EU law currently provides a simple, fast and cost-effective mechanism for a party to enforce a judgment of the Polish courts in the courts of an EU Member State and vice versa. This is particularly important in relation to the so called “special jurisdiction” which allows to sue a foreign party in the EU Member State where the contract was supposed to be performed. In general, the Brussels Regulation provides that parties should be sued in the courts of the EU Member State where they are domiciled. However, where the parties have agreed that the courts of a particular EU Member State have exclusive jurisdiction, only those courts will have jurisdiction. If proceedings were brought in the courts of another EU Member State then those other courts should stay proceedings pending determination of jurisdiction by the chosen court. Until 31 December 2020 this mechanism used to apply also to the UK. Unfortunately, due to Brexit, this mechanism is no longer available for claims commenced in the UK after the 1 January 2021.
As we know, the UK left the EU on 31 January 2020, and the Brexit transition period came to an end on 31 December 2020. Shortly before the transition period ended, the UK and EU agreed the terms of a Trade and Co-operation Agreement (TCA). The TCA a classic free trade agreement – tariff and quota-free trade in goods but little mutual recognition and very modest commitments on services. The real innovations come with the emphasis on preserving the so-called level playing field. EU laws no longer apply in the UK, though the UK has retained EU laws as at the end of the transition period, which have been adapted for the UK.
Even with the TCA in place, the future relationship between the UK and the EU will remain a very fluid one, especially in the area of dispute resolution because TCA does not address jurisdiction and enforcement of judgments in civil proceedings (proceedings that start after 1 January 2021 will be subject to a combination of rules set out in the Hague Choice of Courts Convention, the Brussels Regulation (for the EU Member States) and the local laws of each country). From 1 January 2021, an English judgment will have the same status in an EU Member State as a judgment from, for example, a New York Court. As such, it will be enforced according to the domestic enforcement arrangements in each Member State, unless the Hague Choice of Courts Convention applies.
Businesses should be aware that the way that English judgments will be enforced in the EU and vice versa, has changed for claims commenced in 2021. The domestic enforcement arrangements in most Member States are well-developed, though they are likely to be more time-consuming and more costly. Businesses should factor these considerations into both their litigation strategies and in determining the types of dispute resolution clauses to use in their contracts.
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