Changes to the jurisdiction regime and enforcement across the EU and beyond
By Edward Hazzan & Rupert Croft
Posted: 3rd August 2015 08:34Litigation is frequently discussed in the parlance of sport; parties speak of “teams”, “tactics”, “strategy” and “playing the game”. Just like in sport, one should never underestimate the effect of the home-field advantage in cross-border litigation. In a commercial dispute, having easy access to your witnesses, evidence and lawyers can make all the difference. Consequently, parties often seek to negotiate exclusive jurisdiction clauses into their contracts to ensure that, should a dispute arise, they will litigate at home. But just what determines whether you will be litigating “at home” or “away”?
Within the EU, the correct venue for cross-border disputes has been governed by the rules in the Lugano Convention and the Brussels Regulation (Regulation EC No 44/2001 – the “2001 Regulation”). This latter regulation, which relates to jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, has recently received amendment.
The new Recast Brussels Regulation (Regulation EU 1215/2012 – the “Recast Regulation”) came into force on 10 January 2015, bringing with it changes to the enforcement of judgments and orders across EU member states.
However, the original regulation will continue to apply to proceedings instituted prior to 10 January 2015 and judgments or orders made in them.
With the exception of Denmark, which needs to bring domestic legislation into force to adopt the Recast Regulation, the changes will affect jurisdiction in cross-border disputes and enforcement across all member states.
Here we examine the most notable effects the Recast Regulation will have on jurisdiction and enforcement across the EU with a focus on those most likely to affect commercial readers.
What has not changed?
Under the Recast Regulation the default rule remains that defendants should be sued in the member state where they are based or domiciled. In the following cases a claimant will continue to have the option of litigating in another jurisdiction:
- in tort cases, proceedings may be issued in the jurisdiction where the event which caused the harm took place;
- in contract cases, proceedings may be issued where the contract was to be performed;
- in the case of there being multiple defendants closely connected to a dispute, proceedings may be instituted wherever any one of them is domiciled; and
- in the case of proceedings which relate to third party proceedings, e.g. where the party is involved in an action on a warranty or guarantee, proceedings should be started in the court where those original proceedings took place.
Disputes which have their object matters closely connected with a particular member state, for example concerning land, entries on public registers or corporate constitution, shall remain the exclusive jurisdiction of that member state.
What has changed?
Under the 2001 Regulation, parties domiciled within one or more member states could agree which member state’s courts would have jurisdiction to hear any dispute between them. This ability to choose the courts with jurisdiction over the parties’ dispute has been extended to include parties domiciled in non-member states, whether one or all of them.
Consumers may now bring proceedings against a supplier either in the member state in which the supplier is domiciled, or in their own member state regardless of where the supplier is domiciled. Exclusive jurisdiction clauses in distance selling consumer contracts will not have an effect on this right except that they may allow the consumer to sue the supplier in additional jurisdictions.
In a similar vein, employees who habitually carry out their work in, or from, any member state of the EU may sue their employer in that member state regardless of where the employer is domiciled. Again, exclusive jurisdiction clauses in an employment contract will not have an effect on this right, except that they may allow the employee to sue the employer in additional jurisdictions.
Exclusive jurisdiction clauses will now be treated as independent from the remainder of the contract containing them. Thus the validity of the exclusive jurisdiction clause cannot be contested on the ground that the underlying contract is invalid, although the jurisdiction clause must be valid according to the laws of the nominated member state.
Where an exclusive jurisdiction clause nominates a member state to hear a dispute, the courts in any other member state in which related proceedings are begun are obliged to automatically stay the action until the nominated member state declares that it has no jurisdiction under the agreement. If the nominated member state’s courts establish that they have jurisdiction, then all other member states shall decline jurisdiction. These changes will not affect the rights of consumers or employees to challenge jurisdiction but should reassure parties to commercial contracts that their exclusive jurisdiction clauses will be upheld where valid.
If proceedings relating to the same action and parties are brought in a member state while proceedings are already pending before the courts of a non-member state, the courts of the member state shall have the discretion to stay the proceedings before them. If they do so, they may resume their proceedings in certain circumstances. They are obliged to dismiss the proceedings before them if the proceedings in the non-member state result in a judgment which is capable of recognition or enforcement in the member state in question.
Under the 2001 Regulation, the successful party was obliged to register their judgment with the courts of the member state in which they wished to enforce it before enforcement could be commenced. Now, the successful party is simply required to have the judgment certified as being enforceable by the court in which the substantive hearing was heard. The judgment and the certificate (with any required translations) then simply need to be served on the losing party. The judgment creditor will then be entitled to enforce the judgment in any member state, making full use of the suite of enforcement procedures available to it in the respective jurisdictions.
Additionally, if a judgment originating in another member state grants relief which is not known in a local jurisdiction, the Recast Regulation allows the local courts to adapt it to the fullest extent possible to a form of relief known to the local laws. The local courts can make these adaptation orders of their own initiative, or on the application of either party to the proceedings.
These two changes should allow successful parties to enforce their judgments within the EU more quickly and cost effectively.
When “playing the game” of litigation, commercial parties should take comfort from the fact that their agreed choice of jurisdiction looks easier to enforce under the Recast Regulation. This should go some way to alleviate the threat of expense and delay that can arise when one party to a dispute attempts to force an “away match” by issuing in other jurisdiction first. All businesses, wherever situated, which have employees or consumers within the EU, should be alive to the new rules which could make it easier for litigants within EU jurisdictions to bring proceedings on their home-field.
Rupert is particularly recognised for handling complex High Court litigation and has represented clients all the way to the House of Lords (now Supreme Court) and the European Court of Justice.
He has been described in the Legal 500 and Chambers legal directories as “an exceptional and heavyweight litigator”, “everything a client could want in a solicitor”, and “one of the top litigation solicitors in the UK”.
Rupert is cited as an expert in EU and Competition law in the Legal Business Report and has been short-listed as Competition Lawyer of the Year by Legal Business.
Edward has been working closely with Rupert since early 2012 and has gained experience in a number of complex cases acting for both defendants and claimants.
Edward has worked on a diverse range of cases under Rupert’s supervision, primarily litigated in the High Court in London. He has helped defend clients from allegations of fraud and dishonesty at first instance and in the Court of Appeal, and applications for committal for contempt of court. Edward has assisted clients in making claims ranging from breaches of contract, concealment, fraud, and breach of trust and in making applications for worldwide freezing injunctions.