When the political entity which became the European Union was created in the 1950`s, one of its major innovations was to provide for the easy enforcement of Judgments between member states. These rules were initially set out in the Brussels Convention 1968 governing the rules on jurisdiction and the recognition and enforcement of Judgments in commercial matters that applied to all EU member states. The European Union subsequently amended these rules in the "Brussels Regulation" (44/2001). (For a separate article outlining these rules please click here).
On 14 December 2010, the European Commission published its proposals to reform the Brussels Regulation. This article considers what reforms are being proposed and what impact they will have.Enforcement
Under the current system, a Judgment can validly be obtained in one member state and enforced in another member state on any assets held within that member state. However, under the existing system in order to enforce a Judgment in another member state, the Judgment must first be registered in the country where enforcement is sought before any enforcement action can take place. It is proposed that this requirement be removed to simplify and speed up the enforcement process. This proposal mirrors a similar process that already exist for uncontested and small claims.
Under the proposed regime, a Judgment debtor is still entitled to challenge the enforcement of the award by either applying for a review of the Judgment in the originating Court or by objecting to the enforcement in the Court of the member state where enforcement is sought.
It is envisaged that this amended process will apply to all Judgments except in defamation cases and in compensatory collective redress proceedings. Exclusive jurisdiction agreements
Parties have the right to agree on the jurisdiction where their dispute will be heard. This choice will usually be evidenced in an exclusive jurisdiction clause in the contract. In theory, this choice will be recognised by the Courts. However, under the current system if proceedings are commenced in a different jurisdiction to that nominated in the exclusive jurisdiction clause, proceedings cannot commence in any other jurisdiction until the Court first seized of the matter has established whether or not it has jurisdiction. This can lead to significant delays in bringing proceedings in the jurisdiction named in the exclusive jurisdiction clause.
It is proposed that where there is an exclusive jurisdiction clause in the contract in favour of a particular jurisdiction, proceedings brought in any other member state must be stayed until the member state`s Court named as having exclusive jurisdiction has ruled on its own jurisdiction. It is anticipated that this rule will limit the powers of underhanded litigants who seek to tie up and delay proceedings in an inappropriate jurisdiction (the so called Italian Torpedo). Exclusion of arbitration
Arbitration proceedings are currently excluded from the Brussels Regulation. However, this exclusion was severely limited by the European Court of Justice`s much criticised decision in the West Tankers case, in which the English Courts were prevented from issuing anti-suit injunctions in respect of proceedings in Italy, pending a decision on whether an arbitration clause was enforceable or not.
It is proposed that a member state Court must stay proceedings where there is an arbitration agreement to allow either the arbitration tribunal or the Court of the member state designated as the seat of arbitration to determine the validity of the arbitration agreement. Determining Jurisdiction
Under the current system, English Courts must determine jurisdiction on the basis set out in the Brussels Regulation where the Defendant is based in an EU member state. Where any Defendants are based (domiciled) outside the EU, the English Courts are entitled to use their common law rules on finding jurisdiction. These rules are considerably wider than the Brussels Regulation rules and allow for considerably more flexibility to allow the Court to do justice on a case by case basis. It is proposed that in future all Courts will determine jurisdiction solely on the basis of the Brussels Regulation rules irrespective of whether or not the Defendant is domiciled in an EU member state.