Enforcement: Crossing lines

Businesses involved in proceedings with foreign elements have grown accustomed to working within an European Union (EU) legal system that includes a cross-border framework dealing with enforcement of judgments. While EU law will continue to apply for at least the next two years, as the UK negotiates its departure, it is likely that sooner or later Brexit will disrupt that status quo.

Presently, judgments from courts within the UK legal systems are enforceable in all EU member states, and vice versa. This is the situation under the Recast Brussels Regulation. This regulation provides for a simple and cost effective enforcement mechanism across the EU with limited exceptions, which are strictly applied. The Brussels regime also applies regardless of where the parties come from. So, for example, if a court in the UK decides a dispute between Australian and South African parties, the judgment is enforceable across the EU.

When the UK leaves the EU, it will no longer be subject to the Recast Brussels Regulation. Without an alternative arrangement, this means enforcement of UK court judgments in the remaining EU countries would depend on the laws and procedural rules of each of 27 EU member states. It is likely that this will make the enforcement process more complex, time-consuming and costly, as member states’ rules are unlikely to be as simple as the existing Brussels regime.

This is unlikely to offer the certainty that the construction sector needs. So what are the post-Brexit options for the UK government for enforcement of judgments with EU countries?

The government is proposing a “Great Repeal Bill”, which will take effect on the UK’s exit from the EU. The stated intention behind the bill is to convert existing EU law into UK law, and it would probably see the Recast Brussels Regulation adopted as part of UK law. However, the regulation was not designed to be implemented unilaterally; it operates on the basis of reciprocity. Adopting the text into domestic law would simply commit the UK to enforce judgments from the remaining EU member states. It would not commit those states to do the same in return.

The UK could, instead, pursue the following solutions:

• Negotiate a separate agreement with the EU that mirrors the Recast Brussels Regulation and replicates its effect Denmark has previously done something similar, so there is precedent. However, such an agreement may be an unrealistic hope in the short term, as the current political climate suggests that energy will be focused on “headline” issues such as controlling immigration, as opposed to effectively replicating EU Regulations post-Brexit.
• Join the 2007 Lugano Convention This treaty currently applies between the EU and Norway, Switzerland and Iceland. The convention does not have all the advantages of the Recast Brussels Regulation, but it would enable enforcement of judgments across the EU, Norway, Switzerland and Iceland under a single EU-wide framework.
• Ratify the Hague Convention on Choice of Court Agreements 2005 This convention is currently in force between the EU, Mexico and Singapore. It provides some overarching rules on jurisdiction and enforcement. However, the enforcement rules only apply to judgments given by a court of a signatory state that was chosen by the parties as being the court to exclusively hear disputes. This convention would, therefore, not assist where the underlying agreement contained something other than an “exclusive jurisdiction” clause. This is clearly a limiting factor.
• Rely on earlier reciprocal arrangements with EU members states such as the original Brussels Convention which pre-dated the Brussels Regulation and the Recast Regulation This would seem an unlikely outcome, though, as such arrangements are outdated and offer few attractions to either the EU or the UK.

The content of the UK’s eventual withdrawal agreement from the EU is very much speculation at this stage. However, looking at the available options relating to enforcement, the most likely outcome would appear to be the UK joining the 2007 Lugano Convention. Although it does not have all the advantages of the Brussels Recast Regulation, it offers a relatively simple EU-wide enforcement regime, and provides the certainty in relation to cross-border enforcement which both UK and EU businesses desire.

Irrespective of what the future holds, the current framework will remain in place for at least two years. Firms may wish to take advantage of this window to resolve existing disputes or commence pending litigation while the position on EU-wide enforcement is clear.

Jonathan Gaskell is a construction lawyer and Gavin Deeprose is a professional support lawyer in the Edinburgh office of global law firm DLA Piper