European Commission's Notice to Stakeholders confirms its view Hague Choice of Court Convention will apply to exclusive English jurisdiction clauses only if they are entered into after Brexit transition period ends

The post below was first published on our Litigation blog

On 27 August 2020, the European Commission published a Notice to Stakeholders setting out the rules that, in the Commission's view, will apply in the field of civil justice and private international law once the Brexit transition period comes to an end on 31 December 2020 - assuming no other agreement is reached.

At that point, the current reciprocal regime that governs jurisdiction and the enforcement of judgments between the UK and the EU, under the Recast Brussels Regulation (and related instruments), will no longer apply - unless proceedings were started before the end of the transition period.

Where there is an exclusive jurisdiction clause in favour of a UK or EU court, the position may fall within the 2005 Hague Convention on Choice of Court Agreements. However, the 2005 Convention applies only if the exclusive jurisdiction clause was entered into after the Convention's entry into force for the state of the chosen court. The 2005 Convention originally entered into force for the UK on 1 October 2015, when the EU acceded on behalf of all Member States (apart from Denmark, which acceded separately from 1 September 2018). Pursuant to the UK/EU Withdrawal Agreement, it was agreed that the UK would be treated as an EU Member State for the purposes of international agreements, including the 2005 Convention, until the end of the transition period. And the UK's intention is to re-accede to the 2005 Convention in its own right from 1 January 2021, so that the 2005 Convention continues to be in force for the UK after that date.

EU Commission's position

However, the Commission's Notice makes clear its view that, in these circumstances, the 2005 Convention will apply to exclusive English jurisdiction clauses only if they are concluded after 1 January 2021. The Commission had hinted at this view (at least) in previous communications, but the recent Notice sets out its view in much starker terms. The Commission's view will not of course bind the courts that will decide this question in future, and it is not clear to what extent it is shaped by the ongoing negotiations between the UK and the EU regarding their future relationship.

We believe the better view is that the 2005 Convention should apply to exclusive English jurisdiction clauses entered into from 1 October 2015 onwards, as the 2005 Convention first entered into force for the UK on that date, has remained in force since that date, and will continue to be in force after the end of the transition period. We do not see why a change in the basis on which the 2005 Convention has been in force (first by virtue of EU membership, then under the Withdrawal Agreement, and finally by way of the UK's accession in its own right) should make any difference to that basic position.

Position as it applies in the UK

As far as the UK's own application of the 2005 Convention is concerned, the position is clarified by amendments introduced to the Private International Law (Implementation of Agreements) Bill during its transition through the House of Lords. This is the legislation which will provide that the 2005 Convention has the force of law in the UK from the end of the transition period. The Bill provides (at paragraph 7 of Schedule 5) that for the purposes of the 2005 Convention as it has the force of law in the UK, the date of the 2005 Convention's entry into force for the UK is 1 October 2015. This will not, however, affect how the 2005 Convention is interpreted and applied by other contracting parties, including the EU.

Clauses entered into after 1 January 2021

Regardless of how this debate is resolved, it is important to remember that, on any basis, the 2005 Convention will apply to exclusive English jurisdiction clauses entered into on or after 1 January 2021, once the UK has acceded in its own right. In general terms, therefore, EU Member State courts will have to respect such clauses and enforce judgments given pursuant to them. Parties to existing contracts who wish to have the certainty associated with such clauses may want to consider restating their jurisdiction clause, with the counterparty's agreement, after 1 January 2021 in such a way that it will unquestionably fall within the 2005 Convention.

Of course, the 2005 Convention will be less significant, as between the UK and the EU, if the UK is able to accede to the Lugano Convention either from 1 January 2021 or a date shortly thereafter. However, this requires the EU's consent which, to date, has not been forthcoming.