12 January 2015

Recast Brussels I Regulation: What you need to know

New rules on jurisdiction and enforcement of judgments are now applicable across the EU

The importance of the Brussels I Regulation[1] is well known to EU litigators.  Its rules determine both the jurisdiction of courts in the EU in civil and commercial disputes and the conditions for the recognition and the enforcement of their judgments in other EU member States. The objective of the Brussels I Regulation is the creation of an EU area of justice where parallel court proceedings are prevented and judicial decisions can circulate easily.

Following a wide consultation led by the European Commission, the EU Parliament and the Council have adopted a new version of the Brussels I Regulation: the Recast Regulation[2], which is meant to further improve and simplify the conduct of cross-border litigation within the EU.

The Recast Regulation will apply to court proceedings, falling within its material scope, started after 10 January 2015 in all EU member States, including Denmark and the UK. 

The general rule of jurisdiction under the Brussels I Regulation (Article 2) is that EU defendants should be sued in the courts of their domicile. This remains untouched in the Recast Regulation (new Article 4). The alternative grounds of jurisdiction (Article 5) also remain unrevised (new Article 7).  The most important changes concern jurisdiction agreements, the lis pendens rule and parallel proceedings; arbitration-related court actions; and the enforcement of judgments.

Key changes in the Recast Regulation

New jurisdiction rules removing the condition of an EU-domiciled defendant in limited cases

As a general rule, the Brussels I Regulation applies, and is the basis of the jurisdiction of a member State's court if, and only if, the defendant is domiciled in the EU. It was only in situations of 'exclusive jurisdiction' that the Regulation could apply despite the defendant not being domiciled in the EU. Under Article 22 of the Brussels I Regulation, these situations included disputes over immovable property, the validity of decisions of legal persons, and the registration of IP rights.

From now on, more disputes involving non-EU domiciled defendants will be caught by the Brussels rules of jurisdiction. In addition to the cases of 'exclusive jurisdiction' described above, the Recast Regulation removes the condition that the defendant is domiciled in the EU (i) in cases where the defendant is a non-consumer or an employer pursuant to a consumer or employment contract as defined under new Articles 17 and 20; and (ii) in cases where the parties have entered into a jurisdiction agreement in favour of the courts of a member State.

New rules strengthening jurisdiction agreements

In case of parallel proceedings, the Brussels I Regulation gave primacy to the jurisdiction of the court first seised of the dispute, regardless of whether the parties had agreed the exclusive jurisdiction of another court in the EU. This priority rule created an unsatisfactory situation where parties could commence proceedings in a court of their own choosing, notwithstanding the parties' contract,  leading to costly jurisdiction challenges and inordinate delay to legal proceedings.  This dilatory tactic is often referred to as a 'torpedo action'.

The end of torpedo actions?

Jurisdiction agreements are independent from the main contract.

The Recast Regulation also provides that jurisdiction agreements are severable and independent from other terms in a contract. This new rule allows jurisdiction agreements to survive despite claims that the underlying contract is void.  Furthermore, under the Recast Regulation, the law governing the validity of a jurisdiction agreement is the law of the court chosen in that agreement, not the law of the underlying contract.

Jurisdiction agreements entered into by non-EU domiciled parties will also be protected.

In new Article 25 of the Recast Regulation, the condition that the one or more of the parties to the jurisdiction agreement is domiciled in the EU has been removed.  As a consequence, all jurisdiction agreements designating the courts of an EU member State are now governed by the rules of the Recast Regulation, and benefit from its protection against 'torpedo actions', even if entered into by non-EU parties.

New rules on parallel proceedings pending in courts outside the EU

Under the Brussels I Regulation, if a court of a member State had jurisdiction (for example, because the defendant was domiciled in that member State) it had to exercise that jurisdiction, even if a court outside the EU was already seised of that dispute or was considered to be the more appropriate forum.  

The Recast Regulation has partially sought to address this problem by introducing new Articles 33 and 34 which give courts in member States the discretion to stay proceedings in circumstances where proceedings are pending before the courts of a third state, involving either (i) the same cause of action and same parties; or (ii) related actions.

These provisions introduce the common law principle of forum non conveniens into the Brussels regime. They effectively allow, under limited circumstances, courts having jurisdiction under the Brussels rules to stay their proceedings and decide that courts of a third state are a more appropriate forum to hear the dispute.

These provisions also strengthen jurisdiction clauses agreed by parties in favour of non-EU courts.  However, the requirement that such a non-EU court should be first seised of the dispute is unhelpful. It creates a risk that parties wishing to breach their non-EU jurisdiction agreement, or just delay proceedings, try to race to the courts of an EU member State with jurisdiction under the Recast Regulation. This risk could be reduced oncen the 2005 Hague Convention on  Choice of Court Agreements, currently only signed by the US, the EU and Mexico, enters into force.

New explanation of the arbitration exclusion

The 1968 Brussels Convention, and the Brussels I Regulation after it, have always expressly excluded 'arbitration' from their scope of application. This apparently simple exclusion gave rise to complex legal questions, and confusing decisions from the Court of Justice (“CJEU”).

Behind the prima facie simple term of 'arbitration' hides a variety of arbitration-related court actions, such as (i) actions relating to the validity of the arbitration agreement or its scope; (ii) actions ancillary to arbitration including actions for the appointment of the arbitral tribunal or the challenge an arbitrator; (iii) actions relating to the enforcement – or annulment - of an arbitral award; and (iv) actions relating to the enforcement of a court judgment recognising the validity of an arbitration agreement.

Recital 12 of the Recast Regulation confirms that all these arbitration-related actions are meant to be excluded from the Brussels jurisdiction and enforcement regime. 

Is West Tankers overturned?

The Recast Regulation has at least in part overturned the CJEU decision in Case C-185/07 Allianz v West Tankers.  In that case, the CJEU ruled that in case of parallel arbitration and court proceedings in the EU,  courts of any member State, including the courts of the seat of arbitration, had to stay their proceedings pending a decision of the court first seised.  The Recast Regulation makes clear that courts of member States are no longer bound by the Brussels rules in this situation. They are now free to apply their own national law, including the 1958 New York Convention, to any dispute concerning an arbitration agreement and can order the parties to start arbitration despite court proceedings pending in another EU member State.

It is important to note that the Recast Regulation does not change the existing rule in respect of anti-suit injunctions which are not available in the EU if they concern proceedings before another member State court even in cases where the injunction is in support of an arbitration agreement. The CJEU has repeatedly held that “intra-EU” anti-suit injunctions contravene the principle of mutual trust between courts which is the key principle underpinning the Brussels regime. 

Commercial parties should be aware that there are alternatives to an anti-suit injunction to protect the enforceability of an English arbitration agreement.  In West Tankers, the claimant in the arbitration successfully obtained an award for contractual damages for breach of the arbitration agreement. The award was enforced by the English Court which also held that such an award for damages was not contrary to EU law.

New rules for the recognition and enforcement of judgments: abolition of exequatur

One of the most significant advances of the Recast Regulation is the abolition of the exequatur procedure. Under new Articles 36 and 39, parties asking the courts within the EU to recognise or enforce a foreign EU judgment will no longer be required to obtain a "declaration of enforceability" from the enforcing court. The procedure for recognition and enforcement is reduced to the presentation of :

a. a copy of the judgment that satisfies the conditions to establish its authenticity;   

b. the certificate issued pursuant to new Article 53; and

c. a translation of these documents if required by the competent judicial authority of the required member State. 

These new rules should save significant time and costs for parties and facilitate the free circulation of judgments within the EU.  However, they are unlikely to provide any improvement in the short-term. The Brussels I Regulation has been repealed but it does continue to apply to all legal proceedings instituted before 10 January 2015 and as a result a large amount of judicial decisions will continue to be subject to the exequatur requirement.  Furthermore, the backlog of court proceedings in many member States will make the effects of the Recast Regulation only visible in the medium-to-long term.

For further information on this subject please contact Juliette Huard-Bourgois, Professional Support Lawyer

[1] Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters

[2] EU Regulation 1215/2012 of 12 December 2012

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