Last year, the European Court of Justice (the "CJEU") handed down an important decision in the case of Diageo Brands v Simiramida Case C – 681/13 in relation to the law on the recognition of judgments within the European Union ("EU") and in particular on the grounds available to resist a judgment being recognised in another EU country.
Background to the Brussels Regime
Under the Brussels regime1, a judgment of a court in one EU member state must be recognised and enforced in another member state unless the party that seeks to resist recognition can establish the existence of one of a number of specific grounds.
One of these grounds is that recognition of the judgment would be manifestly contrary to public policy in the member state in which recognition is sought.
Facts of the Case and Application of EU Law
In Simiramida, Diageo obtained an order from the Bulgarian court for the seizure of bottles of 'Johnny Walker' whisky on the basis that their importation into Bulgaria from outside the European Economic Area infringed Diageo Brands' trademark.
That order was granted but subsequently overturned. Diageo's appeal to the Bulgarian Supreme Court failed. Diageo also failed at first instance in the substantive claim in the matter which was in relation to the infringement of its trade mark. Diageo did not appeal this judgment, so it was the final decision of the Bulgarian court on the substantive matter.
Simiramida then initiated proceedings in the Netherlands seeking compensation for the damage it claimed to have suffered as a consequence of the seizure. In doing so it relied on the decision of the Bulgarian courts. Diageo argued that the Bulgarian judgment should not be recognised in the Netherlands as it was manifestly contrary to public policy within the meaning of Article 34(1) of the Brussels Regulation and that the Bulgarian court had misapplied EU law.
The CJEU found that it was necessary to interpret Article 34 strictly. The Court stated that the rules of recognition and enforcement are based on mutual trust and that as such judicial decisions in one member state should be automatically recognised in another member state. The CJEU further noted that in general terms Article 36 of the Brussels Regulation makes it clear that a judgment cannot be reviewed as to its substance during an enforcement application.
In dealing with the question of what amounts to something being manifestly contrary to public policy, the CJEU relied on previous decisions (such as that in the flyLAL-Lithuanian Airlines Case C-302/13), and emphasised that it would not assume the role of defining the content of the public policy of individual member states; instead its role was to review the limits within which EU member states could have recourse to public policy arguments.
In addition, the CJEU found that it was irrelevant whether the alleged error of the national court related to a rule of EU law rather than to one of national law. In each instance, if the public policy exception were to apply, there must be a breach of a rule of law regarded as "essential" in the legal order of the member state in which recognition was sought or a breach of a right recognised as being fundamental in that legal order. In the present case, that test was not satisfied in relation to the application of the trade mark protections in contention. The CJEU also found that the party alleging a breach of public policy must exhaust all legal avenues available in the member state giving judgment. In the instant case, if Diageo had appealed the finding of the Bulgarian court on the substantive matter, any error could have been corrected by the appeal court in Bulgaria. The Bulgarian Supreme Court would have been obliged to make a reference to the CJEU if there was any uncertainty in relation to the interpretation of the EU legislation in question.
Overview of Decision
Simiramida illustrates the difficulties that one will encounter in trying to resist the recognition of a judgment from another EU member state court on the basis that it is manifestly contrary to public policy. As indicated above, it will not suffice that a party can illustrate that the decision in question is wrong, be that as a matter of domestic or EU law; instead it must be demonstrated that there has been a manifest breach of a rule of law regarded as essential, or a breach of a right that is recognised as fundamental, in the legal order in which enforcement is sought.
Whilst the CJEU emphasised that it will not define scope of the so called public policy exceptions of any EU member state, it will review the limits within which EU courts have recourse to this concept. In addition, the CJEU did seem to suggest that if it is demonstrated that courts in EU member states were actively infringing EU law, even if the EU law in question is not in the 'essential' category, then this could lead to a refusal of recognition of a judgment in another member state. This argument was not raised however in Simiramida.
Implications of the CJEU's Decision
This decision makes clear that, save in exceptional circumstances; a party should exhaust all domestic opportunities for appeal prior to seeking to rely on public policy arguments in order to try to resist enforcement of that judgment in another EU member state.
1 Article 34(1) of the Brussels Regulation, No. 44/2001 - recast Brussels Regulation, No. 1215/2012.)
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.