The recast Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“the recast Judgment Regulation”) EU 1215/2012 will apply to proceedings commenced on or after 10 January 2015 and will replace the existing Judgment Regulation ((EC) No 44/2001)). The UK opted into the Regulation after the European Commission published its Proposal (COM (2010) 748 final). The recast Judgments Regulation makes very important changes, including in respect of jurisdiction clauses and lis pendens in non-member states; although it is a less radical instrument than the Commission Proposal.
EXCLUSIVE JURISDICTION CLAUSES FOR THE COURTS OF MEMBER STATES
The recast Judgments Regulation significantly improves the protection for exclusive jurisdiction clauses in favour of the courts of member states. Hitherto, the inflexible application of the “court first seised” rule meant that once the courts of a member state were seised of proceedings, no other member state’s courts could assert jurisdiction, unless and until the court first seised decided that it lacked jurisdiction. This was the effect of the CJEU’s decision in Erich Gasser GmbH v MISAT srl  ECR I-14693 that “a court second seised whose jurisdiction has been claimed under an agreement conferring jurisdiction must nevertheless stay proceedings until the court first seised has declared that it has no jurisdiction”. Although this was designed to prevent parallel proceedings and irreconcilable judgments, it could lead to a race to issue proceedings in a litigant’s preferred forum, sometimes for negative declaratory relief. It also led to ineffective protection of the sanctity of jurisdiction agreements.
The recast Judgments Regulation ameliorates matters by creating an exception to the court first seised rule, meaning that the parties must first appear before the courts putatively chosen, which will determine if the clause is valid and effective. Article 31(2) states that: “…where a court of a member state on which an agreement… confers exclusive jurisdiction is seised, any court of another member state shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement.” If that court determines that it has jurisdiction, the courts of other member states must decline it (Art 31(2); see also Recital 22). This provision does not, however, apply where a “weaker” party falling within the ambit of the special protective provisions in the Regulation is the claimant – namely consumers, insurance policy holders and employees – unless the additional criteria for jurisdiction clauses – which are essentially unchanged in the recast Judgments Regulation – are satisfied.
The reform significantly strengthens the protection of jurisdiction clauses. Even so, a party that alleges that it did not agree to a jurisdiction clause will henceforth be forced to make that allegation before the very court that it asserts lacks jurisdiction. If it does not do so, it will not be able to object to recognition of the foreign judgment, since, somewhat disappointingly, no defence has been introduced into the recast Judgments Regulation that the foreign judgment was obtained in breach of a jurisdiction clause. This problem is, however, partially offset by a new provision stating that a jurisdiction clause will not be binding if it is held to be “null and void” by the law of the state whose courts are putatively chosen (Art 25(1)). This means that the choice of law rules of the designated court should determine the law applicable to the jurisdiction clause and whether it is null and void (Recital 20). This provision, which mirrors Art 6a of the Hague Choice of Court Convention 2005, plugs a welcome lacuna in the existing Regulation, which effectively treated the formality requirements for establishing the validity of a jurisdiction clause as exhaustive, even if it was alleged, for example, that the clause was the product of mistake or duress (see Benincasa v Dentalkit Srl  ECR I-3767; Trasporti Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA  ECR I-1597). However, it gives rise to potential uncertainty, not least since: (a) the law applicable to a jurisdiction clause falls outside the ambit of the Rome I Regulation on Choice of Law in Contract ((EC) No 593/2008, Art 1(2)(e)) and so is a matter for national choice of law rules, which may make the outcome difficult to predict; (b) it is doubtful that the phrase “null and void” will have a clear or consistent meaning or ambit in every legal system; or, indeed, that it is self-evident why a clause that is voidable should be excluded. The Regulation does, however, now explicitly confirm that the jurisdiction clause is separable from the contract to which it relates – so that the invalidity of the latter does not affect the former. Hence, if it were alleged eg that a contract was the product of duress, it would be necessary to show, separately, that the jurisdiction clause was also the result thereof.
A further change is that the Judgments Regulation states that where neither party is domiciled in a member state, the courts of a member state designated by a jurisdiction clause have first refusal but are not bound to accept jurisdiction and can apply national grounds to determine whether to do so. This latitude is removed under the recast Judgments Regulation, with the effect that if the agreement is valid, it must be given effect, regardless of the domicile of the parties.
Elsewhere, the court first seised rule still prevails. The Commission proposed tackling the problem of delay in some legal systems by proposing that the court first seised should normally establish its jurisdiction within six months but this did not find its way into the recast Judgments Regulation.
STAYING PROCEEDINGS IN FAVOUR OF COURTS OF NON-MEMBER STATES
The CJEU held in Owusu v Jackson  ECR I-1383 that there is no general power to stay proceedings brought against an EU domiciliary in favour of the courts of a non-member state. The CJEU declined to say whether there are any circumstances in which a stay is possible: and, in particular, whether a stay could be granted in order to give “reflexive” effect to the grounds of exclusive jurisdiction, jurisdiction clauses for the courts of non-member states or where there is lis pendens in a non-member state.
The recast Judgment Regulation ameliorates matters by providing a power to stay where the courts of a member state have jurisdiction on the basis of the defendant domicile rule or an alternative ground of “special” jurisdiction and the courts of a non-member state were first seised of identical or related proceedings (Arts 33 and 34, respectively). The power is discretionary and does not operate by strict analogy to the lis pendens rules between member states. Where the proceedings in the non-member state involve the same cause of action and the same parties, the court of the member state should still consider whether it may be expected that the court in the third state will, within a reasonable time, render a judgment that will be capable of recognition in that member state; and the court of the member state must be satisfied that it is necessary for the proper administration of justice to stay its proceedings. Necessarily, the former requirement means that the availability of a stay depends on national grounds of recognition of non-member state judgments and so cannot be applied uniformly in all member states. The court shall then dismiss proceedings if the foreign proceedings result in a judgment entitled to recognition. The enhanced flexibility is to be welcomed; although phrases such as “reasonable time” and “proper administration of justice” are unlikely to be easy to apply. As to the latter, a court is directed to consider, inter alia, the connections between the facts of the case and the parties and the third state concerned, and the stage to which the proceedings in the third state have progressed. It may also consider “whether the court of the third state has exclusive jurisdiction in the particular case in circumstances where a court of a member state would have exclusive jurisdiction” (Recital 24).
Inevitably, in exercising this discretion, the temptation in England to reimport aspects of the forum non conveniens doctrine, within the confines permitted by the recast Judgments Regulation, will exist.
The extension of the power to stay to related actions (which the Commission had not proposed) is also to be welcomed. It operates in a similar fashion, although, the court should also consider whether “it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings”. This is rather curious, since there is no power to decline jurisdiction in order to permit consolidation of the proceedings abroad.
Where the foreign proceedings are concluded, the court may dismiss its proceedings but is not obliged to do so. Whilst some flexibility to coordinate proceedings between member and non-member states is better than none, these provisions arguably do not go far enough. The third state must be first seised and there is no power to stay proceedings merely because the courts of a non-member state are clearly the more appropriate forum. Hence, the risk of parallel proceedings in a non-member state remains. Indeed, one might expect instances where there is a rush to commence proceedings, perhaps for negative declaratory relief, in the courts of a non-member state to trigger the applicability of these provisions; or, conversely, a rush to start proceedings in the courts of a member state to preclude the possibility of a stay in favour of the courts of a non-member state. Nor is there any express power to stay proceedings to give reflexive effect to the grounds of exclusive jurisdiction.
So, for instance, the courts of the member state where a company has its seat have exclusive jurisdiction in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies. It is somewhat surprising that the English courts would have no power to stay proceedings if the company instead had its seat in a non-member state. It may be difficult to enforce the resulting 2 October 2014  9 JIBFL 620A English judgment in the relevant non-member state. English courts have suggested that a power to stay exists in such circumstances (eg in Ferrexpo AG v Gilson Investments Ltd  EWHC 721 (Comm);  1 Lloyd’s Rep. 588) but the matter is far from certain.
Furthermore, the treatment of jurisdiction clauses for non-member states is problematic. There remains no express power to stay proceedings in favour of the chosen court. The authorities are unclear on whether a stay can be granted. On one construction of the CJEU’s decision in Coreck Maritime GmbH v Handelsveem BV  ECR I-9337, it is for national law to determine what to do in this situation. The view that a stay is permissible has been endorsed, obiter, in Konkola Copper Mines plc v Coromin  2 Lloyd’s Rep 555; but rejected in Catalyst Investment Group Ltd v Lewinsohn  Ch. 218, which considered it to be incompatible with the Owusu judgment. At the heart of the issue is the Hague Convention on Choice of Court Agreements 2005, which applies only to exclusive jurisdiction clauses in favour of the courts of contracting states and requires courts of other contracting states to decline or stay proceedings. On 30 January 2014, the European Commission published a proposal for a Council Decision on the approval, on behalf of the European Union, of the Hague Convention (COM/2014/46 final), with a proposed exception in respect of insurance matters. Should the Convention enter into force and be ratified by other non-member states, they would benefit from these provisions and so jurisdiction clauses in favour of their courts would be given effect.
Even so, it is likely to be a long time before the Hague Convention will provide a widespread mechanism for giving effect, on a reciprocal basis, to jurisdiction clauses for the courts of non-member states, as and when they ratify the Convention; and it may be regretted that the recast Judgments Regulation did not directly address jurisdiction clauses in favour of the courts of non-member states.
Until the CJEU says otherwise, English courts are likely to continue to consider that a power to apply the recast Judgments Regulation reflexively exists. It must, however, be recognised that the silence of the recast Judgments Regulation on the permissibility of a stay where the courts of a non-member state have exclusive jurisdiction and in the case of jurisdiction clauses for the courts of non-member states, especially when seen in contrast to the express legislation providing a power to stay in the case of lis pendens, may lead to a stronger inference that the recast Judgments Regulation does not permit stays of proceedings in favour of the courts of non-member states in either scenario – and may ultimately lead to a retreat from the English case law permitting stays in such circumstances.
THE ARBITRATION EXCEPTION
The arbitration exclusion in the existing Regulation has proven problematic. The exclusion was interpreted by the CJEU in Allianz SpA v West Tankers Inc  ECR I-663 extremely narrowly. It held that if the substantive proceedings before a foreign court were civil and commercial in nature, its jurisdiction derived from the Regulation, even if it had to decide a preliminary question as to the validity of an English arbitration agreement. This meant that “mutual trust” operated in respect of the foreign court’s interpretation of the arbitration clause, so that English courts could not therefore restrain the apparent breach of the agreement by anti-suit injunction; and that, since nothing in the Regulation said otherwise, the resulting court judgment was enforceable in England (The Wadi Sudr  1 Lloyd’s Rep 193). This was particularly problematic since the New York Convention 1958 requires contracting states to enforce arbitral awards and the Regulation is silent on problems of incompatibility between court judgments and arbitral awards.
The Commission proposed to coordinate court and arbitral proceedings by a provision stating that where the agreed seat of an arbitration was in a member state, the courts of another member state whose jurisdiction was contested on the basis of an arbitration clause must stay proceedings so that the courts of the seat of the arbitration or the arbitral tribunal could determine the existence and validity of the clause. The Ministry of Justice, however, lobbied for a blanket exclusion of arbitration.
In the event, the Commission Proposal has not been adopted. The only amendment in the recast Judgments Regulation is a decidedly enigmatic new Recital (12), which states that “This Regulation should not apply to arbitration” and that “Nothing in this Regulation should prevent the courts of a member state, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement, from referring the parties to arbitration, from staying or dismissing the proceedings, or from examining whether the arbitration agreement is null and void, inoperative or incapable of being performed, in accordance with their national law.” Furthermore, it provides that the New York Convention 1958 takes precedence over the recast Judgments Regulation (a statement reiterated in Art 73(2)). It also states that a ruling given by a court of a member state as to whether or not an arbitration agreement is invalid (whether determined as the main or an incidental issue) should not be subject to the rules of recognition and enforcement laid down in the Regulation. All this might be taken to suggest that there was now a total exclusion of arbitration, even where the validity of an arbitration clause arises in the context of civil and commercial proceedings.
By contrast, and arguably somewhat inconsistently, Recital (12) states that where a court does give judgment on the merits having determined that an arbitration agreement is invalid, this should not preclude that court’s judgment on the substance of the matter from being recognised in accordance with the Regulation. The end result is less than clear or satisfactory. It is not apparent whether the scope of the arbitration exception is substantively changed and the extent to which mutual trust operates in relation to a determination by the courts of another member state as to the validity of an arbitration agreement.
It seems probable, however, that nothing has changed at all and that, in particular, West Tankers would be decided the same way under the recast Judgments Regulation. There is also no express provision addressing the relationship between inconsistent judgments and arbitral awards. This will be regretted by many and the recast Judgments Regulation represents something of a lost opportunity to clarify the ambit of the arbitration exception.
EXTENSION OF “WEAKER PARTY” PROTECTION
The recast Judgments Regulation extends the protection for employees and consumers acting as claimants to cases where the defendant employer or business is a non-EU domiciliary. These provisions allow “weaker parties” to sue in their home courts and restrict the effectiveness of jurisdiction clauses. Whilst this provision will enhance weaker party protection, it may be unattractive for business located outside the EU who might find themselves vulnerable to being sued across the EU and unable to conclude a binding jurisdiction agreement to negate that risk. In the case of consumers, considerable uncertainty still surrounds the question of when a business might be deemed to be directing its activities to consumers in the EU through its website, and so liable to be sued in the consumer’s home state.
In the case of insurance, however, the recast Judgments Regulation does not include a similar provision – a position supported by the Ministry of Justice, who considered that this would unduly restrict the validity of choice of court clauses in insurance contracts, many of which are essentially commercial in character.
The recast Judgments Regulation continues to permit courts of a member state to grant provisional or protective relief in support of proceedings in another member state in accordance with its national law (Art 35). The effect of the CJEU jurisprudence, however, at least in respect of interim payment orders, has been to confine such relief to assets within the jurisdiction (see Van Uden Maritime BV v Kommanditgesellschaft In Firma Deco-Line  ECR I-7091; Mietz v Intership Yachting Sneek BV  ECR I-2277).
The recast Judgments Regulation makes it clear that ex parte interim orders are excluded from its ambit, whether granted by the court with jurisdiction on the substance or not (as the CJEU had held in Denilauler v SNC Couchet Frères  ECR 1553), unless the measure is served on the defendant prior to enforcement (Art 2 and Recital 33). This is somewhat curious, since service on the defendant does not, of course, ensure that the defendant has the opportunity to challenge the order. The recast Judgments Regulation also states that interim measures granted by a court with jurisdiction on the substance shall circulate freely under the Regulation; but that where the court has no jurisdiction on the substance, its orders shall not be enforceable under the Regulation in other member states. This is arguably regrettable, especially since, for example, an English freezing order in support of foreign proceedings will be unenforceable overseas if, in defiance of the injunction, the defendant takes the assets out of the jurisdiction.
ABOLITION OF “EXEQUATUR”
The recast Judgments Regulation abolishes the “exequatur” procedure by which a declaration of enforceability is required to enforce a foreign judgment in another member state (Art 39). “As a result, a judgment given by the courts of a member state should be treated as if it had been given in the member state addressed” (Recital 26). Judgments will instead be enforceable without any special procedure being required. A party seeking enforcement must produce an authentic copy of the judgment and a certificate in a stipulated form certifying that the judgment is enforceable (Arts 37 and 53). These documents must be served on the judgment debtor before the first enforcement measure is taken (Art 43).
In all other respects, however, the recast Judgments Regulation is much less radical than the Commission Proposal, which effectively proposed the abolition in most cases (save in the cases of violations of privacy, defamation and collective redress for consumers) of the public policy defence; and proposed that the defence that the defendant had insufficient notice to arrange its defence where a default judgment had been issued should be raised in the state of origin and not in the state of enforcement. In the event, the existing defences have been retained and a party can apply to set aside registration in the state of enforcement (Art 45).
The Regulation previously provided a defence to recognition where the consumer or insurance provisions of the Regulation were infringed by a foreign court, leaving a lacuna in respect of the employment contract provisions. This has now been remedied, whilst at the same time, the defence now only applies in cases where a “weaker party” is the defendant to the foreign proceedings and is the party purporting to rely on the defence (Art 45(1)(e)).
DEFENDANTS DOMICILED IN NON-MEMBER STATES
The most radical aspect of the Commission’s Proposal was the proposed extension of the harmonised rules of jurisdiction to non-EU domiciliaries, meaning that national grounds of jurisdiction would be removed for all matters within its ambit. This radical proposal was, in the event, not supported by the member states and has not been adopted in the recast Judgments Regulation, which continues to derogate to national rules of jurisdiction in such circumstances (save where an exception to the defendant domicile rule exists in the Regulation: Art 6(1)). In particular, there was not felt to be sufficient evidence of a need for complete harmonisation. It is reasonable to suppose that the issue is likely to resurface when the Regulation is revised again in future.
The introduction of enhanced protection for exclusive jurisdiction clauses for EU member states and the limited power to stay proceedings in favour of the courts of non-member states should be welcomed. Ultimately, however, the recast Judgments Regulation is a less radical instrument than the Commission’s Proposal. The uncertainty about the ambit of the arbitration exception has, if anything, been fuelled. The absence of any provisions on jurisdiction clauses for the courts of non-member states is also regrettable.
Overall, the recast Judgments Regulation materially improves upon its predecessor, whilst still leaving the feeling that more could and perhaps should have been done to enhance its effectiveness.
Professor Jonathan Harris is a practising barrister at Serle Court Chambers, London.