The 2007 Lugano Convention on the Recognition and Enforcement of Judgments in Civil and Commercial Matters governs the jurisdiction and reciprocal enforcement of judgments in civil and commercial matters between the member states of the European Union (EU) and three countries of the European Free Trade Association (EFTA) (Iceland, Norway and Switzerland). The Lugano Convention is in essence the equivalent of the 2001 Brussels I Regulation which applies between EU member states only.
As a consequence of having left the EU on 31 January 2020, the United Kingdom is since the end of the Brexit transition period on 31 December 2020 no longer bound by the Lugano Convention and the Brussels I Regulation. The UK-EU Trade and Cooperation Agreement does not address the issue of jurisdiction and enforcement of judgments in civil proceedings. As a result, UK cross-border enforcement proceedings involving parties in EU member states, Iceland, Norway or Switzerland that begin after 31 December 2020 will be subject to a combination of older, more fragmented international treaties, such as the 2005 Hague Convention on Choice of Court Agreements, bilateral agreements and the involved countries’ local laws.
On 8 April 2020, the United Kingdom requested to accede to the Lugano Convention as an independent contracting state. Accession to the Lugano Convention requires the consent of all other contracting parties within one year of the request. Whilst Iceland, Norway, Switzerland and Denmark (as independent States) have already given their consent, the decision of the EU is still pending. The EU has previously expressed some hesitation about the UK’s accession and it therefore remains to be seen whether the EU will give its consent. However, with the one year deadline fast approaching the EU has less than three months to decide.
Switzerland and the United Kingdom have signed a number of agreements with the aim to regulate their bilateral relations post Brexit but none of the agreements cover the judicial realm in general and the reciprocal enforcement of judgments in particular. The United Kingdom has also deposited its Instrument of Accession to the 2005 Hague Convention on Choice of Court Agreements, but as Switzerland is not a party to the Convention the solution to any difficulty in enforcing an English judgment in EU member states would not be available in Switzerland.
This means that in the event that the UK does not re-join the Lugano Convention, English judgments will be treated in Switzerland like judgements of any other third party state, as a result of which the Swiss exequatur procedure will apply: Swiss courts will apply Swiss domestic conflict of law rules to the recognition and enforcement of an English judgment, namely the Federal Act on Private International Law (the “PILA”).
Joining the Lugano Convention is generally seen as the preferred option for the UK as English court judgments would continue to be recognised and readily enforceable throughout the EU and in EFTA countries and English jurisdiction clauses would largely continue to be respected in those countries. In particular, the Lugano Convention eliminates the need for multiple legal actions in different countries and the risk that parties cannot get assets that are in other counties. As a result, the Lugano Convention significantly reduces the risk of doing business with someone in another country. The Lugano Convention further creates certainty for consumers buying across borders by allowing them to enforce their rights in the country where they are based.
Without accession, on the other hand, enforcement of judgments will no longer happen automatically which creates uncertainty and more burden in terms of process, time and costs. With respect to Switzerland, the enforcement process for judgments under the PILA is longer and not as simple as under the Lugano Convention and may have negative consequences for claimants and defendants alike. For claimants wishing to enforce their court decision in Switzerland, the grounds for resisting recognition of a foreign judgment are wider under the PILA than under the Lugano Convention. Under the Lugano Convention Swiss courts are generally not entitled to review whether the court of a member state had jurisdiction over the defendant. According to the PILA, foreign judgments may only be recognised and enforced if the foreign court had jurisdiction over the dispute pursuant to the rules set out in the PILA (e.g. if there is a valid jurisdiction clause). Furthermore, under the PILA a judgment must be final to be enforceable which means that foreign preliminary decisions (i.e. subject to appeal) are generally not enforceable under the PILA. The situation is different under the Lugano Convention which does not limit the remedies that can be enforced.
In the event that the EU does not allow the UK to accede to the Lugano Convention and for all proceedings commencing after 31 December 2020 until accession to the Lugano Convention is effective, litigators are advised to verify the enforceability of an English judgment before commencing litigation in a case with Anglo-Swiss parties.
By April 2021 at the latest this uncertain situation should hopefully end.