Brexit to take the UK out of the Lugano Convention governing judgments with Switzerland
As a consequence of leaving the EU at the end of March 2019, the UK will no longer be bound by the Lugano Convention, which currently governs the enforcement of foreign judgments in litigations between Swiss and British parties. The applicable legal regime in the enforcement of judgments will change making it crucial that Swiss and British parties diligently plan any litigation in the years to come.
It should be noted that the UK has never ratified the Lugano Convention, and was only bound by it due to being a member of the EU. Thus, also a potential withdrawal agreement with the EU would not affect the UK's exit from the Lugano Convention, as such agreement would not prolong the UK's membership in the EU. Nonetheless, it is currently envisaged that the UK will retain the provisions of the Lugano Convention as part of national law.
In the absence of an international treaty for the enforcement of UK judgments in Switzerland, Swiss courts will apply Swiss national law, namely the Federal Act on International Private Law, to the enforcement of a UK judgment. This will generally increase the potential options for defence available to a judgment debtor. In particular, the absence of a (valid) jurisdiction agreement will be problematic in this context.
As for the timing of this change, the transitional provisions of the Lugano Convention are not entirely clear. According to general international public law, the Lugano Convention will likely continue to apply to the enforcement of judgments rendered on or before 29 March 2019. Yet the enforcement of judgments rendered after this date, even if claims were initiated before, will be solely governed by national law.
The UK has already announced that it will seek to remedy the lack of an international instrument for the enforcement of foreign judgments. One option is for the UK to ratify and re-enter the Lugano Convention. The ratification process, however, will require that the UK either gain the approval of all contracting states of the Lugano Convention, including the EU, or join the EFTA. As a result, it is unlikely that the UK will re-enter the Lugano Convention any time before the end of 2019.
In conclusion, before commencing litigation in a case with a British-Swiss element, it is essential to verify in detail the enforceability of a later judgment in Switzerland. In particular, the validity of a jurisdiction agreement will be of essence. Also, the option of an arbitration agreement should be looked at. For more information on this eAlert and how it may affect your business, feel free to contact Dr Nino Sievi, LL.M.
