The European Parliament and the Council of the European Union revised the Brussels I Regulation (Regulation No 44/2001) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. The revised Brussels I Regulation (Regulation No 1215/2012) is already in force but will only apply to proceedings within the EU from 10 January 2015.
The key changes in the revised Brussels I Regulation are the following:
- Strengthening of choice of court agreements
- Protection of arbitration agreements
- Partial extension of the jurisdiction ambit of the Regulation to non-EU defendants
- Optimisation of the enforcement process across EU member states
1. Strengthening of choice of court agreements
Currently, the parties may designate in their agreement the national court of a member state to have (exclusive) jurisdiction to resolve their possible disputes (known as “choice of court agreements”). Yet, such choice of court agreements have so far been impeded by the increasingly popular strategy of “torpedo” proceedings, which involves bringing actions for declaratory relief in courts other than the designated one to cause delay. Under the current Brussels I Regulation, the court nominated by the parties must stay its proceedings until the court in which proceedings are first commenced has determined whether it has jurisdiction. Depending on the jurisdiction of the first court, this can cause severe delays. Such strategies are particularly effective for the party seeking delay where it brings the action for declaratory relief before a court in a state with a reputation of a slow and/or inefficient judicial system (cf. idiomatic expression “Italian torpedo”).
The revised Brussels I Regulation aims to end torpedo proceedings by providing that any other member state court first seised of an action must stay proceedings if the court designated in the choice of court agreement is also seised. For example, if the parties agree on an exclusive choice of court agreement in favour of a German court and the claimant nevertheless commences proceedings in an Italian court, the Italian court must stay its proceedings if the German court is also seised by the defendant. The proceedings must be stayed by the first court until the court nominated by the choice of court agreement rules on its jurisdiction. Where the court designated in the choice of court agreement has established jurisdiction, any other member state court, including the court first seised, must decline jurisdiction.
However, as the revised Brussels I Regulation will not apply until 10 January 2015, it seems likely that torpedo proceedings will continue to happen for some time yet. Once the revised Brussels I Regulation becomes applicable, it will also extend to exclusive choice of court agreements concluded by parties not domiciled in the EU, but which nominate a member state court.
2. Protection of arbitration agreements
Although arbitration matters have been excluded from the scope of the Brussels I Regulation since its outset, this Regulation complicates arbitration in the EU since it appears to legitimise court actions in breach of arbitration agreements. In the West Tankers case (Allianz SpA v West Tankers, case C-185/07), the European Court ruled that, pursuant to the Brussels I Regulation other member state courts had to stay any related proceedings if a decision by the court first seised is pending. Moreover, the European Court established that member state courts were not entitled to issue anti-suit injunctions (a court order restraining a person from commencing or continuing proceedings in another jurisdiction) to restrain such actions in the courts of other member states. In West Tankers, a vessel owned by West Tankers Inc and chartered by ERG Petroli SpA, collided with a jetty in Italy. The charterparty provided for disputes to be resolved by arbitration in London. Arbitration proceedings were commenced in London. However, the insurer of ERG Petroli SpA commenced state court proceedings in Italy against West Tankers Inc. West Tankers Inc argued that the Italian courts could not hear the case because of the existence of an arbitration agreement providing for arbitration in London. West Tankers Inc sought a declaration in state court proceedings in England arguing that the dispute was covered by the arbitration agreement and asked the court to issue an anti-suit injunction. The European Court (referred to by the English court) then decided that one member state cannot grant an anti-suit injunction to restrain proceedings in another member state, even if those proceedings have been commenced in breach of an arbitration agreement. This judgment was, therefore, impetuously criticised as it undermines arbitration agreements.
The revised Brussels I Regulation clarifies that arbitration is absolutely excluded from the ambit of the Brussels I Regulation. Therefore, the seizure of a member state court with a dispute which may be subject to arbitration will no longer bar another member state court from exercising jurisdiction to address the question of the validity of the arbitration agreement and to refer the parties to arbitration. Referring to the facts in the West Tankers case under the revised Brussels I Regulation, the English court can address the validity of the arbitration agreement and refer the parties to arbitration.
In addition, the revised Brussels I Regulation sets out in its recital the primacy of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“NYC”).
3. Partial extension of the ambit to non-EU defendants
At present, the Brussels I Regulation generally applies – despite a few exceptions –only to defendants domiciled in an EU member state. Where defendants are domiciled outside of the EU, member state courts apply their own national law to determine whether they have jurisdiction. These national laws differ from state to state.
The revised Brussels I Regulation now provides for further exceptions to this rule by addressing a limited number of circumstances under which member state courts can exercise jurisdiction even if the defendant is not domiciled within the EU:
(i) A consumer with domicile in a EU member state may bring proceedings against the other party in the courts of his domicile regardless of whether or not the other party has its domicile in a member state.
(ii) An employee domiciled in a EU member state may bring proceedings against the employer in the courts of the member state where the employee habitually carries out his work or in the courts of the member state where the business that engaged the employee is situated even if the employer is not domiciled in a member state.
Finally, as already mentioned, the revised Brussels I Regulation extends its remit to choice of court agreements entered into by parties not domiciled in the EU but which designate a member state court as the chosen forum.
4. Optimisation of the process of enforcement across member states
Under the existing Brussels I Regulation, a creditor is required to obtain a declaration of enforceability (known as “exequatur”) from the enforcing member state court in order to enforce a civil or commercial judgment from one member state court in another member state. Depending on the particular enforcing state, this process is not only potentially time-consuming but also costly. The judgment debtor could even delay this process by raising baseless defences.
The revised Brussels I Regulation will remove the requirement of a declaration of enforceability by abolishing the exequatur process and, therefore, reduce time and cost for judgment creditors.
However, in spite of the abolishment of the exequatur, the existing grounds for opposing enforcement in the member state where enforcement is sought will be retained to preserve due process and the right to a fair trial. The burden will be placed on the judgment debtor to challenge a judgment, which will require that he can – amongst other things – elaborate that the judgment is either:
(i) contrary to public policy (“ordre public”) in the enforcement state; or
(ii) a default judgment and he was not served with the document which instituted the proceedings; or
(iii) irreconcilable with a judgment given between the same parties in the member state addressed or with an earlier judgment given in another member state or in a third state involving the same cause of action and between the same parties.
5. What is the impact of the recast of the Brussels I Regulation on Switzerland?
Switzerland, Iceland, Norway, Denmark and the EU are signatories to the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Lugano Convention”), which was concluded in Lugano on 30 October 2007. The Lugano Convention serves as a parallel agreement to the Brussels I Regulation as its content is virtually identical to the latter. Therefore, if the scope of the Lugano Convention is engaged and a party domiciled in Switzerland or a choice of court agreement nominating a court in Switzerland are involved, the jurisdiction would be determined according to the Lugano Convention.
However, the revision of the Brussels I Regulation does not immediately affect the Lugano Convention as a matter of course. Moreover, the Lugano Convention remains unchanged until any future revision. Hence, under the Lugano Convention the inherent problems set out above concerning the currently applicable Brussels I Regulation will persist. It is likely that it is only a matter of time until the Lugano Convention is adapted to reflect the revised Brussels I Regulation. However, such a process will certainly take several years.