The overwhelming support that the European Parliament recently gave to the European Commission’s proposal to reform current rules regulating cross-border litigation has paved the way for easier access to justice for both businesses and consumers.

The court failed to accept the other justification put forward by Hungary- Mariosa Vella Cardona

For industry and consumers to benefit from the EU’s single market by doing business across borders or purchasing goods from any EU member state of their choice, it is indispensable that there is a coherent legal framework to resolve any disputes that may arise. A 2001 EU law known as the “Brussels I” Regulation currently establishes common EU rules on jurisdiction in civil and commercial matters and determines which court has jurisdiction in cross-border cases. It also allows for court judgments in one member state to be recognised and enforced in another.

For example, a company based in Italy concludes a works contract with a company based in Malta in which they designate the Maltese courts as those which will deal with any dispute arising under their contract. The “Brussels I” Regulation ensures that the choice for the Maltese courts will be respected, even if, for instance, the works are carried out in Italy. In principle, the judgment given by the Maltese courts will be recognised and enforced everywhere in the EU, including in Italy.

Unfortunately, in practice, not all is as rosy as it sounds. Litigation tactics have led to a situation where the validity of such choice of court clauses in agreements is challenged in a court in another member state to delay the settlement of the dispute. The proposed rules now seek to eliminate such abusive tactics by ensuring that the court chosen by the parties in their agreement is always the first to determine whether the agreement is valid or not.

Furthermore, in terms of the current rules, a judgment given in one member state does not automatically take effect in another member state. To be enforced in another country, a court in the latter country first has to validate the decision and declare it enforceable. This is done through a special intermediate judicial procedure known as the “exequatur” procedure.

This procedure makes cross-border litigation more cumbersome, time-consuming and costly than national litigation. It may take several months to obtain a decision, delaying cross-border enforcement.

The proposed rules now make provision for the abolition of this cumbersome procedure. They provide that judgments in civil and commercial matters delivered by a court in one member state will be automatically enforceable across the EU.

The execution of the judgment could still be stopped by a court, but only under exceptional circumstances, such as a violation of fair trial rights by the court which delivered the judgment. In essence, the abolition of this procedure will mean that judgments delivered by the courts of any EU member state will be treated like domestic judgments.

The proposed rules also enhance consumer protection with regard to legal disputes involving non-EU countries. At the moment, EU consumers benefit from the principle of the protection of the weaker party that is firmly enshrined in the “Brussels I” Regulation.

This means that in a legal dispute between consumers and businesses, the consumer may always choose to go to a court in the EU member state in which he/she is domiciled, irrespective of whether he/she brings an action or defends himself/herself. This principle currently applies only to legal relationships with parties domiciled in the EU and not to situations where there is a connection with a third country.

National rules on jurisdiction for third-country defendants vary widely between member states. The national laws of one country may allow a citizen or company to sue a third country defendant in the national court, while this may not be a possibility in another country. The proposed rules now provide that in relations between a consumer domiciled in the EU and a business established outside the EU, the courts of the State where the consumer is domiciled will have jurisdiction.

The Commission’s proposal also improves legal certainty for arbitration agreements which so far were not covered by the “Brussels I” Regulation. Currently, a company that wants to escape from an arbitration agreement can relatively easily claim that the deal is invalid and file a lawsuit in the court of a member state in which it is likely to get a favourable decision questioning the validity of the arbitration agreement. The proposed rules now give companies certainty that the choice of the arbitral tribunal will be protected against abusive litigation.

The ball is now in the court of the Council of Ministers to give their final endorsement to these proposed amendments.

One may note that though the EU’s single market gives traders access to a market of 500 million consumers, statistics prove that only a quarter of Europe’s 20 million SMEs are involved in cross-border trade.

Legal complexities and exorbitant costs relating to judicial procedures in the eventuality of a dispute surely contribute to this state of affairs. Businesses and consumers clearly stand to benefit from these proposed rules which seek to facilitate the judicial process for all parties involved.

mariosa@vellacardona.com

Mariosa Vella Cardona is deputy chairperson of the Malta Competition and Consumer Affairs Authority and a member of the National Commission for the Promotion of Equality.

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