EU member state courts
Until the end of the Transition Period, the rules applied by both EU member state courts and the English courts to determine which court should take jurisdiction over a civil dispute were contained in the Recast Regulation, which had direct effect in both the UK and the EU.
The starting point under the Recast Regulation was that a person domiciled in an EU member state (which, during the Transition Period, was taken to include the UK) must, whatever their nationality, be sued in the courts of that member state, subject to the following exceptions:
- where the parties (including non-EU parties) had agreed that the courts of another member state should have jurisdiction, that choice would be respected;
- where the parties had agreed that their dispute should be subject to arbitration, that choice would be respected and the rules in the 1958 New York Convention would apply instead; and
- where the dispute involved certain "reserved" subject matters (e.g. rights in rem in immovable property, certain matters relating to companies and cases involving employment, consumer or insurance contracts), the courts of certain member states were given exclusive jurisdiction to deal with it.
The Recast Regulation therefore in most circumstances gave primacy to the parties' choice of forum.
In support of this, the general rule in the Recast Regulation was that when multiple member state courts were seised in respect of a dispute, all courts other than the court first seised had to stay their proceedings while the court first seised determined whether or not it has jurisdiction to hear the dispute. There was, however, an exception to this where a member state court had been seised pursuant to an exclusive jurisdiction clause. In those circumstances, it was for that court, not the court first seised, to take the initial step of determining whether or not it has jurisdiction, with all other courts staying their proceedings in the meantime. The reasoning behind this was to prevent parties from initiating 'Italian torpedo' actions (i.e. initiating proceedings in another jurisdiction in breach of an exclusive jurisdiction clause as a delaying tactic, on the basis that it would take that court a long time to determine whether or not it had jurisdiction, during which time the hands of the court which should be dealing with the dispute were tied).
Norwegian, Icelandic and Swiss courts
Until the end of the Transition Period, the rules applied to determine jurisdiction as between the English courts and the Swiss, Norwegian and Icelandic courts were contained in the Lugano Convention.
The rules in the Lugano Convention were very similar to those in the Recast Regulation, with both regimes giving primacy to the court the parties had chosen, and the one significant difference being that, in circumstances where multiple contracting state courts were seised of the same dispute, under Lugano it was the court which was first seised in time which must first determine whether it had jurisdiction to hear the dispute, rather than the court seised pursuant to an exclusive jurisdiction clause.
At the end of the Transition Period, the Recast Regulation ceased to apply to and in the UK. However, the Withdrawal Agreement provides that the rules in the Recast Regulation for determining which court has jurisdiction to deal with a civil dispute will continue to apply on a reciprocal basis in both the UK and the EU with respect to any proceedings instituted before the end of the Transition Period.
The Lugano Convention also ceased to apply to and in the UK at the same point. The Withdrawal Agreement does not contain any equivalent transitional provisions concerning the Lugano Convention. Instead, the UK has implemented a very limited unilateral transitional provision concerning the stance that the English courts should take after the end of the Transition Period if they have been seised of proceedings pursuant to the Lugano Convention, and a court in Switzerland, Norway or Iceland is subsequently seised of parallel proceedings. However, none of Switzerland, Norway or Iceland have reciprocated in this regard.
The position now
As set out above, immediately upon expiry of the Transition period, both the Recast Regulation and the Lugano Convention ceased to apply to and in the UK. As a result, there is no longer a comprehensive reciprocal regime in place between either the UK and EU member states, or the UK and Norway, Iceland and Switzerland, for determining which local court should take jurisdiction over any given civil dispute. The UK government has sought partially to plug this gap, at least as regards EU member states, via the 2005 Hague Convention.
The key point to be aware of in relation to the 2005 Hague Convention, discussed in further detail below, is that it requires contracting states to give effect to exclusive jurisdiction clauses in favour of other contracting states (provided always that those clauses meet certain qualifying criteria). The 2005 Hague Convention does not require contracting states to give effect to non-exclusive jurisdiction clauses in favour of other contracting states. Although the position is not entirely free from doubt, it should also be assumed that it does not require contracting states to give effect to asymmetric or sole option jurisdiction clauses in favour of other contracting states. Where disputes are governed by non-exclusive or asymmetric/sole option jurisdiction clauses (or indeed by exclusive jurisdiction clauses outside the ambit of the 2005 Hague Convention), the English courts, and any relevant local EU courts, will therefore need to apply their own local rules to determine whether they can take jurisdiction over the dispute in question.
The 2005 Hague Convention
From 1 October 2015 until the expiry of the Transition Period, the UK was a member, by virtue of its membership of the EU, of the 2005 Hague Convention. That membership technically expired upon conclusion of the Transition Period. However, immediately upon the conclusion of that prior period of membership, the UK re-joined the 2005 Hague Convention as a contracting state in its own right.
The aim of the 2005 Hague Convention, like that of the Recast Regulation and the Lugano Convention, is to deal with both allocation of jurisdiction as between contracting states in relation to civil disputes, and the recognition and enforcement of any resulting judgments. It is, however, as a general matter, much more limited in scope than those two latter regimes. In particular, as set out above, the 2005 Hague Convention is concerned only with the allocation of jurisdiction over disputes which are governed by a jurisdiction clause (and even then only certain types of such clauses). By contrast, both the Recast Regulation and the Lugano Convention contain a comprehensive system for the allocation of jurisdiction based on various different grounds, of which jurisdiction clauses are but one example.
In very broad terms, the 2005 Hague Convention requires the courts of contracting states to give effect to qualifying exclusive jurisdiction clauses in favour of the courts of other contracting states. The current parties to it are the UK, the EU, Mexico, Singapore and Montenegro.
The 2005 Hague Convention will therefore, to an extent, fill the gap left by the Recast Regulation. It should, however, be noted that it likely only applies where both:
- a qualifying exclusive jurisdiction clause has been concluded in favour of a contracting state (i.e. non-exclusive jurisdiction clauses expressly fall outside its scope and, although the point has never been tested, asymmetric or sole option jurisdiction clauses are also likely to fall outside its scope); and
- that exclusive jurisdiction clause was concluded after the Convention entered into force for the contracting state upon which jurisdiction has been conferred.
The 2005 Hague Convention also contains a number of other limitations as to when it will apply. These include that:
- unlike the Recast Regulation and the Lugano Convention, the 2005 Hague Convention only applies to "choice of court agreements" (i.e. exclusive jurisdiction clauses) – for example, it does not apply to tortious claims where no exclusive jurisdiction clause features;
- even where one is dealing with an exclusive jurisdiction clause, there are certain specific subject matters that the 2005 Hague Convention is expressly stated not to cover. These include consumer and employment contracts, insolvency matters and certain company law matters, unless such matters arise only as a preliminary question. The 2005 Hague Convention's applicability in any given case must therefore always be considered by reference to the subject matter of the dispute; and
- contracting states can also make individual declarations that the 2005 Hague Convention is inapplicable to other specific subject matters, beyond those stated above. By way of example, both the EU and the UK have declared that the 2005 Hague Convention will not apply to most insurance contracts (although reinsurance contracts are still within scope). It is therefore important always to check the 2005 Hague Convention status table, which sets out all declarations made by contracting states.
The regime that the 2005 Hague Convention contains for dealing with parallel proceedings (i.e. for determining which court shall proceed to determine jurisdiction in the first instance in the event that multiple courts are seised) is also both less detailed, and less tried and tested, than that contained in the Recast Regulation, although it does seek to prevent "Italian torpedo" style actions via the same mechanism as the Recast Regulation uses.
Finally, there remains a question mark as to the status of qualifying exclusive English jurisdiction clauses concluded between 1 October 2015 and 31 December 2020, given that there was a (theoretical at least) "break" between that period of the UK's membership and the UK re-joining the Convention as a standalone state in its own right. The UK government has implemented domestic legislation to the effect that any exclusive jurisdiction clauses which would have been caught by the 2005 Hague Convention between 1 October 2015 and 31 December 2020 will continue to be treated as such, despite the break in the UK's membership. However, that legislation is not something that EU member states will necessarily be prepared to replicate (or otherwise it might not be the approach that would be taken by member state courts and, ultimately, the CJEU). In short, therefore, there can be no guarantee as to how exclusive English jurisdiction clauses concluded before the UK re-joined the 2005 Hague Convention in its own right will be treated.
The common law
To the extent that the 2005 Hague Convention does not apply to any given civil or commercial dispute, the English courts will instead need to revert to their own common law rules for determining jurisdiction (which have of course always applied in cross border cases concerning the rest of the world). Those rules will usually result in the English courts taking jurisdiction over a dispute where the parties to it have agreed that they should do so. The courts of EU member states (and of Iceland, Norway and Switzerland) will also need to apply their own domestic rules in this area.
Looking to the future, the UK government has made an application for the UK to re-join the Lugano Convention as soon as possible. The current parties to the Lugano Convention are the EU, Iceland, Norway and Switzerland. If the UK were to re-join the Lugano Convention in its own right, that Convention would therefore apply as between the UK and the EU, as well as between the UK and Iceland, Norway and Switzerland. Unlike the 2005 Hague Convention, however, the UK needs the agreement of all of the existing signatories to the Lugano Convention before it can re-join it. Iceland, Norway and Switzerland have all formally endorsed the UK's application. The EU is yet to either consent to or refuse the application, but the European Commission has recommended that it be refused on the basis that the Lugano Convention should only be open to states which are a part of the internal market (which the UK is not). The Commission has also deposited a Note Verbale with the Federal Department of Foreign Affairs of Switzerland (in its capacity as Depository for the Lugano Convention) stating that the EU is not in a position to give its consent to the application at this time. A final decision on the issue will likely be made at some point by the European Council (i.e. effectively by the EU member states themselves), but in view of the European Commission's recommendation, and the reasons for it, it appears unlikely that the EU will be prepared to approve the UK's application at this time.
If the UK does ever re-join the Lugano Convention, it would take precedence over the 2005 Hague Convention as regards allocation of jurisdiction and recognition and enforcement of judgments as between both the UK and EU member states, and the UK and Iceland, Norway and Switzerland. The provisions of the Lugano Convention are very similar to those of the Recast Regulation, and in many ways it would provide a like-for-like replacement for that Regulation. In particular, the Lugano Convention gives precedence to the parties' choice of forum to resolve their dispute in the same way that the Recast Regulation did. There is, however, one key difference, in that the Lugano Convention provides, in the event of parallel proceedings, that it is the court first seised which must take the initial step of determining whether it has jurisdiction while all other proceedings are stayed: it does not allow courts seised of claims on the basis of exclusive jurisdiction clauses to take this initial step in the way that the Recast Regulation did. It is, as a result, less effective than both the Recast Regulation and the 2005 Hague Convention in preventing the use of 'Italian torpedo' style claims as a delaying tactic.
Now that the Transition Period has concluded, there are some types of English jurisdiction clause which are no longer near-automatically (subject to limited grounds for refusal) respected throughout the EU, or in Norway, Iceland and Switzerland, in the way that they would have been previously. As regards the EU, that includes exclusive English jurisdiction clauses concluded prior to 1 January 2021 or otherwise not within the ambit of the 2005 Hague Convention, and all non-exclusive or asymmetric/one-sided English jurisdiction clauses, no matter when they were concluded, on the basis that such clauses either are not, or should be assumed not to be, caught by the 2005 Hague Convention. There is no longer a comprehensive EU-wide bar on parallel proceedings being commenced in EU states in breach of such clauses.
That said, the fact that the Recast Regulation and the Lugano Convention have now fallen away means that the implicit restrictions they contain on the issuing by national courts of anti-suit injunctions should no longer apply. Although the point has not yet been tested in the context of the 2005 Hague Convention, the English courts should therefore once again be free to issue injunctions prohibiting proceedings being brought in other jurisdictions, while proceedings are live in this jurisdiction. The success of these injunctions relies upon the counterparty having some form of presence in the UK, such that it is in its interests not to act in defiance of an English court order.
Exclusive English jurisdiction clauses in contracts with EU counterparties which have been concluded on or after 1 January 2021, and which are within the scope of the 2005 Hague Convention, should benefit from the protection of that convention, and as a result continue to be treated in a very similar way to the way that they would have been previously.
In light of the above, parties must continue to pay very close attention to the dispute resolution mechanism that they include in any new contracts with an EU element. Exclusive English jurisdiction clauses will now in some cases have become more attractive than they were previously, because they will, generally speaking, benefit from the protections afforded by the 2005 Hague Convention. However, an analysis should always be made of: (a) whether the 2005 Hague Convention does in fact apply in the particular circumstances; and (b) even if it does, whether the protection it affords is trumped by other factors, such as the flexibility afforded by a non-exclusive/asymmetric/one-sided jurisdiction clause (which will allow a party to choose the best courts in which to pursue any proceedings necessary at the point at which a dispute actually arises). For example, if a contractual counterparty has (or may in the future have) assets located in many jurisdictions, then it may well be in the other party's best interests to preserve the ability to take action in any one of those jurisdictions in the event of a breach of contract. Equally, if the contract is of a type where speedy interim relief may need to be sought in multiple jurisdictions in the event of a breach (for example because the contract in question is a Non-Disclosure Agreement and confidential information may be disseminated in the EU jurisdiction in which the counterparty is located, or because it contains restrictive covenants which may need to be enforced locally), then, all other things being equal, a non-exclusive/asymmetric/one-sided jurisdiction clause may be preferable to an exclusive English jurisdiction clause, notwithstanding that the benefits of the 2005 Hague Convention will fall away. For a summary of the potential options, see the section below entitled "Dispute Resolution Mechanisms in Contracts: the Options".