The UK left the EU on 31 January 2020, and the transition period ended on 31 December 2020. Yet, months later, the issue of jurisdiction post-Brexit still remains a hot topic. This article summarises a number of the key changes and developing legal issues.
Within the EU, and in the UK before Brexit, the rules on which country’s courts had jurisdiction over a dispute were found principally in the Recast Brussels Regulation (RBR). The RBR sets out a very effective scheme for determining jurisdiction issues and avoiding multiple sets of proceedings.
Under the RBR, whilst the general approach is that a person shall be sued in the courts of the EU Member State where they are domiciled, that is overridden by a choice by the parties that the courts of a certain Member State are to have jurisdiction, and that jurisdiction is exclusive.
In addition, under Article 31 of the RBR, where the courts of a Member State have exclusive jurisdiction as a result of a choice by the parties: (i) if the contractually chosen Member State court is seised, any court of another Member State is required to stay its proceedings unless and until the chosen Member State court declares it has no jurisdiction; and (ii) if the contractually chosen Member State court establishes jurisdiction, any court of another Member State is required to decline jurisdiction.
These provisions were intended to try to avoid the problem of what is often called the ‘Italian torpedo’ – a tactical manoeuvre whereby a party to an exclusive jurisdiction agreement could, before proceedings were issued in the chosen court, cause delay and inconvenience to the other side by commencing proceedings in a court other than that specified in the agreement, normally in a country with a slower moving legal system, which as the court first seised would need to decide if it had jurisdiction, causing significant delays to the progress of the claim in the country specified in the agreement.
The position on jurisdiction between Member States (and the UK, before Brexit) on the one hand, and Iceland, Norway and Switzerland on the other hand, is governed by the 2007 Lugano Convention, which is similar to the RBR. However, the Lugano Convention is generally considered to be inferior to the RBR because it does not address the ‘Italian torpedo’ issue – there is no equivalent provision to Article 31 of the RBR in the Lugano Convention.
In the UK, as well as in EU Member States in situations involving the UK, in respect of legal proceedings started before the end of 31 December 2020, the jurisdictional provisions in the RBR continue to apply.
As regards Iceland, Norway and Switzerland, the UK passed a statutory instrument which provides that it will continue to apply the Lugano Convention to proceedings begun before the end of the transition period.
Post-Brexit, the UK is no longer party to the RBR and the Lugano Convention, both of which operate on the basis of mutual reciprocity between states. As a result, in respect of legal proceedings which commenced after 31 December 2020, the RBR will no longer assist if a party to an English jurisdiction clause finds that its counterparty has issued proceedings in breach of that clause in an EU Member State – the courts of the EU Member State will not be obliged to stay proceedings and decline jurisdiction under the RBR as it was previously.
Instead, each country will apply its domestic rules to the issue of jurisdiction in cases where there is a UK angle. In England and Wales, that will mean considering the 2005 Hague Convention, to which the UK is a party, the common law, and potentially also, in the future, the Lugano Convention, as explained further below.
2005 Hague Convention
The UK acceded in its own right to the 2005 Hague Convention, with effect from 1 January 2021. The EU Member States are party to the Hague Convention, along with a few others, like Mexico, and the Hague Convention applies where there is an exclusive jurisdiction agreement in favour of one of the Contracting States.
The Convention requires the court designated in an exclusive jurisdiction agreement to hear the case and requires the courts of other Contracting States to suspend or dismiss proceedings where an exclusive choice of court agreement applies. So, if you have an exclusive jurisdiction clause, the Hague Convention could be helpful.
However, the Hague Convention is restricted to exclusive jurisdiction clauses – it does not deal with circumstances where there is no exclusive jurisdiction clause. There is also a debate about whether the UK being a party to the Hague Convention in its own right from 1 January 2021 provides protection in relation to exclusive jurisdiction clauses which were entered into before that date, when the UK was treated as a party to the Hague Convention as a result of its EU membership, or not. As a result, some businesses are entering into supplemental agreements which make clear that the pre-existing exclusive jurisdiction clauses are re-agreed after 1 January 2021.
If the Hague Convention does not apply, the position in England & Wales is that we will need to look at the common law to determine jurisdiction. Under the common law, jurisdiction is established in three main ways: (i) by service of process within the jurisdiction; (ii) by service of process outside the jurisdiction; or (iii) by submission to the jurisdiction by the defendant.
If the intended defendant is within the jurisdiction, the claimant can effect service on them, leading to the court having jurisdiction. However, the court may still decline jurisdiction in certain circumstances. If the defendant is outside the jurisdiction, the claimant will generally need to obtain the permission of the court to serve the claim outside the jurisdiction, and, again, the court has discretion to decline jurisdiction.
However, since 6 April 2021, due to an amendment to the Civil Procedure Rules, as flagged here, where a contract contains an English jurisdiction clause, no permission will be needed to serve the claim outside the jurisdiction. This is a welcome change which streamlines the process for serving claims outside the jurisdiction in those circumstances.
The Lugano Convention
At the moment, as noted above, in England & Wales, if the 2005 Hague Convention does not assist, jurisdiction is governed by the common law. Given the limitations of the Hague Convention and the lack of certainty offered by the common law compared to the RBR, the UK has applied to join the Lugano Convention in its own right.
Whilst the UK has applied to join the Lugano Convention, it has not yet acceded to the Convention, as doing so requires the consent of all Contracting Parties, including the EU. Iceland, Norway and Switzerland have stated that they support the UK in its application to rejoin Lugano, but as noted here, it has been reported that the European Commission has expressed opposition to the UK membership on the basis that the UK is not a member of the European Economic Area or European Free Trade Association (EEA/EFTA).
The issue of the UK’s accession to the Lugano Convention gives rise to questions about the nature of the Lugano Convention, specifically, whether it is intended to be an EEA/EFTA convention or a convention which is open to third countries. It is anticipated that a final decision will be made on the UK’s accession soon. In the meantime, the matter of jurisdiction post-Brexit remains unsettled.