EU Commission rejects the UK's Application to rejoin Lugano

Lugano

Author Sergey Prokudib-Gorsky Source Wikimedia Commons

 

Jane Lambert

Although I had predicted it in my April Brexit Briefing, the publication on 4 May 2021 of the European Commission's Communication to the European Parliament and the Council recommending the rejection of Her Majesty's Government's application to rejoin the Lugano Convention (Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters OJ L 339, 21.12.2007, p. 3–41) will have disappointed many British lawyers and even more British businesses that benefited from  Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters OJ L 351, 20.12.2012, p. 1–32. The member states do not have to follow the Commission's recommendation but there is no point in asking the Commission to evaluate the British application and then not following the Commission's advice.

The Commission's reasoning is that while there is no formal requirement for an acceding state to belong to the EU, EEA or EFTA every party to the Convention has been a member or prospective member of one of those blocs.  The UK has left not only the EU but also the single market and the customs union with the following consequence:

"The United Kingdom is, since 1 January 2021, a third country with an “ordinary” Free Trade Agreement facilitating trade but not including any fundamental freedoms and policies of the internal market. The Convention is based on a high level of mutual trust among the Contracting Parties and represents an essential feature of a common area of justice commensurate to the high degree of economic interconnection based on the applicability of the four freedoms."

Neither the withdrawal agreement nor the trade and cooperation agreement provides for British accession to Lugano.

In the Commission's view, an appropriate framework for cooperation with third countries in the field of civil judicial cooperation is provided by the multilateral Hague Conventions such as the Convention on Choice of Court Agreements of 30 June 2005 and the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.  These agreements are much more limited in scope. For instance, art 1 (1) of the Choice of Court Agreements Convention states that the Convention shall apply in international cases to exclusive choice of court agreements concluded in civil or commercial matters and art 2 (2) excludes:

"the validity of intellectual property rights other than copyright and related rights"

and

"infringement of intellectual property rights other than copyright and related rights, except where infringement proceedings are brought for breach of a contract between the parties relating to such rights, or could have been brought for breach of that contract."

The European Parliament and member states will have an opportunity to express their views before the EU responds formally to the British application.

It is not yet clear what will be the long term effect on London as a financial centre or forum for the resolution of commercial disputes but it will be seen as an opportunity for Amsterdam, Dublin, Frankfurt and Paris and their new English speaking commercial courts (see English Speaking Commercial Courts in France, Germany and the Netherlands bid for London's Work 2 April 2021).

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