The Lugano Convention determines which countries Courts have jurisdiction over cross border disputes, and makes provision for how judgments from different jurisdictions in civil and commercial matters are to be enforced.
When the UK was part of the EU it was a contracting state of the Lugano Convention. Following the UK’s departure from the EU, it has had to apply for re-entry as a contracting state. This application was made in April 2020 and, since then, the UK has been waiting for a decision.
For many legal practitioners there is a desire for the UK to re-enter the Lugano Convention, in order to provide certainty on the subject of cross border enforcement of judgments.
However, following a recent meeting that took place with EU diplomats on 12 April 2021, the European Commission looks set to oppose the UK’s accession to the Lugano Convention. The stance being adopted by the Commission is it considers if the UK were to be allowed accession, with it no longer being a member of the EEA (European Economic Area) or the EFTA (European Free Trade Association), then other countries would equally demand membership to the Lugano Convention.
For the UK’s application to succeed, all members of the Convention must be unanimous in their decision. So far, several countries including Switzerland, Iceland and Ireland have given their unanimous consent to the UK’s application. However, France has backed the European Commission’s view. Germany is yet to state its position.
While it will come as a slight blow for cross border disputes, if the outcome of the application is that the UK’s membership of the Lugano Convention is rejected, the UK has demonstrated on numerous occasions that it can and will adapt, and the Courts that make up the UK will continue to thrive and remain a jurisdiction of choice for many international disputes.
With jurisdiction becoming more of a ‘live’ topic following the UK’s departure from the EU, it would be prudent for companies to determine the jurisdiction as well as the governing law that will be applicable should a dispute arise, at the time when entering into contractual agreements. By determining both elements from the outset, it can avoid possible issues from arising in the future.
Additionally, if there are agreements in place that are presently silent on the governing law and jurisdiction, it would be advisable to revisit these aspects and determine whether any amendments can be agreed between the parties, in order to create certainty in the agreement going forward, in the event of a dispute.