The Consequences of Brexit for Judicial Cooperation in Civil and Commercial Matters since 1 January 2021

Following the expiry of the transitional period agreed upon in the Withdrawal Agreement between the EU and the UK, the Brussels Ia-/EuGV-Reg (Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters "EuGVVO") will no longer apply to proceedings relating to the UK as of 1 January 2021: The UK has become a third country. Therefore, the uniform jurisdiction rules, automatic recognition of judgments, and their enforcement without separate proceedings are a thing of the past. Since the EU-UK Trade and Cooperation Agreement ("TCA") lacks any provision on judicial cooperation in civil matters between the EU and the UK, a "mini-hard Brexit" has occurred in this area. In the future, a potpourri of multilateral and bilateral treaties as well as the respective national law will apply. However, under German civil procedure law, the UK will also be treated as a third country from now on. Consequently, the defendant can demand a British plaintiff to provide security for litigation costs according to Section 110 of the German Code of Civil Procedure (ZPO).

1. Proceedings before ordinary courts

a) Multilateral Agreements

(1) Hague Convention on Choice of Court Agreements (HCCA)

If the parties are merchants and have concluded a choice of court agreement, the rules of the HCCA apply. Until 31 March 2019, the HCCA applied to the UK as an EU member state. As of 1 April 2019, the UK accedes to the HCCA in its own name, provided the UK becomes a non-EU member state through Brexit. Contracting states of the HCCA are obliged to recognize agreements on jurisdiction between merchants. Furthermore, they recognize to enforce these judgments in a simplified procedure. In Germany, the enforcement of a judgment issued in the UK is specifically governed by the Act on the Execution of Intergovernmental Treaties and the Implementation of European Union Agreements in the Field of Recognition and Enforcement in Civil and Commercial Matters ("AVAG"): Since an application by the enforcement creditor suffices, no separate recognition and enforceability judgment is required. The competent regional court then decides on the issuance of the enforcement clause without hearing the enforcement debtor. However, the HCCA has a limited scope of application: it only applies to merchants and excludes some disputes, such as inheritance or antitrust (competition) matters or claims arising from rent and lease.

(2) Lugano Convention

The Lugano Convention also contains rules on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Its content is essentially the same as that of the EuGVVO and extends its scope to the European Free Trade Association states (“EFTA”). However, it does not apply to matters between Germany and the UK. Although the UK has submitted a request for accession to the Lugano Convention on 8 April 2020, the EU has not yet given its necessary consent, neither in the TCA nor otherwise. Negotiators of the EU have indicated that the EU Commission will reject a request by the UK for admission to the Lugano Convention after the UK has decided to leave the European internal market.

b) UK-Germany Convention

The Convention between Germany and the UK for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters from 1960 also simplifies and accelerates theprocedure for judgments on civil and commercial matters between Germany and the UK. However, it is questionable whether this agreement will apply again after Brexit: Despite the Convention never having been formally repealed by the European Conventions, the agreement is considered to be outdated. Moreover, the EU Commission has spoken out against its applicability, and the UK also seems to assume that its national law will apply.

c) EuGVVO and national law

(1) Jurisdiction

In areas not regulated by international agreements, international jurisdiction in Germany continues to be assessed according to the EuGVVO. However, the EuGVVO only applies to third countries in certain cases, e.g. consumers can always sue their contractual partner at the court of their own place of residence. Proceedings concerning rights involving immovable property or the rental of immovable property are to be brought before the court of the member state in which the immovable property is located. In all other respects the regulation refers to the national provisions of the Code of Civil Procedure.

(2) Recognition and enforcement

Sections 328, 722, and 723 of the German Code of Civil Procedure (ZPO) apply to the recognition and enforcement of judgments from the UK in Germany. Therefore, a separate enforcement judgment will be required in the future. In its enforcement judgment, the German court will not assess the substantive reasoning of the UK court. However, it will assess formalities such as proper service or the possibility of defense in court. Therefore, German enforcement judgments can differ from UK judgments. This could, at least theoretically, prevent the enforcement of a UK judgment in Germany.

The same applies vice versa to the recognition and enforcement of German judgments in the UK: they will no longer be automatically recognized and declared enforceable under the provisions of the EuGVVO. Instead, in the future, the plaintiff will have to bring an action for recognition and declaration of enforceability under national common law rules before a UK court.

2. Proceedings before arbitration courts

Concerning the recognition and enforcement of arbitral awards between Germany and the UK, nothing changes despite Brexit: the legal basis remains the New York Convention. Therefore, arbitral awards are mutually recognized and enforceable.

What is new is the possibility of securing arbitration proceedings before UK courts in the future through so-called anti-suit injunctions. Since UK courts are no longer bound by ECJ case law, they can issue injunctions against a plaintiff who initiates legal proceedings in an EU member state despite the existence of an arbitration clause. This may be seen as an advantage but it may also - according to the ECJ's view, which is no longer relevant to the UK - be seen as curtailing judicial protection.

Conclusion

The recognition and enforcement of judgments between the EU and the UK will continue to be possible in the future. However, in the case of decisions by ordinary courts, the procedures will become more expensive and time-consuming. Therefore, companies are advised to agree on contractual arbitration clauses in their legal relations with the UK.