Brexit: EU “Not in Position to Consent” to UK Re-Accession to Lugano Convention

On 1 July 2021, the Swiss Federal Council announced, as Depository of the “Lugano Convention” on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, that the European Commission (“the Commission”) had notified that “the European Union is not in a position to give its consent to invite the United Kingdom to accede” to the Convention.  In this regard, the Commission explained in an earlier Communication that the EU should not consent in view of the fact that the Lugano Convention aims to protect the EU’s internal market and relates to the EU-EFTA/EEA context, whereas the UK is a “third country without a special link to the internal market.”

By way of background, the Lugano Convention governs cross-border civil and commercial legal disputes between the EU Member States, Norway, Iceland, and Switzerland by identifying the national court that should have jurisdiction and ensuring that judgments can be recognized and enforced in the territories of other signatories.  When the UK was still a member of the EU, the Convention provided businesses and the UK legal services sector with the significant benefit of facilitating the choice for the UK’s legal system, and its key assets in terms of efficiency and language, to resolve cross-border legal disputes.  However, the Convention ceased to apply to the UK when it became a “third country” at the end of the Brexit transition period on 31 December 2020, following which the UK applied, on 8 April 2020, to re-accede as an independent country.

In terms of next steps, the Council of the European Union must still adopt a final EU decision on the matter through an – as of yet unscheduled – qualified majority vote.  Although the outcome of the latter can at present not be predicted and will likely depend at least in part on political factors, it is important to consider that the UK’s re-accession to the Convention, which requires the consent of all signatories, could be blocked by the EU.  If this were to be the case, companies involved in cross-border trade between the EU/EFTA and the UK should be ready to address the negative implications of such a scenario in terms of having a less predictable and settled legal framework, jurisdictional issues in litigation becoming more complex, and cross-border recognition and enforcement of judgments becoming more time-consuming and costly.  As Pierstone can assist all businesses with these and other Brexit-related legal issues, please do not hesitate to contact us should you have any questions.

 

Maarten Vanderhaeghe                          Slavica Puric

Partner                                                                Associate

E: maarten.vanderhaeghe@pierstone.com   E: slavica.puric@pierstone.com