Will the UK join the Lugano Convention 2007?
Conflicting reports have emerged in recent days as to whether the EU will approve the UK’s application to join the Lugano Convention 2007, the UK’s preferred regime for governing jurisdiction and the enforcement of judgments with EU Member States after Brexit. This post briefly describes what the Lugano Convention 2007 is and why the UK wants to join it, and provides an update on the accession process.
Previous posts in this series consider the Lugano Convention 2007 in more detail (Part 1: here) and explain the rules that now apply to jurisdiction and enforcement of judgments in the UK following the end of the Brexit transition period on 31 December 2020 (Parts 2-4: here, here, and here).
What is the Lugano Convention 2007?
The Lugano Convention 2007 governs jurisdiction and the enforcement of judgments between the EU and three European Free Trade Association (EFTA) states — Switzerland, Iceland, and Norway (but not Liechtenstein). It closely replicates the Brussels Recast Regulation (Regulation 1215/2012)(Brussels Recast), which applied to jurisdiction and the enforcement of judgments between the UK and EU Member States prior to the end of the Brexit transition period on 31 December 2020. The UK was formerly a member of the Lugano Convention 2007 through its membership of the EU.
Why does the UK want to join?
Joining the Lugano Convention 2007 would enable the straightforward cross-border enforcement of judgments between the UK and EU Member States, and would provide legal certainty and predictability for parties by allowing them to identify the courts in which they may sue and be sued.
From the UK’s perspective, it is also significant that the Lugano Convention 2007 contains only a relatively weak obligation to “pay due account” to the case law of the Court of Justice of the European Union (CJEU), which may permit greater divergence by the UK than under the Brussels Recast Regulation.
What is the accession process?
The UK requires the unanimous approval of the current contracting parties to the Lugano Convention 2007, namely the three EFTA states and the EU (including Denmark, which is a contracting state in its own right). Article 27(3) of the Lugano Convention 2007 requires the contracting states to “endeavour” to give their consent within one year. The deadline was 14 April 2021. While the three EFTA states have indicated their support, the EU has yet to make a formal decision.
On 12 April 2021, reports emerged that the European Commission had recommended that the EU reject the UK’s application.[i] The Commission reportedly believes the Lugano Convention 2007 should be restricted to members of EFTA and the European Economic Area (EEA).
The Commission will not have the final say, however. That lies with the European Council, which comprises EU Member State heads of state or government. The Council is reportedly not expected to make a decision for a matter of weeks.
The EU may still approve the UK’s accession to the Lugano Convention 2007 in due course. In the meantime, contracting parties should continue to feel confident about including English governing law and jurisdiction clauses in their agreements, which will continue to be upheld and enforced by English courts. In fact, as explained in our previous posts, choosing English governing law, jurisdiction, and arbitration clauses may even bring certain advantages.
Latham & Watkins will continue to monitor and report on developments in this area.
[i] FT, “Brussels opposes UK bid to join legal pact, splitting EU states”, 12 April 2021 (https://www.ft.com/content/7aad8362-ef75-4578-81eb-38b5d2c51223).