identified ,or the focus of the parties’ commercial dealings had moved outside of the UK. What we were seeing now, was a trend towards exclusive English jurisdiction clauses, given the benefits Hague brought.  

The big questions going forward were whether the UK would rejoin Lugano, which would greatly simplify the position, and whether with or without Lugano we would see more competition to the English courts from other jurisdictions and arbitration. 

Anna Pertoldi is a Partner at Herbert Smith Freehills and Member of the Law Society of England and Wales’  Private International Law Working Group. 

Law Society Resources:

• Law Society of England and Wales - Brexit resources
  

• Law Society of England and Wales – End of transition period guidance: Rules on jurisdiction 

• Law Society of England and Wales – End of transition period guidance: Choice of courts 

• Law Society of England and Wales – End of transition period guidance: Service of documents 

• Law Society of England and Wales – End of transition period guidance: Evidence