Client Alert
New Rules on Jurisdictions and Enforcement of Foreign Judgments in the EU to Streamline the Enforcement of Court Decisions and Prevent Dilatory Tactics
January 29, 2015
BY FRANCESCA PETRONIO & FABIO COZZI
Regulation (EC) 44/2001 (also known as “Brussels I”), that has been governing questions of jurisdiction and the recognition and enforcement of judgments in civil and commercial matters within the European Union for more than 10 years, was repealed and replaced by Regulation (EU) 1215/2012 “on jurisdiction and the recognition and enforcement of judgments in civil and commercial matter (recast)” (“Recast Regulation”) on January 10, 2015.
The Recast Regulation applies to all new proceedings brought before courts of the EU Member States, starting from January 10, 2015.
Although it is more a recast of the former regulation than an entirely new legislative text, the Recast Regulation introduces a number of important changes. In particular, the new regulation:
Abolishes the “exequatur” procedure, streamlining the enforcement of foreign judgments;
Introduces an exception to the general lis pendens rule, in favor of the Court chosen by the parties through an exclusive jurisdiction clause, so as to prevent abusive litigation tactics (“Italian Torpedo”);
Extends the application of the rules regarding jurisdiction agreements also to cases where neither of the parties is domiciled in the EU;
Introduces an international lis pendens rule;
Improve the interrelation between arbitration and litigation.
I. Abolition of the “Exequatur” Procedure
First of all, the Recast Regulation abolishes the costly and time-consuming procedure known as exequatur. Formerly, the creditor seeking to enforce a judgment issued in a Member State in a different Member State (e.g., the Member State where the debtor has assets suitable to be attached), had to run the exequatur procedure, to obtain a declaration of enforceability in that State. Although the Court of the place of enforcement carried out a merely formal evaluation of the decision to be enforced, the procedure was in any case time and cost consuming, and the debtor had the chance to object to the recognition for various reasons (e.g., breach of the public order, lack in the service of the writ of summons in case of judgment issued in default of appearance of the defendant, etc.).
The new regulation radically changes that approach. No more preliminary evaluation (even merely formal) of the Court of the place of the enforcement is required. The creditor can apply directly to the authority competent for the enforcement, simply filing a copy of the judgment to be enforced and a form certificate.[1] It is up to the debtor to apply to the designated court of the State of enforcement to oppose the enforcement (but this opposition can be made on limited grounds).
The new procedure will surely speed up and simplify the enforcement of foreign judgment within the EU.
II. Adoption of a Derogation from the General Lis Pendens Rule in Order to Enhance the Effectiveness of Choice of Court Agreements: No More “Italian Torpedo” Tactics
One of the goals of the Recast Regulation was to improve the efficiency of jurisdiction agreements, fighting the abusive litigation tactic, known as the “Italian Torpedo.”
Under Regulation (EC) 44/2001, in the event that proceedings between the same parties and involving the same cause of action were commenced before courts of different Member States, all the courts other than the court first seized had to stay their proceedings until the court first seized had ruled on whether it had jurisdiction (even if this court was seized in breach of an exclusive jurisdiction clause). The aim was to prevent inconsistent judgments, but the rule actually allowed dilatory tactics: the party interested in delaying the proceedings could bring the case before a court of a Member State not competent, with the effect of suspending the competent Court subsequently seized until the first court seized had ruled on its jurisdiction.
Now, the Recast Regulation gives priority to the court designated in the choice of jurisdiction clause: that court has to rule on its jurisdiction and all the other courts of different Member States—even if first seized—have to stay their proceedings.
However, this exception does not apply:
(i) to consumers, insurance and employee matters;
(ii) when the exclusive jurisdiction clause designates the court of non-Member States;
(iii) when the clause concerns a merely non-exclusive jurisdiction; or
(iv) where the parties entered into conflicting jurisdiction clauses.
III. Extension of the Rules on Jurisdiction Clauses Also to Cases Where Neither of the Parties is Domiciled in a Member State
Under Regulation (EU) 44/2001, an exclusive jurisdiction clause was applicable only when (i) at least one party was domiciled in the EU; and (ii) the exclusive jurisdiction clauses provide for a court of a Member State.
The new regulation changed this “double precondition,” abolishing the domicile requirement. Therefore, the jurisdiction clause selecting a specific Member State’s Court will be binding and effective even if neither of the parties is domiciled in a Member State. This will enhance contractual autonomy for parties not domiciled in the EU, who may now choose for the jurisdiction of the Court of an EU Member State.
Article 25 of the Recast Regulation also establishes that questions on the substantive validity of jurisdiction agreements will be governed by the law of the Member State’s court designated in the clause.
IV. Introduction of an International Lis Pendens Rule
The Recast Regulation also introduces an international lis pendens rule, in order to prevent parallel proceedings inside and outside the EU. Member State’s courts are granted with the power to stay a proceeding if a court of a non-EU state has already been seized with a related proceeding, where:
(i) it is expedient to avoid the risk of conflicting judgments;
(ii) it is expected that the court of the non-EU state will give a judgment capable of recognition and, where applicable, enforcement; or
(iii) the Court of the Member State is satisfied that it is necessary for the proper administration of justice to do so.
V. A Step Towards a More Effective Protection of Arbitration Agreements Against Abusive Litigation Tactics
The Recast Regulation confirms the exclusion—already provided in Brussels I Regulation—of arbitration from the scope of the regulation. However, while the former regulation did not provide instruments to solve the frequent issues related to the interrelation between litigation and arbitration, now, recital 12 of the Recast Regulation clarifies that nothing in the regulation prevents the courts of a Member State from:
Referring the parties of an arbitration agreement to arbitration;
Staying or dismissing the proceeding in favor of arbitration; or
Examining whether an arbitration agreement is null and void, inoperative or capable of being performed in accordance with its national law, even if the issue has been already submitted to the court of another Member State.
Moreover, the recital of the Recast Regulation provides that an EU Member State court judgment on the validity of an arbitration agreement is not subject to the rules of recognition and enforcement of the Recast Regulation, regardless of whether arbitration is a principal or incidental question and that EU Member State courts may recognize and enforce arbitral awards under the New York Convention, which takes precedence over the Recast Regulation, even if the arbitral award conflicts with another EU Member State court judgment.
From a practical standpoint, the above clarifications solve—at least in theory—some of the concerns related to the interaction between litigation and arbitration. By way of example, where a valid award under the New York Convention is conflicting with a decision of a court of another Member State enforceable under the Recast Regulation, the enforcement of the award would prevail (since the New York Convention takes precedence over the Recast Regulation).
Even if some uncertainties and unsolved problems still exist (e.g., the Recast Regulation does not address the issue of the enforcement of an award in a Member State where the arbitration agreement, on the basis of which said award has been issued, has been qualified as invalid), the Recast Regulation is a step towards a better coordination between arbitration and court litigation in the EU. A further step could be taken by the European Court of Justice deciding the “Gazprom” case (Case C‑536/13, still pending), with respect to the admissibility of anti-suit injunctions issued by arbitral tribunals (having their seat in the EU) against civil proceedings pending before courts within the EU.
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[1] The standard form is provided in Annex 1 of EU Regulation 1215/2012.
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