Brexit Reloaded (2): Impact of Brexit on Enforcement of Judgments.

 What is the impact of Brexit on the enforcement of judgments? What preventive measures can be taken?

Brexit Reloaded (2): Impact of Brexit on Enforcement of Judgments.

The first episode of the "Brexit Trilogy" highlighted the consequences of Brexit for court proceedings. This Insight will now focus on the consequences of possible hard brexite for the enforcement of judgments.

The United Kingdom (UK) left the European Union on 01.02.2020. The EU and UK have concluded a Withdrawal Agreement on 17 October 2019, which regulates some important points (e.g. the status of British citizens living in the EU and vice versa and the Irish border). A very important provision of the Agreement is that EU law will continue to apply in the UK between 01. February 2020 (withdrawal) and 31.12.2020. This transition period is meant to serve to negotiate a final agreement which will then settle all important outstanding issues. These include jurisdiction and the recognition and enforcement of judgments. The problem is that it does not look like the EU and the UK will reach such an agreement before this year concludes.

This Insight deals, as the second of three parts, with the impact of a possible “Hard Brexit”, i.e. a Brexit without a (final and broad) agreement, on the enforcement of judgments.

1. Status Quo

But how is enforcement in the EU (and, on a transitional basis, in relation to the UK) currently regulated? The short answer: relatively convenient. The Brussels Ibis Regulation (spoken: “one bis” as successor of the Brussels I Regulation, nothing to do with the bird; in full: Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) governs enforcement within the EU (and, on a transitional basis, also in relation to the UK) and is the same regulation that governs jurisdiction in civil proceedings (see Brexit Reloaded (1): Impact on Court Proceedings).

Enforcement is (still) convenient because the regulation applies in all EU member states. The procedure is therefore always the same. This ensures legal certainty. However, the procedure for enforcement is not only uniform but also simple. The beneficiary of a judgment (or other legal title) needs a form to be filled in by the court of origin and, if necessary, a translation, nothing else. The exequatur procedure for a declaration of enforceability, which has been known and practised for years, was abolished in 2012 by the latest version of the Brussels I Regulation, the Brussels Ibis Regulation. A huge step towards the harmonisation of civil proceedings within the EU.

2. And what happens now?

You’ll miss it when it’s gone.

You will only realise what you had when it’s gone. Because without the Brussels Ibis Regulation, things will certainly not get any easier. Enforcement will become more difficult, but a few scenarios need to be distinguished:

  • Existing judgments will continue to be enforceable under the CFI Regulation. Nothing will change here.
  • Enforcement from judgments in proceedings that began before 31 December 2020 will continue to be governed by the Brussels Ibis Regulation (Article 67(2) of the Withdrawal Agreement). It is the date of the commencement of the court proceedings, not the date of the judgement, that is decisive. Such judgments will also continue to be enforceable without special proceedings.
  • Only the status of judgments and other titles for proceedings that will be instituted only after 31 December 2020 is unclear. In any case, the Brussels Ibis Regulation will then no longer apply – in the UK alone, because the Regulation is EU law; in the EU, the Regulation will continue to apply, but no longer to the enforceability of decisions from third countries.

Some legal scholars argue that the 1968 Brussels Convention (in full: 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters), a predecessor of the Brussels I Regulation, is revived. This would also lead to enforcement without considerable difficulties. How this can happen and the arguments for and against it are of a rather academic nature. From the point of view of practitioners, the only decisive factor is that although the possibility exists, it is still completely unclear whether courts on either side of the English Channel will accept such a possibility. In this unclear situation, it would therefore be wrong for the practitioner to put all eggs into this basket.

It is more likely that the enforcement of judgments between the EU and the UK will be governed by purely domestic rules. In that case, however, the plaintiff would have to bring an action for recognition and declaration of enforceability both in Germany (action for recognition under Section 328 of the German Code of Civil Procedure) and in the UK (action for summary judgment). This costs – time and money.

3. What needs to be done?

Companies should first be aware that enforcement of judgments between the EU and the UK is becoming more difficult. Those who already have a judgement in their hands may be a bit more relaxed – at least as long as the existing 2019 exit agreement is not deliberately broken. Those who have yet to assert claims in court can make their lives easier by considering the following:

  • If proceedings are pending, it might be a good idea to initiate them before the end of the year. Because, as with the jurisdiction rules, the plaintiff benefits from the protection provided by the Withdrawal Agreement of 17 October 2019. A judgment is then enforceable in the UK or the EU without any further declaration of enforceability, even if it is not issued for several years.
  • And in terms of enforcement, an arbitration clause could also be the safer alternative to a choice of court agreement. This is because both Germany and the UK are members of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Enforcement from arbitral awards is therefore safe even after a hard Brexit.

You’ll only miss it when it’s gone. This is also the case with Brexit. The UK will miss the EU and the EU will miss the UK. The common framework that EU civil procedure law has meant for the EU and the UK will also be missing and legal uncertainty will follow. But with a few simple steps and careful planning, many of the consequences of Brexit for companies trading with the UK can be mitigated.

Johannes Brand, lawyer and bar approved specialist in international business law, will help with questions regarding Brexit.