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UK in limbo over European legal co-operation agreement

The UK has found itself in limbo in relation to a key European legal co-operation pact because the EU has yet to decide whether to grant it access after the end of the post-Brexit transition period.

The EU has three months to decide whether to let Britain accede to the Lugano convention, which determines which courts have jurisdiction over cross-border civil and commercial disputes and ensures British court judgments are recognised abroad. 

Britain applied to join last April and the contracting parties — the EU, Denmark in its own right, Iceland, Norway and Switzerland — have a year to make a decision, which must be unanimous. The non-EU countries have backed the UK’s accession.

The agreement is in many ways more important to aspects of litigation than the EU and UK’s new trade deal, which includes provisions for legal services but does not cover the mutual recognition of English court judgments or broader judicial co-operation.

Britain’s accession was thrown into doubt last year when Brussels told EU member states there were clear grounds to reject it, without giving details. The UK had hoped to be accepted in time for the end of the post-Brexit transition period, but it cannot join without the approval of the EU Council, the institution that brings national governments together. 

According to an EU official, the bloc still “has questions for the UK”, without giving details. The European Commission said the UK’s application was “still under consideration”.

EU officials said last year the commission was not inclined to grant the UK speedy accession, on the grounds that it would be a clear financial benefit to Britain’s legal sector.

Without accession, English court judgments regarding cross-border disputes risk losing their force within the countries covered by the convention, and the UK would be reliant on older, more fragmented international agreements that determine which country disputes would be heard in. Those include bilateral agreements and the 2005 Hague Convention on the Choice of Court Agreements.

Disputes that cross UK borders could also result in multiple court cases taking place on the same issue in different countries, radically escalating the cost of such disputes.

“It would absolutely be damaging [to lose access],” said Helena Raulus, head of the Brussels office of the trade body the Law Society. “Until now things have been very straightforward, as the judgments are almost automatically enforced, they have been complied with and you don’t have to reach into another jurisdiction to try and get assets.

“[Losing access] would also increase uncertainty for consumers and would have an impact on the courts, because they would have to entertain more complex procedural questions and allocate resources which would take up more time,” said Ms Raulus.

The majority of UK litigation would not be affected by a lack of access to the convention and lawyers said most EU member states would continue to recognise English rulings under their own laws. However, they added the Lugano Convention offered a smoother and potentially less costly route to international litigation over the long run.

“For a small window of time, not having Lugano does not matter but over the long term it would be very unhelpful. It is also symbolically important in terms of upholding the rule of law,” said James Palmer, senior partner at Herbert Smith Freehills.

“Lugano is about forcing people to abide by their obligations rather than allowing them to renege . . . This is not about law firms, it’s about consumers and businesses of all sizes.”

Another lawyer said it seemed Lugano was “being used as a lever [during the Brexit process]. It would be extraordinary if we didn’t get [accession],” he said. “Anyone undermining it will face a lot of criticism.” 

This article was first published at https://www.ft.com/content/ccdbdd62-0244-47f7-b82a-86eccc38f8ed

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The Markets Today