European Union: The Recast Brussels Regulation: What It Means For Commercial Parties

Last Updated: 13 February 2015
Article by Keith Smith, David Strahan, Florence Loric and Nicholas Cole
Most Read Contributor in Ireland, October 2018

On 10 January 2015 the Brussels Regulation which, since 2001, governed jurisdiction and the recognition and enforcement of judgments in civil and commercial matters across the EU, was repealed and replaced by the Recast Brussels Regulation.

The Recast Regulation largely mirrors the approach and structure of the Brussels Regulation and many of the provisions remain unchanged. However there are a number of significant changes to the old regime under the Brussels Regulation, in particular in relation to the:

  • rules relating to jurisdiction clauses;
  • issue of "torpedo actions";
  • ability of EU member state courts to stay proceedings in favour of non- EU member state courts;
  • scope of the arbitration exclusion; and
  • procedure for the recognition and enforcement of judgments across the EU.

RULES RELATING TO JURISDICTION CLAUSES

Jurisdiction or 'choice of court' agreements are commonly used in commercial agreements. Under the Brussels Regulation, EU member state courts were obliged to recognise such agreements, provided at least one of the parties was domiciled in the EU.

The Recast Regulation removes that domicile requirement. Now, where parties to a contract, regardless of their domicile, agree that the courts of a particular EU member state will have jurisdiction to settle any disputes which arise in connection with the contract, the jurisdiction clause must be recognised by all EU member state courts.

JURISDICTION CLAUSES & "TORPEDO ACTIONS"

Under the Brussels Regulation, if a party, in breach of an exclusive jurisdiction clause, commenced proceedings in the courts of an EU member state other than that chosen by the parties, and the other party brought parallel proceedings in respect of the same cause of action before the chosen court, the chosen court had to wait until the court first seised determined whether it had jurisdiction.

This "first in time" rule seriously undermined the efficacy of exclusive jurisdiction clauses. Parties seeking to delay or frustrate proceedings which might properly be brought before the courts of the chosen member state often brought proceedings in another member state where it was likely to take a long time to determine the jurisdiction question. The courts of the chosen member state were required to stay the proceedings properly brought before them, pending the court first seised determining the issue of jurisdiction. This had the knock-on effect of delaying the determination of the proceedings properly brought. This tactic was often known as a "torpedo action".

The Recast Regulation addresses this shortcoming by giving priority to the chosen court and requiring any other court first seised to stay its proceedings until the chosen court decides whether it has jurisdiction. If the chosen court decides that it has jurisdiction, it can proceed to determine the substantive issue irrespective of whether the court first seised has granted a stay of the proceedings.

This solution only applies, however, where there is an exclusive jurisdiction clause. Many standard form contracts, particularly in the finance sector, contain what are known as unilateral or asymmetric jurisdiction clauses. Such clauses require one party to sue in a particular jurisdiction, but give the other party freedom to sue in a number of jurisdictions. It is as yet unclear whether such clauses will be regarded as exclusive jurisdiction clauses for the purposes of the Recast Regulation and so the risk of being 'torpedoed' potentially remains where such clauses are used.

JURISDICTION AGREEMENTS IN FAVOUR OF NON-EU MEMBER STATE COURTS

The Brussels Regulation was silent on the issue of whether EU member state courts could recognise exclusive jurisdiction agreements in favour of non-EU member state courts. Case law suggested that where there was an exclusive jurisdiction clause in favour of a non-EU member state court, but one of the parties brought parallel proceedings in an EU member state on the basis of one of the jurisdictional rules set out in the Brussels Regulation, the EU member state court was required to hear the matter, irrespective of the jurisdiction clause.

Under the Recast Regulation where the proceedings brought before the non-EU member state court are first in time, the EU member state court can stay any parallel proceedings brought before it in breach of the jurisdiction clause provided that: (i) the judgment of the non-EU member state court will be capable of recognition and enforcement in that member state; and (ii) the stay is necessary for the proper administration of justice.

This only applies where the non-EU member state court proceedings are first in time. There is an obvious risk therefore that a party who wishes to avoid a jurisdiction clause in favour of a non-EU member state court might simply bring pre-emptive proceedings in an EU member state.

THE ARBITRATION EXCLUSION

While arbitration was excluded from the scope of the Brussels Regulation, the scope of the exclusion was somewhat uncertain, and a confusing body of case law developed across the EU.

The Recast Regulation clarifies that all matters relating to arbitration fall outside its scope, including matters relating to the establishment of an arbitral tribunal, the powers of arbitrators, the conduct of an arbitration procedure and the enforcement of an arbitral award. Where one party brings proceedings before an EU member state court in breach of an arbitration agreement, the other party can ask the court of the seat of the arbitration to refer the matter to arbitration and the court of the seat cannot be prevented from doing so.

The Recast Regulation does not apply to a ruling given by an EU member state court on the validity of an arbitration agreement. This means, for example, that where a party who has entered into an arbitration agreement where the seat of the arbitration is Ireland, obtains an order from the French courts that the arbitration agreement is invalid, this order need not be recognised by the Irish courts. However, if the French court then determines the substance of the dispute, this judgment must be recognised and enforced. The difficulty here is that the judgment of the French court on the substance of the dispute might conflict with the determination of the arbitral tribunal. Both these judgments will technically be enforceable in the Irish courts as the court of the seat. The Recast Regulation does say, however, that the New York Convention is to take precedence over the Recast Regulation, which suggests that, in the situation described, the Irish courts could recognise the arbitral award notwithstanding the conflicting French judgment. It remains to be seen how this will operate in practice.

ENFORCEMENT OF JUDGMENTS

Under the Brussels Regulation, in order to enforce an EU member state judgment in another member state, a judgment creditor was required to obtain a declaration of enforceability in the member state in which enforcement was sought. The Recast Regulation has removed this requirement, simplifying and streamlining the enforcement procedure. The judgment creditor is now only required to present a copy of the judgment and a standard form certificate issued by the court which granted the judgment. It can then begin whatever enforcement measures are available under the local law. The onus is on the judgment debtor to oppose enforcement and the grounds on which it can do so are very limited.

COMMENTARY

Overall the changes made in the Recast Regulation are to be welcomed, though it appears to have created some new areas of uncertainty. It is likely that we will see quite a bit of litigation in relation to the Recast Regulation in the coming years as parties get to grips with the consequences of its provisions.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions