Switzerland first to approve UK's post-Brexit joining of disputes convention

Out-Law News | 15 Mar 2021 | 3:26 pm | 3 min. read

Switzerland has become the first country to formally give its consent to the UK re-joining an important international disputes convention in the wake of its withdrawal from the EU.

The Federal Department of Foreign Affairs of Switzerland published a letter confirming that Switzerland had consented to the UK being invited to deposit its instrument of accession to the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, which governs jurisdiction and the enforcement of judgments in civil and commercial matters between EU member states and Iceland, Norway and Switzerland, known as the 'Lugano states'.

Litigation expert Emilie Jones of Pinsent Masons, the law firm behind Out-Law, said the formal consent from Switzerland was a small but positive step for businesses which litigate international disputes in UK courts – although, crucially, uncertainty remains as to the EU's position.

International disputes between UK and EU businesses previously fell under the Recast Brussels Regulation, which provided a streamlined regime for the allocation of jurisdiction between UK and EU member state courts and the enforcement of UK court judgments in the EU, and vice-versa. The regulation ceased to apply, save for transitional provisions for cases which had already begun, when the Brexit transition period ended on 31 December 2020. At the same time, the UK also ceased to be treated as a member of the Lugano Convention.

The UK submitted an application to re-join the Lugano Convention in its own right on 8 April 2020. To re-join, it needs the unanimous consent of all the other contracting parties – the EU, Denmark and the Lugano states – and to follow the formal accession procedure for the convention.

In November 2020 a cross-sector group, comprising the law societies of England and Wales, Scotland and Northern Ireland, the City of London Corporation, the British Retail Consortium, the British Chamber of Commerce EU & Belgium, Which? and the Chambers of Ireland, wrote to Charles Michel, president of the European Council, urging the EU to agree to the UK’s application.

Although the three Lugano states have all previously indicated their support for the UK re-joining the convention, Switzerland is the first country to formalise this support.

Jones said in the absence of provision in the UK/EU Trade & Cooperation Agreement for cross-border commercial disputes, there were currently uncertainties for businesses who litigate in the UK courts, particularly regarding whether their English and other UK jurisdiction clauses will be respected in the EU and Lugano states, and how easy it will be to enforce UK judgments in those states.

“The current position is that, in proceedings commenced after 31 December 2020, these matters are generally governed either by the Hague Convention on Choice of Court Agreements, which only applies where there is an exclusive jurisdiction clause in favour of a UK court and is subject to a number of other limitations; or by the national laws of individual states, which vary,” Jones said.

“While this is workable in many cases, the position is less certain than before, increasing costs: for example, parties entering into cross-border contracts with EU counterparties and considering what dispute resolution provisions to include are currently having to seek foreign law advice on the enforcement regime in the likely jurisdiction for enforcement much more often than pre-Brexit.” 

Jones said businesses and the legal profession were eagerly awaiting news as to whether the UK will be able to re-join the Lugano Convention.

“As well as continuing the pre-Brexit position between the UK and the Lugano states, this would go a considerable way to plugging the gap left by the Recast Brussels Regulation, as the Lugano Convention provides a broadly similar – albeit in some respects inferior – regime to that regulation,” Jones said.

Clarity on the EU’s position is expected within the next month, as the convention requires contracting parties to endeavour to respond within one year to any application to join and the UK applied in April 2020.

Litigation expert Richard Dickman of Pinsent Masons said: “There have been recent reports that the EU may be considering refusing to allow the UK to re-join the Lugano Convention in light of current difficulties in the relationship between the EU and UK, but the position remains uncertain."

Dickman said that in the meantime parties to some disputes, who may for example need to enforce any judgment in an EU member state, may have an important tactical decision to make.

“Although the position is not entirely clear, it is likely, based on the wording of the Lugano Convention, that, even if the UK does re-join the convention, it will only apply to claims commenced after that takes place,” Dickman said.

“Given the benefits in terms of jurisdiction and enforcement that the Lugano Convention would bring, in some disputes currently at pre-action stage there may be advantages to waiting to see if the UK is able to re-join the Lugano Convention and only starting proceedings once that has happened. That will not be suitable in all cases – for example, some claims may need to be issued with urgency, perhaps for limitation reasons – but it should be considered as part of the litigation strategy. Specialist advice should be sought,” Dickman said.