Leigh Crestohl comments on the European Commission formally blocking the UK’s accession to the Lugano Convention in the IBA

November 11 2021

Leigh Crestohl's comments were featured in an article in the IBA here

In late June, the European Commission formally blocked the UK’s accession to the Lugano Convention via a communication to the Swiss Federal Council, in its role as Depositary of the Convention.

The Lugano Convention would have offered a similar framework to the Brussels Regulation (recast), which ceased to apply in the UK post-Brexit. Both ensure that parties’ contractual choice of jurisdiction is enforced and that judgments from member states’ courts are enforceable across the EU.

Commercial parties engaging in UK-EU litigation will now have to navigate the requirements of different national regimes on jurisdictional and cross-border enforcement issues. The 2005 Hague Convention on Choice of Court Agreements offers some protection to exclusive jurisdiction clauses, though not to any other kind of jurisdiction clauses.

Whether the Hague Convention applies to contracts entered into before 1 January 2021, when the UK rejoined independently of the EU, is also uncertain.

Previously, if a defendant preferred to defend a claim in the UK, but was sued in an EU or Lugano state, it was reasonably certain the foreign court could be convinced to decline jurisdiction in favour of the UK, says Leigh Crestohl, a partner at Zaiwalla & Co in London.

‘Now, in the absence of any international obligations on foreign courts to decline jurisdiction in favour of the UK, UK parties litigating on the continent will be subject to the domestic private international law rules of the foreign court, as applied to any other third country’, he explains.

‘The delay and additional legal costs occasioned by satellite disputes over jurisdiction will be a significant risk to which parties in the remaining EU member states are now exposed when sued in England or, for that matter, suing a defendant in England that may have a compelling argument in favour of another forum’, adds Crestohl.

Additionally, says Crestohl, although it does raise the spectre of potentially costly satellite litigation, international parties looking to litigate in the English court may find it easier to do so than under the previous rigid and formulaic Brussels Regulation (recast). ‘Many may find that to be an advantage which outweighs the risk or costs of a subsequent dispute over jurisdiction.’

‘Where the holder of a foreign judgment seeks to enforce it in the UK, the procedure can be challenging,’ explains Crestohl. ‘The UK has bilateral agreements with a small number of common law states which ease the process of enforcing judgment internationally, however this does not include any of the members of the Recast Brussels regime.’

The foreign judgment must also have been made ‘on the merits’, which excludes judgment given in default where a defendant has not engaged with the foreign court, says Crestohl. ‘It may be possible for the judgment creditor to obtain summary judgment once it has issued its UK claim, but there will always be more opportunities for a judgment debtor to raise issues and create delays.’

‘This is a particularly attractive option for parties who wish to choose English law, probably the most respected and popular commercial law globally, to govern their international disputes’, says Crestohl.

‘Arbitration allows them to have that law applied without having to be concerned about matters of jurisdiction in a private international law sense’, he adds. ‘Arbitration awards are also readily enforceable around the world, since virtually all significant trading nations have signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.’

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