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).

Anyone wishing to discuss this article should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

How Frankfurt could benefit from Brexit: WHU-Otto Beisheim School of Management Study

Jane Lambert

Frankfurt Main Finance, an organization consisting of the Hesse state government, the local authorities of Frankfurt and Eschborn, Germany's leading banks, major financial institutions from other countries, international law firms and other businesses, has commissioned WHU-Otto Beisheim School of Management, one of the world's leading business schools to assess the economic benefits of Brexit for Frankfurt am Main and its surrounding region. In Brexit brings up to 88 thousand new jobs in the Rhine-Main region 28 Aug 2017 Sabine Knöß interviews Professor Lutz Johanning and Moritz C. Noll of the Business School's Capital Market Research department who carried out that work.

Those academics concluded, on the most optimistic case, that if 10,000 new banking jobs are created in the banking sector over the next 4 years they will lead to the creation of 88,000 new jobs in the Frankfurt Main conurbation as a whole. Most of those jobs will be in the support sectors needed to accommodate an extra 10,000 bankers. Even on a conservative estimate, they calculate that there are likely to be nearly 36,000 new jobs in the conurbation.

Noll explained their methodology as  follows:

"We extrapolated the existing statistical data on the employment market in Frankfurt and the region into the future with the help of an empirical model, taking the effects of the Brexit into account. To ascertain and arrive at meaningful figures for the purposes of further planning, we placed a high priority on two factors. Firstly, a valid data basis has been very important for us. Our study is therefore based on employment market data from the German Federal Employment Agency (BA) covering the past nine years. Secondly, we looked for statistical models that have already been effectively applied in the scientific community."

The interview does not state how the total of 10,000 banking jobs has been computed though there will undoubtedly be some as a number of banks have already announced an intention to transfer some of their operations from London to Frankfurt.

Frankfurt is not the only financial centre in Europe that hopes to benefit from Brexit. Amsterdam, Dublin, Madrid and Paris are also competing for the business that London could lose and all have their own unique attractions. Dubin is capital of the largest English speaking common law country remaining in the EU with close links to the United States and Commonwealth and Amsterdam, Madrid and Paris have similar cultural attractions to London.  From an IP perspective, Frankfurt has many advantages. It is thought to be easier to obtain patents for software implemented inventions than the UK and its courts are considered to be claimant friendly (see the IPO's report Building the Evidence Base on the Performance of the UK Patent System which I mentioned in my article of 26 Aug 2017). That should benefit fintech companies in the region.

Should anyone wish to discuss this article or the legal consequences of Brexit generally, call me on +44 (0)20 7404 5252 during normal office hours or send me a message on my contact form.