Brexit – choice of law, jurisdiction of courts and enforcement of judgments – 16 February 2021

Since the 1st of January, 2021, the United Kingdom has left the European Union. As a result, the UK is no longer part of the internal market of the EU, many EU-conventions are no longer applicable for the UK and the EU-UK Trade and Cooperation Agreement has entered into force (the “Brexit-Agreement”). In this blogpost we will give a short summary of the impact of the Brexit in respect of (i) the choice of law, (ii) jurisdiction of courts (iii) and the enforcement of UK judgments in the Netherlands.

On January 29, 2020 the UK and the EU have entered into a withdrawal agreement (the “Withdrawal Agreement”). Under the Withdrawal Agreement, many regulations and conventions remained to be applicable and valid until December 31, 2020. This to ensure that no major changes would occur prior to the UK actually leaving the EU. As such, in respect of choice of law, jurisdiction of courts and the enforcement of UK judgments in the Netherlands, not much has changed prior to that date. Unfortunately, the Brexit-Agreement does not contain any language regarding the below subjects and some issues are still to be determined.

Choice of law

The rules to determine which country’s laws apply to a dispute or an agreement, are found in the Rome I and Rome II regulations (the “Rome Regulations”). Following the Withdrawal Agreement, the Rome Regulations continued to apply in respect of the UK until December 31, 2020. Since January 1, 2021 the UK is no longer a party to the Rome Regulations. Fortunately, for the Netherlands this does not affect the choice of law clauses, given the fact that the relevant provisions of the Rome Regulations are not bound by reciprocity. This means that the courts in the Netherlands can apply the Rome Regulations without the relevant (chosen) country being a party to the Rome Regulations. As a result, in the Netherlands, the applicable law clauses will continue to apply the same way as prior to the Brexit.

Jurisdiction of courts

The validity of choice of court clauses can within the EU be found in the Brussels I Recast Regulation (the “Brussels I Recast”). Also, the rules to determine the jurisdiction in the event no specific court has been appointed, can be found in the Brussels I Recast. Since January 1, 2021, the UK is no longer a party to the Brussels I Recast and therefore other regulations have to close the gap that Brussels I Recast leaves. We note that for court proceedings which started prior to January 1, 2021, the Brussels I Recast will continue to apply.

The Lugano Convention

The Lugano Convention will be a good alternative to the Brussels I Recast. The Lugano Convention is similar to the Brussels I Recast and is already applicable in relation to the EU and Iceland, Norway and Switzerland. The UK has applied to become a party to the Lugano Convention, but the EU has yet to approve this request. Since the UK has applied to join the Lugano Convention in April, 2020 and the contracting parties have one year to respond to the application, the EU must respond in the next three months. Iceland, Norway and Switzerland have already approved the application.

The Hague Choice of Court Convention (the “Hague Convention”)

In addition to the application to the Lugano Convention, the UK has become a party to the Hague Convention in September 2020, which became effective on January 1, 2021. The Hague Convention requires the designated courts in exclusive jurisdiction agreements to hear the case and therefore closes part of the gap left by Brussels I Recast. The main difference between the Hague Convention and the Brussels I Recast is that for the Hague Convention to be applicable, the jurisdiction clause has to be an exclusive jurisdiction clause.

As the UK was already a party to the Hague Convention prior to January 1, 2021, but as an EU-member state instead of on its own, there is ongoing discussion about the Hague Convention being applicable to agreements being signed prior to January 1, 2021. Contracting parties which have existing exclusive jurisdiction clauses which they would like to continue to rely upon may consider re-agreeing those clauses now, perhaps by way of a supplemental agreement.

Enforcement of judgments

The Brussels I Recast will continue to apply to the enforcement of judgments given in proceedings which started prior to January 1, 2021. For proceedings starting after this date, the enforcement mechanisms that were in place will cease to apply to the UK. Some kind of protection could be sought in the UK’s application to the Lugano Convention. As this has yet to be approved, in the meantime the Hague Convention can provide some comfort in the enforcement of judgements when an exclusive jurisdiction clause is in place.

Until the EU will provide clearance on the Lugano Convention, parties looking to enforce a UK judgment in the Netherlands, without the possibility of the Hague Convention being applicable (i.e. there is no exclusive jurisdiction clause), may be able to rely upon the bilateral treaty between the Netherlands and the UK. This treaty is executed in 1967 and requires additional actions to be taken before enforcement is possible.

We will closely monitor the future development in respect of the above mentioned topics. Should you have any questions in the meantime, please do not hesitate contact us.

Eva Klein Obbink

Eva Klein Obbink

Lotte Smit

Lotte Smit

10 quick things you need to know about the Sustainable Finance Disclosure Regulation (SFDR) and Taxonomy Regulation

As of 10 March 2021, the SFDR will apply, which dictates disclosures to be made to end investors regarding the consideration of adverse sustainability impacts, in investment decision‐making and advisory processes as explained hereafter:

  1. SFDR has been initiated to support the EU sustainability effort and the Paris Agreement;
  2. SFDR applies to (regulated) market participants;
  3. Financial market participants include, amongst others, managers of AIFs, UCITS or EuVECA and EuSEF labelled funds;
  4. Also applicable to Investment Firms providing portfolio management or advise;
  5. SFDR, the Taxonomy Regulation and Delegated Acts provide substantial parameters with regards to disclosure of information on sustainability and social impact(s) of investments;
  6. Three levels defining intensity of requirements: (i) if sustainability is not taken into account, (ii) if sustainability is promoted and (iii) if a specific sustainability claim and investment objectives are at hand;
  7. Delegated acts are expected in 2021, which will impose additional complex requirements for sustainable investments;
  8. SFDR’s disclosure requirements: (i) publish information on investment/sustainability policies and adverse sustainability impacts at entity and product level on the website, (ii) include in remuneration policies details on consistency with the integration of sustainability risks and (iii) include descriptions on sustainability risks in pre-contractual disclosures (such as a prospectus) and in periodic reports;
  9. If sustainability impact is not a relevant factor in the product or that is not part of the investment strategy or policy, an explicit prescribed notification to inform investors shall be published; and
  10. Time left to implement the requirements into the organisation is short, regulators like the Luxemburg CSSF and Dutch AFM already check compliance with the legal requirements upfront.

Van Campen Liem supports sustainable finance and assists many sustainable EU-funds and its managers. Please reach out to Bastiaan Bloemink or Marieke Spee for further information on these Regulations or a tailored advice relating to the relevance of such Regulations for your business.