The impact of Brexit on English litigation: service of process and enforcement of judgments

For many years, parties across the EU have regularly chosen the English courts to resolve international disputes. Many of the reasons for this are independent of the UK’s membership of the European Union and should continue after it leaves: the reputation of the English courts for quality, consistency, honesty, transparency and technical knowledge; England’s status as a global financial centre; no juries in civil cases; no awards of punitive or exemplary damages; and a ‘loser pays’ costs system.

Since the referendum result, concern has arisen as to whether the advantages of England as a dispute resolution centre might be diminished. Two perceived areas of risk relate to: (i) service of process – whether it will become more difficult to serve the English court proceedings on parties in EU Member States post-Brexit; and (ii) enforcement of judgments in EU Member States.

For properly advised commercial parties there should, from a practical perspective, be little change – at least for claims arising out of a contractual relationship between the parties.

Currently, English court proceedings may be served on defendants in other EU member states in accordance with the Service Regulation, which can be relatively quick and cost effective. The Service Regulation permits a variety of methods of service including service between designated state central bodies (Article 4); postal service where proceedings are sent by the Member State (Article 14); and direct service where permitted under the law of the Member State (Article 15). As to the latter, it should be noted that several Member States, including Germany (for documents initiating proceedings), Spain and Poland do not permit direct service. Indeed, the UK is also opposed to direct service on parties in England and Wales under Article 15.

It may be that the UK is able to negotiate continued application of the Service Regulation or equivalent post-Brexit. However, even if no formal arrangements between the UK and the EU are put in place, claimants could instead effect service on defendants in other EU states in accordance with the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. The Hague Convention provides that each contracting state designate a Central Authority to receive and execute requests for service originating in other contracting states. In some cases this is likely to be slower than service under the Service Regulation (at least under Article 14 of the Service Regulation)¹.

Although Article 10 of the Hague Convention provides that it does not interfere with the freedom to send judicial documents by post, directly to persons abroad, there is no obligation on contracting parties to allow service by such methods. In this regard, several EU states, including Germany, do not permit postal service under the Hague Convention.

In any event, notwithstanding potential benefits of the Service Regulation over the Hague Convention, well-advised parties would usually include within commercial agreements a contractual provision authorising service on a process agent at an address within England and Wales. Such service, in accordance with the Civil Procedure Rules (CPR 6.11), is quicker and simpler than service under the Service Regulation and will be unaffected by Brexit, whatever the outcome of negotiations.

To put it another way, even if the UK ceases to be party to the Service Regulation and no equivalent is put in place, the only real change would be an additional incentive to do what is often done as a matter of course.

The considerations relating to the enforcement of judgments are similar.

Enforcement of judgments from civil and commercial claims, a key plank of international trade, is governed by the recast Brussels Regulation. One of its principal aims is that judgments made by Member State courts should be easily recognisable and enforceable in other Member States.

Currently, under Articles 36 and 39 of the Brussels Regulation, a judgment given in a Member State is recognised and enforceable in all other Member States without any special procedure or declaration of enforceability being required. There are few defences available which could impede enforcement – essentially limited to issues including public policy; failure of service of the claim; or where the judgment is irreconcilable with an earlier judgment.

In contrast, enforcement of a non-EU judgment in an EU Member State is a matter for the local law in the enforcing state. This is not to say, however, that enforcement of such judgments is unduly burdensome, although the procedure may not be as straightforward. Indeed, despite the uncertainty as to what post-Brexit arrangements will look like, there appears to be enthusiasm on both sides for continued close trade. To this end, it would be counter-productive to impose obstacles to the enforcement of judgments.

Even opting out of all international agreements so that the UK applies its previous common law rules and other EU countries apply their existing rules, treating the UK as a non-Member State or equivalent non-signatory country, should not result in significant difficulties in enforcing judgments in EU Member States.

As a matter of English common law, enforcement of foreign judgments in England (where there is no reciprocal enforcement treaty) requires the judgment creditor to commence a fresh cause of action against the judgment debtor in the English courts with the foreign judgment being the cause of action. This will generally be slower than the enforcement of judgments from EU Member State courts, but not so much as to make enforcement of such judgments impossible. For example, judgments from US courts are regularly enforced in England without undue difficulty, despite the fact that the UK and the US have no reciprocal enforcement agreement.

Similarly, for example, Germany and France have procedures under their own domestic law for the recognition and enforcement of judgments from third countries so that although it may take longer than enforcement under the Brussels Regulation, enforcement should not be unduly difficult. In both jurisdictions, the concepts underpinning the principal bars to enforcement are not dissimilar to those under the Brussels Regulation: failure of service; where the judgment is incompatible with public policy/essential principles of domestic law; and in addition, recognition will also be refused where the original court did not have jurisdiction.

There are various other post-Brexit possibilities which could improve on the adequate baseline described above.

These include the following.

• The UK remaining in the current Brussels Regulation regime.
• The UK entering into the closely related Lugano Convention, which currently applies as between the EU and Norway, Switzerland and Iceland.
• The UK ratifying the Hague Choice of Courts Convention: at present this has been ratified by the EU, Mexico and Singapore; it has also been signed by the USA.
• Reverting to the Brussels Convention on Jurisdiction and Enforcement of Judgments 1968: the Brussels Convention was signed by individual states, including the UK in 1978.

Accordingly, whether the UK ends up within the range of options above, or even if there is no formal arrangement, there is a strong argument for saying that recognition and enforcement of English judgments in Member State courts should not present undue difficulties for parties post-Brexit.

In general, uncertainty and change tend to trigger disputes – and there can be little doubt that disputes will generated by Brexit. Sharp dislocations in currencies, asset prices and other disruption in the financial markets may cause counterparties to look for ways to avoid their contractual obligations. Similarly, the assumptions behind contracts which form part of a European supply chain may no longer hold, again leading parties to look for exits. Contractual parties, including borrowers and lenders, will be examining their material adverse change or force majeure clauses and other events of default. These will work their way through the English courts over the next several years.

In the longer term, there is no reason why the English Courts should not continue to be the venue of choice for large commercial disputes. As noted above, the reasons for the popularity of the English Courts are independent of the UK’s membership of the EU. Even if there are changes to the procedural mechanisms of enforcement and (to a lesser extent) service of process, they should not undermine the advantages that of litigating in the English courts.