Brexit update: Enforcement of UK judgments from 1 January 2021
The United Kingdom left the European Union (“EU”) on 31 January 2020. Since then, the relationship between the United Kingdom and the EU has been governed by the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (2019/C 384 I/01) (“Withdrawal Agreement”). Articles 66 onwards of the Withdrawal Agreement regulate judicial cooperation in civil and commercial matters during the transitional period. Pursuant to Article 67(2)(a) of the Withdrawal Agreement, Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Regulation 1215/2012”) applies to the recognition and enforcement of judgments given in judicial proceedings instituted before the expiry of the transitional period. However, this transitional period came to an end on 31 December 2020.
Whilst the United Kingdom and the EU concluded a trade and cooperation agreement on 30 December 2020, this agreement leaves out the area of European civil procedural law, which is tantamount to a “hard Brexit” in this area. The UK’s accession to the Lugano Convention on jurisdiction and recognition and enforcement of judgments in civil and commercial matters of 30 October 2007 (“Lugano Convention”) also appears to have failed. After the United Kingdom had declared its willingness to accede to the Lugano Convention on 8 April 2020, the necessary consent of all contracting parties has not been obtained even after expiry of the one-year period pursuant to Article 72(3) Lugano Convention.
This leaves the Hague Convention on Choice of Court Agreements of 30 June 2005 (“Hague Choice of Court Agreements Convention”), bilateral agreements between the UK and individual Member States and the applicable national law as options for the enforcement of UK judgments in the Member States of the EU or for the enforcement of judgments from EU Member States in the UK.
Our previous news on the enforcement of UK judgments in the event of a no-deal Brexit can be found here.
Option 1: Enforcement under the Hague Convention
The Member States of the EU, with the exception of Denmark, have been party to the Hague Choice of Court Agreements Convention since 1 October 2015 on the basis of a declaration by the EU Commission. The United Kingdom stated in a declaration of 31 January 2020 that based on this declaration by the EU Commission it would continue to be bound to the Hague Choice of Court Agreements Convention during the transitional period stipulated in the Withdrawal Agreement. With its declaration of 28 September 2020, the United Kingdom then joined the Hague Choice of Court Agreements Convention with effect from 1 January 2021.
In addition to the jurisdiction of courts designated in an exclusive choice of court agreement, the Hague Choice of Court Agreements Convention also regulates the recognition and enforcement of judgments of a court of a contracting state designated in an exclusive choice of court agreement in the other contracting states. Pursuant to Article 8(1) and (2) of the Hague Choice of Court Agreements Convention, such judgments are in principle to be recognised and enforced without review of the merits of the judgment, unless there are obstacles to recognition and enforcement.
In particular, according to Article 11(1) of the Hague Choice of Court Agreements Convention, the enforcement of punitive damages and exemplary damages may be refused.
But: Narrow and temporally unclear scope of application of the Hague Choice of Court Agreements Convention
However, unlike, for example, Regulation 1215/2012 or the Lugano Convention, the Hague Choice of Court Agreements Convention remains limited in its scope of application. Apart from the fact that the Hague Choice of Court Agreements Convention only deals with the recognition and enforcement of judgments of courts designated in an exclusive choice of court agreement, its Article 2 contains a comprehensive catalogue of matters that are excluded from its application. These include, in addition to consumer matters, tort or delict claims for damage to tangible property that do not arise from a contractual relationship as well as tenancies of immovable property matters.
Finally, in relation to the United Kingdom, the temporal scope of application is questionable and has not yet been clarified. Pursuant to its Article 16(1), the Hague Choice of Court Agreements Convention applies to exclusive choice of court agreements concluded after the Convention has entered into force for the state of the court agreed upon. In its accession declaration of 28 September 2020, the United Kingdom stated that it assumed to have been a contracting state without interruption since 1 October 2015. It remains to be seen how the German courts will evaluate this declaration of the United Kingdom in enforcement proceedings with regard to the Convention’s temporal scope of application.
However, a major advantage of enforcing judgments within the scope of the Hague Choice of Court Agreements Convention in Germany will be that pursuant to section 1 no. 2 b) of the German Recognition and Enforcement Act (“AVAG”) this Convention falls within the scope of the AVAG. This means that the procedure for admission of enforcement of foreign judgments regulated in sections 3 onwards AVAG is applicable. Pursuant to section 4(1) of the AVAG, the foreign judgment is admitted to enforcement by adding the enforcement clause upon application. According to section 6(1) of the AVAG, the court decides without hearing the obliged party. This is a significant simplification compared to the procedure under section 722 of the German Code of Civil Procedure (“ZPO”), which requires an enforcement judgment.
Option 2: Bilateral agreement between Germany and the United Kingdom
On 14 July 1960, Germany and the United Kingdom concluded the Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters (“German-British Convention”). There are differing opinions on whether this German-British Convention will be revived with the abolition of Regulation 1215/2012. Even if this Convention is revived, its content is far removed from that of modern rules.
But: Formal judicial recognition and enforcement procedure
Pursuant to Article VII of the German-British Convention, in order to enforce judgments from the United Kingdom in Germany an application for a declaration of enforceability is required. According to the Implementing Act to the German-British Convention, the declaration of enforceability is made by analogous application of the provisions on arbitral awards in section 1063(1) and section 1064(2) of the German Code of Civil Procedure. This means that in principle the decision will not be reviewed on the merits; rather, it will be examined whether any ground for non-recognition and non-enforcement exists. However, the application for a declaration of enforceability is decided by ways of a court order after hearing the opponent, which means that there is no element of surprise.
Option 3: Recognition and enforcement under national law
If no international convention applies, judgments from the United Kingdom can be enforced in Germany under autonomous German law. In practice, this is done by filing an action for enforcement under sections 328 and 722 of the German Code of Civil Procedure, which is granted if there are no grounds for non-enforcement. The enforcement judgment obtained in this way is enforced in Germany like a German judgment.
It should be carefully examined for each individual case which option is available for the enforcement of UK judgments from 1 January 2021 and how it can best be enforced in practice. In this way, time delays and additional costs can be avoided.
Any questions? Please contact: Dr. Kathrin Nordmeier or Lucie Gerhardt
Practice group: Liability & Insurance