Proposed Amendments to Brussels Regulation on European Union Jurisdiction and Enforcement of Judgments

Proposed Amendments to Brussels Regulation on European Union Jurisdiction and Enforcement of Judgments

On 11 February 2011 the UK Ministry of Justice closed its consultation on the European Commission's proposed amendments to the Brussels Regulation (Council Regulation (EC) 44/2001) which governs jurisdiction and the recognition and enforcement of judgments within the European Union ("EU").  The Commission's proposals include major changes which are likely to impact both policy wordings where there is no clear choice of law or jurisdiction clause, and those insurers/reinsurers involved in disputes with a European angle. The following key areas are pertinent:

Arbitration Exception Confirmed

Arbitration is generally excluded from the scope of the Brussels Regulation. Problems arise where one party launches litigation in the courts of one Member State on a dispute that is subject to an agreement for arbitration in another Member State. In Allianz SpA v. West Tankers (Case C-185/07) [2009], the European Court of Justice ("ECJ") held that the Member State where the arbitration was to take place could not issue an anti-suit injunction to call a halt to the litigation. This judgment was thought to effectively pull arbitration into the scope of the Brussels Regulation and undermine the certainty and effectiveness of agreements for arbitration with an EU seat. The proposed amendment would relegate this problem to history by confirming that the arbitration exclusion is broad in scope. The new Article 29(4) would require the courts in Member States to stay proceedings and allow issues relating to the arbitration to be dealt with by the courts at the seat of the arbitration.

Italian Torpedo Defused?

A tactic that has arisen in litigation in Europe by parties wishing to delay resolution of a dispute is to take advantage of the lis pendens rule in Article 27 by launching proceedings first, often in breach of a choice of court agreement, in a Member State where litigation is infamously slow (such as Italy). Under Article 27 and the ECJ's ruling in Gasser v. MISAT (Case C185/07) [2003], the courts in other Member States must stay proceedings until the court first seized has ruled on jurisdiction, which can be a very slow process and effectively torpedo any chance for a speedy resolution of the dispute. The proposed new Article 29(2) would eliminate this problem by requiring the courts first seized to establish jurisdiction within 6 months "except where exceptional circumstances make this impossible." The proposed new Article 31 requires courts to cooperate to ensure proceedings are coordinated. But there are no sanctions for failure to meet these requirements and it remains to be seen how they might operate in practice.

Forum Non Conveniens

There has been a great deal of criticism of the ECJ's decision in Owusu v. Jackson (Case C-281/02) [2005], which effectively eliminated the forum non conveniens principle.  The ECJ held that a Member State must not stay proceedings involving a defendant over which it had jurisdiction in favour of proceedings in a non-Member State, even when the non-Member State appeared to be the most appropriate forum. The proposed amendments go some way towards eliminating this problem by adding a new Art 34 which allows for a stay under the rules of lis pendens when the courts of the non-Member State were first seized.

Automatic Recognition and Enforcement

Under the Brussels Regulation, a judgment of a Member State must be enforced (subject to very limited exceptions) by the courts of any other Member State if accompanied by a certificate of enforceability issued by the issuing court. The Commission proposes to abolish the exequatur procedure whereby this certificate is issued, thus simplifying the process. In addition, the proposed amendment would eliminate public policy as a ground for refusal by the receiving State to enforce a judgment of another Member State, and adding further certainly to the process of enforcement, although it appears unlikely that the Member States will agree to this proposal.

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It will be some time -- the European Commission estimates two to three years -- before amendments to the Brussels Regulation are finalised. Nevertheless, these issues should be considered when drafting dispute resolution clauses in a policy wording, particularly where the parties are based within the EU.