The EU Withdrawal Agreement between the UK and the EU allowed for a transition period until 31 December 2020. Until then most EU law continues to apply in the UK. For creditors with judgments against defendants in the EU and litigants currently seeking judgments that may need to be enforced in the EU this is significant. It means that the current reciprocal arrangements for enforcing judgments across the EU will continue to apply to all judgments already obtained as well as those arising from legal proceedings that have begun before the end of the transition period.
As we discuss below there is some uncertainty about how judgments obtained in the English courts might be enforced in Europe in 2021 and beyond. At Nath Solicitors in London we have seen some evidence of an uptick in legal proceedings by plaintiffs wishing to secure a judgment that can be enforced under the current regime.
We are also urging clients to be cautious about what enforcement clauses to include in commercial contracts at the drafting stage so that the unclear post-transition picture is dealt with as far as possible.
RECAST BRUSSELS REGULATION – THE CURRENT SITUATION
Under the Recast Brussels Regulation (‘RBR’) English court judgments can be enforced in EU member states. RBR continues to apply to judgments until 31 December 2020 when the UK’s transition period for leaving the EU ends. So long as proceedings have been issued before the transition period ends judgment creditors can take advantage of RBR to pursue payment of judgment debts across Europe.
WHAT HAPPENS WHEN THE BREXIT TRANSITION ENDS?
The UK is seeking to sign up to an alternative enforcement regime – the Lugano Convention – to replace the RBR once the transition period is over. The Lugano enforcement regime currently applies to jurisdiction issues and judgment enforcement between the EU and European Free Trade Association (EFTA) countries like Switzerland and Norway. It’s attractive to the UK because in many respects it mirrors RBR. To a large extent being part of the Lugano Convention will ensure there is still a high degree of co-operation between EU countries and the UK courts when it comes to enforcing judgments.
DIFFERENCES BETWEEN LUGANO AND RECAST BRUSSELS
There are however significant differences between Lugano and RBR that may in future make enforcement across the EU more difficult. In particular exclusive jurisdiction clauses may not be as watertight under Lugano as under RBR.
And in any event the UK’s accession to the Lugano Convention is by no means certain. Although the UK has received support from some quarters for its accession to Lugano the EU must also agree and it has recently indicated that allowing the UK to become a full member of the Lugano might not be in the EU’s interests.
If the UK doesn’t enter the Lugano Convention the result will be creditors having to submit to the enforcement procedures of individual EU states. It may also make it easier for defendants to avoid satisfying judgments by using different legal systems to delay proceedings. All of this adds to uncertainty and increased costs for litigants.
So the position regarding enforcement of judgments after the transition period is unsettled. Until there is more clarity on the subject you should seek legal advice on how to draft jurisdiction clauses in commercial contracts. You might also want to consider including an arbitration clause in your contract – enforcement of decisions of arbitrators is handled differently from court judgments.
CONTACT NATH SOLICITORS
We act for small and medium-sized businesses involved in commercial disputes. If you are considering legal action bear in mind some of the uncertainty you may face post-Brexit when it comes to enforcing any judgment you obtain against a defendant that’s based in Europe. We can offer practical advice on the strength of your case and your legal options. Please contact Nath Solicitors on 0203 983 8278 or contact the firm online.
