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Jurisdiction JumbleDate: 03/03/2021 Type: Articles Topic: Disputes |
This bulletin is of interest to those clients currently considering the commencement of English High Court proceedings, or who have recently had such proceedings served on them. In this context the UK’s EU withdrawal agreement gives rise to some significant uncertainty, including both opportunities and threats, during what should be an interim jurisdictional regime pending the EU’s decision whether to allow the UK to accede to the Lugano Convention.
This bulletin explains how the UK’s withdrawal from the EU gives rise to the possibilities of the return of anti-suit injunctions, forum conveniens arguments (and contractual clauses waiving such arguments), races to be first-to-file (in particular to avoid the infamous “Italian torpedo”), and a new regime for the recognition and enforcement of judgments.
It is important to note that the departure of the UK from the EU, and associated impact on jurisdiction, does not affect arbitration, which is subject to a separate regime (primarily the 1958 New York Convention).
Consider prompt issuing of claim forms to counter the “Italian torpedo” and other forum skirmishes.
The UK has ratified the Hague Choice of Court Convention (“HCCC”), which has also been ratified by the EU and a handful of other countries (but not, for example the US, which is merely a signatory at this stage).
The HCCC prevents the continuation of proceedings brought in contravention of an exclusive jurisdiction clause, and ensures the due recognition and enforcement in other jurisdictions of judgments obtained pursuant to such clauses.
Broadly, where the HCCC applies, a party to a contract with an exclusive jurisdiction clause in favour of England can expect that the clause will be respected by courts in EU Member States (and in other countries where the HCCC is operative).
However, the HCCC is no panacea. It only applies to exclusive jurisdiction clauses (which is unlikely to include any asymmetric jurisdiction clauses) agreed after it entered into force in the relevant state. The UK has been bound by the HCCC since 1 October 2015, the date on which the HCCC became effective across the EU. However due to Brexit, the UK separately acceded to the HCCC in its own right on 28 September 2020, and with effect from 1 January 2021. There is currently a divergent view as to the effective date. The UK considers that the effective date is 1 October 2015, but the EU Commission considers the effective date is 1 January 2021. It remains to be seen how this will be resolved, but (at least with respect to exclusive jurisdiction clauses) it does seem as though the UK has found a workable replacement for the EU regime.
Jurisdiction under the Common Law
Where there is no exclusive jurisdiction clause, the domicile rule (and its exceptions) as enshrined in the Recast Brussels Regulation (“RBR”) has now been displaced, and the UK is back to the position under the common law. This presents an interesting situation insofar as defendants domiciled in EU Member States are concerned. Jurisdiction can be established over such defendants in the same way as other non-EU foreign defendants, which gives enormous flexibility to a claimant wanting to pursue a claim in the English courts. In short, where a defendant cannot be served in England, permission of the Court can be obtained to serve the defendant in an EU Member State if one or more of the 21 “Gateways” can be established under CPR6.36 and paragraph 3.1 of Practice Direction 6B. These gateways are familiar to many of us practising cross border litigation, but some of the more commonly used are set out below:
- the claim is pursuant to a contract that was made in England, and/or is governed by English law;
- the claim is for a breach of contract that was committed in England;
- (for tort claims) either the wrongful act was committed in England, or the damage was suffered here;
- the foreign defendant is a necessary or proper party to a claim against a different defendant, in respect of which the English Court already has jurisdiction.
Of course, once permission has been given, and service abroad effected, the defendant will have the opportunity to dispute the English Court’s jurisdiction on forum conveniens principles, and the traditional principles on the question of whether a defendant has been taken to have submitted to the jurisdiction will also apply.
Some Practical Considerations
- Arbitration Agreements (which are not affected by these changes) will remain popular – service and enforcement are considerably more straightforward (but of course there are other inherent limitations to arbitrations which have been frequently welldocumented elsewhere).
- Inserting an arbitration clause into a settlement agreement arising from court proceedings may provide a broader and more expedient enforcement platform.
- Consider carefully avoiding the use of asymmetric jurisdiction clauses so as to maximise the prospect of such clauses being found to be within the scope of the HCCC.
- For contracts concluded between October 2015 and December 2020, consider restating the jurisdiction agreement afresh in 2021, so as to avoid the risk that an EU Member State Court rules that the HCCC is not engaged.
- Consider incorporating forum non conveniens waivers in jurisdiction clauses.
- Request non-English counterparties to name an agent for service of proceeds in England.
When considering how to effect service on a defendant domiciled in the EU, another effect of Brexit post 31 December 2020 is the fact that the Service Regulation ceases to apply. This provides for relatively quick service of proceedings between EU Member States which for claims issued in England will now not apply. However, for practical purposes, the absence of the Service Regulation can be mostly overcome by recourse to the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents (the “Service Convention”). All EU Member States and the UK are parties to the Service Convention (although there are differing declarations and notification requirements in certain cases). Nonetheless local law advice in each relevant case would be the prudent course.
It is also worth noting the English Court’s power under CPR Rule 6.15 to permit service by an alternative method (eg. via email) although if the method of service is not recognised in other jurisdictions, subsequent enforcement efforts might be prejudiced.
Resisting the Jurisdiction of Foreign Courts
As a matter of EU jurisprudence, anti-suit injunctions are not looked at favourably. However, post-Brexit, the English Court will once again be able to grant such injunctions to prevent a party from pursuing proceedings in an EU Member Sate in breach of an English arbitration clause, or an exclusive jurisdiction clause in favour of England. This potential revival (however short-lived if the Lugano Convention regime is adopted in due course), is the flip-side of the fact that as a “third state”, EU Member State Courts will no longer be obliged to stay proceedings commenced in spite of either earlier “first seised” proceedings in England, or proceedings commenced in accordance with a jurisdiction clause. The EU Member State Courts will have a discretion to stay proceedings where proceedings have been commenced in England before the proceedings in the Member State. There will thus be renewed urgency to be the “first-tofile”, in order to avoid problems analogous to the “Italian torpedo” (where proceedings are commenced in a jurisdiction which takes a long time to resolve claims in order to frustrate resolution of the dispute) , that existed before the RBR.
Enforcement The EU recognition and enforcement regime to which the UK was a party prior to 31 December 2020, no longer applies. Where no relevant treaty applies between the UK and any relevant EU Member State, enforcement of an English judgment will be a matter of local law. Where the HCCC applies it is anticipated that judgments will be readily recognised and enforced. It is also anticipated that the Foreign Judgments (Reciprocal Enforcement) Act 1933 will once again apply as between the UK and any of Austria, Belgium, France, Germany, Italy, the Netherlands, and Norway (arising from pre-EU Treaty commitments). However this is as yet untested and it cannot be assumed that old treaties are automatically revived upon Brexit.
When considering the enforceability of EU Member State Judgments in England, post 31 December 2020, questions of jurisdiction of the foreign court, and of public policy will potentially have a greater role to play than was previously the case under the RBR.