Brexit: don't forget to negotiate the dispute resolution clause!
The postponement of Brexit prolongs the suspense concerning the future cooperation between the European Union (EU) and the United Kingdom (UK). Uncertainty regarding recognition and enforcement of judgments by UK courts in civil and commercial cases has partially dissipated since its application, in December 2018, to accede in its own name1 to the Hague Choice of Court Convention of 30 June 2005, from the moment it ceases to be an EU Member State and in the event that no specific agreement has been concluded with the EU at that point.
Nevertheless, a new concern arises in practice when negotiating dispute resolution clauses with parties located in the UK, when those parties maintain their desire to submit the contract to English law and the jurisdiction of the UK courts, and act as if there were no specific issue as to the enforcement of a court decision handed down in the event of litigation.
The risk is for one to have to resort to lengthier, more costly and unpredictable proceedings in order to invoke a decision handed down by the UK courts in an EU Member State. Even though the 2005 Hague Convention may be applicable, there would be significant differences compared with the current situation. The same would be true if the draft Judgments Convention2 currently being drafted by the Hague Conference was adopted. Despite the ambition of the above-mentioned Convention and draft Convention to facilitate the free movement of foreign judgments, that facilitation is not equivalent to that in place in the EU via EU Regulation 1215/2012 (the “Brussels I bis Regulation”).3 The mutual trust on which the Regulation is based, which allows almost automatic recognition and enforcement of decisions, can exist because common EU values and rules are shared.
Unlike the Regulation, the other texts above mentioned do not exempt the party wishing to invoke or enforce a foreign decision from asking, to the courts of the State in which enforcement is sought4, a court order declaring it is enforceable, via a specific exequatur procedure.
Furthermore, the scope of application of the 2005 Hague Convention is narrower than the scope of the Regulation since it only applies in cases where the parties have concluded an exclusive choice of jurisdiction clause.
As for the draft Judgments Convention, although it appears particularly welcome insofar as it could facilitate recognition and enforcement of decisions on the territory of major powers such as the United States and China, it is still uncertain when it will be finalised and come into force. Given the length of international negotiations, it may only come into effect in a few years. The Hague Choice of Court Convention, for example, was drafted in 2005, but only came into force in 2015.
The problem is a tricky one and the most appropriate decision needs to be identified strategically on a case-by-case basis. In some cases, the negotiation of a clause assigning jurisdiction to the courts of an EU Member State will be useful as it will allow the contracting parties to benefit from the provisions of the Regulation and favour a quick enforcement of the decision within the EU. In other cases, such a clause will be redundant or even detrimental. For example, if all the co-contracting party’s assets are located in the UK, it will unnecessarily complicate enforcement in the UK while enabling the other party to enforce a decision more quickly against the European co-contracting party, even though that ability is not beneficial to the European party since the British party has no asset in the EU. For parties wishing to see their potential commercial dispute decided by the French courts, the designation of the courts of Paris seems judicious since they have international chambers which are well-versed in the resolution of international disputes.5
1. The EU has approved the 2005 Hague Convention on behalf of its Member States.
2. Draft Judgments Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, available on the Hague Conference website: https://assets.hcch.net/docs/23b6dac3-7900-49f3-9a94-aa0ffbe0d0dd.pdf
3. 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.
4. Article 39 of EU Regulation No 1215/2012: a judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without any declaration of enforceability being required.
5. See Journal Spécial des Sociétés, 26 July 2018, “La chambre internationale de la cour d'appel de Paris: un bel exemple d'innovation à droit constant”, J.-F. Brun, L, Bourgeois and É. Vieille.
