Last week’s UK-EU summit in Brussels had been billed as “crunch time” for a future trade agreement to be reached between the UK and EU in time for any deal to be ratified before the end of the transition period, which expires on 31 December 2020.
There are many consequences of no agreement being reached. One consequence of legal significance is that court proceedings commenced after 31 December 2020 will no longer benefit from EU rules providing for the reciprocal enforcement of judgments, and a streamlined process for enforcement, pursuant to the so-called Recast Brussels Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Regulation“). This is important because without the Regulation, enforcing UK judgments in EU jurisdictions, and vice versa, is likely to be a more cumbersome and uncertain process, and therefore more time-consuming and expensive.
Under the terms of the Withdrawal Agreement signed in January 2020, existing rules in relation to cross-border judicial co-operation – most notably, the Regulation – will continue to apply in the UK and EU member states during the transition period. This means that, whether or not a UK-EU agreement is reached, the courts of EU countries will continue to enforce the judgments of UK courts that result from proceedings instituted (i.e. commenced) before the end of the year (and vice versa). Similarly, the courts of Iceland, Norway, and Switzerland will probably continue to enforce the judgments of UK courts (and vice versa) pursuant to the Lugano Convention 2007 during the same transition period.
In England and Wales, to institute court proceedings, it is sufficient for a party to issue a Claim Form, which might contain only brief details of the claim. Neither the Claim Form, nor any other document, needs to be served on the other parties immediately. There may be a number of advantages to instituting proceedings so that they are governed by the Regulation, but one of the commercial and practical benefits is ease of enforcing any judgment that may eventuate, and the mitigation of “enforcement risk”. Given the continued uncertainty about whether a deal will be reached before the end of the year, parties considering litigation in the UK against parties located, or with assets, in EU member states (or vice versa) will be well advised to institute proceedings before year end, to guard against the risk that they will soon no longer be able to avail themselves of the enforcement-friendly regime provided by the Regulation.
Suppose, for example, that no deal is reached, and a UK-based supplier of hydrocarbons commences litigation in the English courts against a refinery based in an EU member state for unpaid invoices. If the claim is issued prior to 1 January 2021, courts in EU member states will be obliged to enforce the English court’s judgment in accordance with the streamlined procedures of the Regulation, even if the judgment is only delivered much later. If, however, the claim is commenced on or after 1 January 2021, the Regulation will not apply, and so enforcement will be entirely a matter for the local rules in the jurisdiction where enforcement is sought. Given that the Regulation was intended to streamline enforcement procedures across the EU, it is likely that these procedures will be less certain, more time-consuming, and more costly.