Earlier this year, the recast EU Regulation on jurisdiction and the recognition of judgments and commercial matters came into force. The Recast Regulation replaces the original Council Regulation that, since 2001, governed such matters in the EU.
Although a number of rules remain largely the same, the new regulation seeks to facilitate access to justice, in particular through the principle of mutual recognition of judicial and extrajudicial decisions in civil and commercial matters, and to streamline cross-border litigation in a bid to make it more efficient. The new regulation will apply to legal proceedings instituted on or after January 10, 2015, while the replaced regulation will continue to apply to judgments given in proceedings instituted before January 10, 2015.
Jurisdiction clauses are common in commercial agreements. The general principle remains that the parties may agree which EU jurisdiction will hear disputes relating to their agreement.
However, the requirement that one of the parties must be domiciled in the jurisdiction of choice has been dropped.
Under the Recast Regulation, the jurisdiction clause must be recognised across the EU regardless of where the parties are domiciled, provided the jurisdiction clause is not null and void as to its substantive validity and the agreement conferring jurisdiction in a particular member state is evidenced in writing. If there is no jurisdiction chosen by the parties, subject to certain exceptions, the default rule that persons domiciled in a member state are to be sued in the courts of that member state, irrespective of their nationality, applies.
The removal of the domicile requirement, however, does not apply to particular agreements that merit different treatment.
Special jurisdiction rules apply in the case of consumers and employment contracts, intended to protect the party perceived to be the weaker party.
In employment matters, employees may sue the employer in the courts of the member state where the employer is domiciled, or in another member state where the employee normally performs work.
An employer, on the other hand, may bring proceedings only in the courts of the member state in which the employee is domiciled.
An exclusive jurisdiction clause will only be effective if it is entered into after an employment dispute has arisen, or where it is the employee who seeks to rely on it.
The requirement that one of the parties must be domiciled in the jurisdiction of choice has been dropped
The new regulation allows employees to sue a non-EU employer in an EU member state where that employee habitually works, even if that employer does not have a presence through a branch, agency or other establishment in that member state.
Consumers are entitled to sue either in the courts of the member state in which the trader is domiciled or where the consumer is domiciled. Traders may sue only in the courts of the member state in which the consumer is domiciled. In relation to non-EU entities, a consumer may sue in the consumer’s member state of domicile where the non-EU entity pursues commercial or professional activities.
Arbitration proceedings are excluded from the scope of the Recast Regulation. However, by express provision of the regulation, the courts of a member state are not prevented from referring the parties to arbitration, from staying or dismissing proceedings or from examining whether the arbitration agreement is null and void, inoperative or incapable to be performed, in accordance with national law.
Revised provisions aim to prevent parallel proceedings before member state courts and the possibility of inconsistent judgments.
The Recast Regulation moves away from the first-in-time rule that allowed the court first seized of the case to determine whether it has jurisdiction and the second court to stay proceedings, even if the second court has no jurisdiction in terms of the parties’ agreement. Consequently, a member state court specified in an exclusive jurisdiction clause may proceed to determine a dispute, even if proceedings have been commenced first before another member state court.
The Recast Regulation introduces a simplified mechanism for the recognition and enforcement of member state judgments in other member states. The requirement to obtain a declaration of enforceability in the courts of the member state in which enforcement was sought has been eliminated.
Mutual trust in the administration of justice in the EU and the aim of making cross-border litigation less time-consuming and costly justified the abolition of the requirement. As a result, the judgment creditor is only required to present a copy of the judgment and a standard form certificate issued by the court that delivered the judgment.
The changes introduced by the Recast Regulation impact all businesses that operate in the EU and even beyond. They have been generally welcomed, although some uncertainties remain. It may take some time before we can see real effects on EU cross border litigation as a result of the Recast Regulation.
jgrech@demarcoassociates.com
Josette Grech is adviser on EU law at Guido de Marco & Associates.