Up until 31 December 2020, any British company wishing to sue a company in any country in the European Union or in Norway, Switzerland, Denmark or Iceland, was able to do so with relative ease. The procedures are set out to some extent in the Civil Procedure Rules at CPR 6.
The instrument that facilitates suing across borders in EU member states and the other countries mentioned above is the Lugano Convention, signed in 2007, an agreement designed to make cross border litigation as painless as possible.
However, from 1 January 2021 it is now becoming increasingly difficult to conduct litigation in these states because the UK is no longer a member of the EU. While Norway, Switzerland, Denmark and Iceland have enthusiastically welcome the UK to the Lugano Convention, the EU – primarily France – is against the UK achieving membership.
Under Lugano, a UK company could sue a French company, for example, either in a UK court or in a court in the EU, or in any court in the Lugano countries outside of the EU. This was a reciprocal arrangement as companies from any of those countries could start proceedings against UK entities from their own jurisdictions. Think European Arrest Warrant applied to civil matters. However, this option is no longer available, following the UK’s departure from the EU.
The EU objection centres around the internal market. Whereas the UK conformed to all the requirements of the internal market right up until December 2020, now, according to the European Commission, the UK “is a third country without a special link to the internal market”. Given the extensive family ties across Europe, cooperation in industry and technology and our geographical proximity, the Commission’s approach seems somewhat unhelpful.
An alternative course of action for UK litigants, if we are unable to conduct proceedings under Lugano, is to rely on the Hague Convention, but this is a less user-friendly procedure and it is somewhat more restrictive.
Some EU states are on the UK’s side in this matter, notably the Netherlands. Germany has yet to make up its mind. France, as with the contretemps in the fishing industry, appears to wish that the UK did not exist.
However, fortunately the Commission does not have a veto on this matter, and if enough EU countries support the UK, then we will regain Lugano rights and matters can progress very much as they did up until 1 January 2021.
In the absence of the UK acceding to the Lugano Convention, and if the Hague Convention proves unworkable in practice, the UK will have to make arrangements with individual countries, so that if a UK company wishes to begin proceedings against an entity in any of the states mentioned above, then the respective domestic laws of that jurisdiction might have to be applied on a case by case basis. For the time being, therefore, taking out proceedings against EU and other Lugano countries might prove to be inefficient and probably more costly.
For the future, UK entities undertaking new contracts with businesses and other organisations in Europe and the adjacent Lugano territories should consider a jurisdiction specific clause in contracts whereby any disputes would be litigated according to English law in English courts. While this does not address previous agreements entered into, it may at least offer some protection for the future.