What just happened?
Recently, influential legal and commercial entities have joined the bid for the UK’s accession into the convention by writing to Charles Michel, president of the European Council. These include the law societies of England and Wales, Scotland and Northern Ireland; City of London Corporation; British Retail Consortium; British Chamber of Commerce EU & Belgium; Which?; and the Chambers of Ireland.[1]
What does this mean?
As the date for Britain’s withdrawal from the EU draws nearer, the UK is no closer to establishing whether their application to accede to the Lugano Convention as an independent member will be successful.
The Lugano Convention is an international treaty that the EU negotiated on behalf of its member states with Iceland, Norway and Switzerland, the members of the European Free Trade Association. It clarifies which courts have jurisdiction in cross-border disputes between the EU member states and the Free Trade States. It also governs the enforcements of decided judgements. Accession would require the unanimous[2] agreement of the contracting parties. Although Norway and the UK have agreed to keep a mutual recognition of the enforcement of judgements from each jurisdiction[3] there are some who are fighting the application.
How does it impact the legal sector?
Accession into the convention will ensure that disputes between individuals and companies based in the UK, Europe, and the members of the European Free Trade Association are easier to resolve. If the UK is unable to enter the agreement when we leave the UK, we will be without the framework which details which courts take precedent in a dispute. Consequently, parties to fresh disputes will need to bring new proceedings which are costly and slow, delaying justice for those parties involved. This also creates further work for their representatives who will face courts competing to provide judgements first, meaning the parties may be two conflicting judgements. The issue then being establishing which judgement takes precedent.
Therefore, gaining accession will bring a level of certainty and predictability to business and the legal sector. Without the convention, parties to a dispute and their representatives will have to rely on the individual rules of each state to establish which court has jurisdiction over a legal matter. This may cause discrepancies as to which national courts have jurisdiction. In turn, this will create issues over whether a judgement will be recognised and enforced. This may lead to businesses seeking to take advantage of different legal jurisdictions seeking to delay judgements and use it to their advantage. This will create rebate uncertainty as to how a dispute may go, in turn affecting the level of certainty with which a firm can advise their clients.
However, to counter such issues, firms may seek to advise cross-border contracting parties to put terms in their contracts to address these potential complications. Meaning that these issues can be avoided if a dispute were to ever arise. Alternatively, parties to a cross-border dispute, post-Brexit, may choose arbitration to settle any disagreements. Arbitration falls outside of the remit of the Lugano convention and is instead covered by the United Nation’s 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This may prove a more attractive solution[4] as a quicker and more cost-effective resolution to disputes.
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References:
[1] Jemma Slingo, ‘Eleventh hour plea on Lugano pact’ (Lawgazette, 27 November 2020) <www.lawgazette.co.uk/news/eleventh-hour-plea-on-lugano-pact/5106588.article> accessed 10 December 2020
[2] Convention on jurisdiction and the recognition and enforcement of judgement in civil and commercial matters (Lugano Convention, as amended) (art 72)
[3] ’UK and Norway Agree Continued recognition of civil judgements’ (Out-Law News, 12 November 2020) <www.pinsentmasons.com/out-law/news/uk-norway-continued-recognition-civil-judgments> accessed 10 December 2020
[4] Hendrik Puschmann and Lucy Penn, ‘UK Application to join the Lugano Convention: hedging the risk of rejection’ (Farrer & Co, 30 April 2020) < www.farrer.co.uk/news-and-insights/uk-application-to-join-the-lugano-convention-hedging-the-risk-of-rejection/#>
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.