European Union: Pitfalls Enforcing Judgments In New Member States

After five enlargements, the EU is expecting to grow even further in the near future. The EU expects the accession of Croatia in 2013. Ice land, Montenegro, Serbia and Turkey have applied for membership, and at least some of them will likely accede in the second decade of the century.

The enlargement of the EU also extends the common "area of justice" in which the EU will "facilitate access to justice, in particular through the principle of mutual recognition of judicial and extra judicial decisions in civil matter" (article 67(4) Treaty on the Functioning of the European Union).

The Brussels Convention

Already in 1968 the first step towards the harmonisation of the rules on jurisdiction of national courts and the mutual recognition and enforcement of their decisions was taken by the Brussels Convention1. Under this treaty, it was for the first time possible to enforce judgments rendered by the courts of any member state in any other member state. This treaty was superseded in 2002 by the Brussels I-Regulation2. Both instruments pro vide for a catalogue of jurisdictional rules to be applied by the courts of each member state and for the possibility of immediate enforcement of court decisions in all member states. EU enlargement will there fore also entail the possibility to enforce judgments in the new member states and to recover debts from par ties seated there.

The Wolf Naturprodukte case

The recent decision of the European Court of Justice in Wolf Naturprodukte3, how ever, limits the temporal scope of application of the enforcement mechanism of the Brussels I-Regulation. According to article 66(1) of the Regulation, it only applies to legal proceedings instituted or to documents drawn up after its entry into force. Sub paragraph 2 of the article contains two exceptions to this strict rule about the enforcement of judgments rendered after the entry into force of the Regulation, even if the proceedings were initiated before.

First, judgments will be enforced if the Brussels (or the parallel Lugano) Convention was in force both in the state of origin and the state addressed when the proceedings were initiated.

Second, judgments will be recognised if the jurisdiction of the courts of the state of origin were based on rules that accorded with those of the Brussels I-Regulation or a bilateral treaty concluded between the state of origin and the addressed state. The thrust of these exceptions is to avoid unnecessarily restricting the enforce ability of judgments based on rea son able jurisdictional rules, while at the same time ensuring that judgments based on excessive jurisdictional rules of national law will not be enforced under Brussels I.

In Wolf Naturprodukte, the Austrian claimant had obtained a final judgment from an Austrian court on 15 April 2003 against a Czech respondent. The Czech Republic then joined the EU on 1 May 2004. In May 2007, Wolf Naturprodukte sought enforcement of the Austrian judgment in the Czech Republic. The application was denied in two instances. The Czech Supreme Court then requested a preliminary ruling by the ECJ on the question of whether enforcement of a judgment under the exceptions of article 66(2) requires that the Brussels I-Regulation was in force in both the state of origin and the addressed state when the judgment was rendered.

Article 66(2) of the Regulation merely states that judgments will be enforced under the Regulation if they were rendered after the "entry into force" of the Regulation. How ever, and this was the question presented to the ECJ, the Regulation does not specify whether article 66(2) requires that the regulation is in force in the state of origin, the addressed state or both when the regulation is rendered.

This question is of course of great practical relevance when a party seated in the EU is considering claims against a party seated in an applicant state. If article 66(2) requires that the Regulation be in force also in the addressed state when the judgment is issued, the claimant will – if prescription allows – be well advised to initiate proceedings at a time that ensures that the judgment will be rendered only after the addressed state's accession to the EU. If the Regulation need only be in force in the state of origin, the claimant could obtain a judgment (which usually will extend prescription periods consider - ably) and wait for accession of the state in which the respondent is seated.

The ECJ held that the Regulation must be in force in both the state of origin and the addressed state when the judgment is rendered. It explained that the jurisdictional catalogue of the Regulation protects the defendant by ensuring that a judgment will be issued only by a court that has jurisdiction under articles 2 and 5 through 7 of the Regulation and, there fore, has a real connection to the case. The jurisdictional catalogue and the possibility to enforce judgments are thus closely linked. So only judgments delivered in accordance with the jurisdictional rules will be enforced.

Conclusion

This decision is of great practical relevance for parties considering the enforcement of their claims against respondents seated in applicant states. If the claimant with out a bilateral enforcement treaty wants to ensure the enforceability of the judgment under the Brussels I-Regulation, it will need to time the proceedings as certaining the issue for after the accession of the state in which the respondent is seated. Alternatively, in particular if prescription is pending, the claimant will have to consider raising the claim before the national courts at the seat of the respondent (so national rules of jurisdiction so provide) – commonly a less attractive option.

This article was originally published in the schoenherr roadmap`12 - if you would like to receive a complimentary copy of this publication, please visit: pr.schoenherr.eu/roadmap.

Footnotes

1. Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters

2.Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, Council Regulation (EC) 44/2001.

3.Wolf Naturprodukte GmbH v. DEWAR spol. s.r.o., Judgment 21 June 2012, Case no. C-514/10.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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