DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT C: CITIZENS' RIGHTS AND CONSTITUTIONAL AFFAIRS LEGAL AFFAIRS

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3 DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT C: CITIZENS' RIGHTS AND CONSTITUTIONAL AFFAIRS LEGAL AFFAIRS The Proposal for a Regulation of the European Parliament and of the Council on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Recast) NOTE Abstract This note considers several aspects of the reforms proposed by the Commission (COM (2010) 748 final, 14 December 2010) to the current EU legal framework regulating the jurisdiction of Member State courts, and the recognition and enforcement of judgments, in civil and commercial matters, as contained in Regulation (EC) No. 44/2001 (the Brussels I Regulation). It suggests possible amendments to the Commission s Proposal, as set out in the Annex. PE EN

4 This document was requested by the European Parliament's Committee on Legal Affairs. AUTHOR Professor Andrew DICKINSON Professor in Private International Law, University of Sydney Visiting Fellow, British Institute of International and Comparative Law Solicitor, England and Wales; Consultant, Clifford Chance LLP RESPONSIBLE ADMINISTRATOR Roberta PANIZZA Policy Department C: Citizens' Rights and Constitutional Affairs European Parliament B-1047 Brussels LINGUISTIC VERSIONS Original: EN Translation: FR ABOUT THE EDITOR To contact the Policy Department or to subscribe to its monthly newsletter please write to: Manuscript completed in September European Parliament, Brussels, This document is available on the Internet at: DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

5 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson TABLE OF CONTENTS TABLE OF CONTENTS 1 LIST OF ABBREVIATIONS 2 INTRODUCTION AND EXECUTIVE SUMMARY 3 1. THE ABOLITION OF EXEQUATUR The Proposal in Outline Appraisal Reform of the procedure for enforcement Reform of the grounds for opposing recognition and enforcement 8 2. THE REGULATION IN THE INTERNATIONAL LEGAL ORDER The Proposal in Outline Appraisal Extending the Regulation's rules to non-eu domiciled defendants Relations with third State courts CHOICE OF COURT AND ARBITRATION AGREEMENTS The Problem Stated The Proposal in Outline Choice of court agreements Arbitration agreements Appraisal The Commission s policy Drafting of the Proposal Hague Convention on Choice of Court Agreements A NEW BASIS OF SPECIAL JURISDICTION RIGHTS IN REM IN MOVEABLE PROPERTY (ART. 5(3)) The Proposal In Outline Appraisal RINGFENCING THE RIGHT TO STRIKE (ART. 85) The Proposal Appraisal 24 ANNEX - DRAFTING PROPOSALS 25 1

6 Policy Department C: Citizens' Rights and Constitutional Affairs LIST OF ABBREVIATIONS Brussels I Regulation / Brussels I regime Commission Proposal / Proposal ECHR EP Resolution Impact Assessment Nuyts Report Rome I Regulation Rome II Regulation TEU TFEU Regulation (EC) No. 44/2011 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (as amended) Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) (COM (2010) 748 final) European Convention on Human Rights European Parliament resolution of 7 September 2010 on the implementation and review of the Brussels I Regulation (2009/2140(INI)) Impact assessment supporting Commission Proposal (SEC (2010) 1547 and 1548 final) Professor A Nuyts, Study on Residual Jurisdiction, available at Regulation (EC) No. 593/2008 on the law applicable to contractual obligations Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations Treaty on European Union Treaty on the Functioning of the European Union 2

7 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson INTRODUCTION AND EXECUTIVE SUMMARY KEY FINDINGS The Commission s conduct of the Brussels I review process provides a model for future exercises of this kind. Overall, the Proposal and Impact Assessment provide a sound basis for discussion in the Council and the European Parliament of reforms to the Brussels I regime. The Brussels I Regulation is an important instrument, which has generally worked well in practice. A convincing case must be made for any material changes. Some elements of the Proposal give cause for concern, and require amendment if they are to be accepted. In late 2010, the Commission published its Proposal 1 to recast Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2 (the Brussels I Regulation ). The Brussels I Regulation is foremost among the EU private international law instruments, in terms of its heritage 3 and significance in commercial and legal practice in the EU. 4 It has, in the main, worked well. 5 Accordingly, the justifications advanced by the Commission for reforming several key aspects of the Regulation s architecture must be closely scrutinised, and not accepted without demur. The need to maintain the integrity of the instrument, and its close relationship with the Lugano Conventions (revised as recently as 2007), require a convincing political, legal and economic case for any material amendments. Account must also be taken of the draft report of the European Parliament s Committee on Legal Affairs 6 and the Opinion of the European Economic and Social Committee. 7 The Commission Proposal sets out the text of a new Regulation 8 to repeal and replace the Brussels I Regulation in its entirety, 9 while carrying forward many of its provisions without substantial amendment. 10 The Commission s short Explanatory Memorandum 11 and its 1 COM (2010) 748 final [ ]. Unless otherwise stated, (a) references in this briefing note to Article and Recital numbers are to the Articles and Recitals of the Commission s Proposal in this COM document, and (b) the Article numbers of the Proposal are the same as those of the corresponding provisions of the Brussels I Regulation (note 2 below) in its current form. 2 OJ L12/1 [ ]. 3 The Regulation is the successor to the 1968 (Brussels) Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (OJ L299, 32 [ ], as amended; for consolidated text, see OJ C27/1 [ ]) and a close relative of the 1988 and 2007 (Lugano) Conventions on the same subject matter between Member States of the (then) EC and EFTA States (Lugano I: OJ L319/9 [ ]; Lugano II: OJ L147/5 [ ]). 4 The EESC describes it as "the EU's most important piece of legislation so far on judicial cooperation in civil matters" (note 7 below, para. 2.1). 5 The European Parliament's Rapporteur describes it, without hyperbole, as "one of the most successful pieces of EU legislation" (note 6 below, p. 46). 6 EP document 2010/0383(COD) [ ]. 7 OJ C218/78 [ ]. 8 For convenience, this draft Regulation will be referred to in this note as the Proposal, proposed Brussels I bis Regulation or Brussels I bis regime. 9 Art. 92(1). 10 Other than amendments relating to the Commission s proposal to extend the Brussels I regime to defendants not domiciled within the EU (Section 2, pp below), the draft Regulation contains no major textual changes to (1) the primary rule of jurisdiction based on the defendant s domicile (Art. 2), (2) the rules of special jurisdiction for contractual and tortious matters, civil claims ancillary to criminal proceedings, and disputes relating to a branch etc., a trust or a salvage claim (Art. 5), (3) the rules of special jurisdiction for particular situations involving connected claims or proceedings (Art. 6), (4) the protective rules of jurisdiction for consumer, insurance and employment contracts (Arts. 8-21), or (5) the rules of exclusive jurisdiction (Art. 22). 3

8 Policy Department C: Citizens' Rights and Constitutional Affairs accompanying Impact Assessment 12 focus upon the following proposed reforms to the currently applicable Brussels I regime: 1. The abolition, for most judgments, of the intermediate procedure for the enforcement of judgments between Member States (exequatur), coupled with a significant reduction in the grounds for challenging recognition or enforcement (see Section 1 below). 2. The extension of the Regulation s rules of jurisdiction to defendants not domiciled in any Member State, in lieu of the current delegation within the Regulation framework to national rules of jurisdiction (see Section 2 below) Measures to enhance the effectiveness of choice of court and arbitration agreements (see Section 3 below). These elements of the Proposal are also the main focus of this briefing note, which addresses also other aspects of the relationship with third State courts (Section 2 below, p. 16) the proposed new basis of special jurisdiction for movable property in Art. 5(3) (Section 4 below) and the boilerplate provision in Art. 85 which appears to ringfence the right to strike (Section 5 below). 14 In summary, the Commission s justifications for some of its policy choices are not wholly convincing, and there remains significant room for improvement in the drafting of the provisions of the proposed Brussels I bis Regulation. 15 In particular, this note concludes that: Reform of the procedural mechanism for the enforcement of judgments (exequatur) should be de-coupled from reform of the substantive grounds for opposing recognition or enforcement. The public policy (ordre public) exception to recognition and enforcement must be retained in all cases. The Commission s case for extending the Regulation s rules to non-eu domiciled defendants is unconvincing. This element of the Proposal should not be accepted, at least in its present form. Some drafting improvements are needed to achieve the Commission s policy objectives with respect to choice of court and arbitration agreements. Art. 85 (concerning the right to strike) is unwarranted, and should be deleted. These points of disagreement should not, however, be taken as condemning the Proposal as a whole there can be no doubt that it targets important issues and offers many opportunities to improve the existing Brussels I regime. Moreover, those responsible within the Commission s DG Justice must be commended for the manner in which they have approached the Brussels I review and the time and careful thought that have clearly gone into drafting the Proposal and accompanying documentation. As appears from the detailed Impact Assessment, 16 the Commission based its detailed Proposal on the several studies commissioned by it, 17 on the responses (130) to the Commission s 2009 Report and Green 11 COM (2010) 748 final, pp SEC (2010) 1547 final, with a summary in SEC (2010) 1548 final. 13 Brussels I Regulation, Art For a more detailed appraisal of the Commission Proposal, see A Dickinson (2010) 12 Yearbook of Private International Law, pp Some drafting suggestions appear in the Annex. 16 Impact Assessment, para Including, in particular, the Heidelberg Report, authored by Professors Hess, Pfeiffer and Schlosser, on the functioning of the Brussels I regime, available at: 4

9 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson Paper, 18 on views expressed by delegates at conferences in Heidelberg and Madrid coorganised by the Commission and on empirical data collected by an external service provider to support the Impact Assessment. 19 These materials provide a sound footing for the future legislative process. All in all, the Commission s thorough and methodical approach to the review process represents a model for future exercises of this kind, avoiding damaging errors of the past See also (at the same website) (1) the study by Professor Nuyts on the Member States' residual grounds of jurisdiction, currently available under Art. 4 ( Nuyts Report ), and (2) a study by Professor Hess on the enforcement of judicial decisions in the European Union. The Impact Assessment refers also to a study by GHK Consulting on the impact of a possible ratification by the EU of the 2005 Hague Convention on choice of court agreements (see the Commission s Proposal (COM (2008) 538 final) and Impact Assessment (SEC (2008) 2390) [both ] concerning the Decision on the Signing by the European Community of the Hague Choice of Court Convention). 18 COM (2009) 174 (Report) and 175 (Green Paper) [both ]. The responses are collected at < 0002_en.htm>, and briefly summarised in Annex II to the Impact Assessment. 19 Centre for Strategy & Evaluation Services (CSES), Data Collection and Impact Analysis Certain Aspects of a Possible Revision of Council Regulation No. 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters («Brussels I»), available at < civil/studies/doc/study_cses_brussels_i_final_17_12_10_en.pdf>. 20 Most notably, in the justice area, in relation to the Commission s Proposals for the Rome II Regulation (COM (2003) 427 final [ ], not preceded by any Green Paper) and for the Rome I Regulation (COM (2005) 650 final [ ], lacking any impact assessment), as well as the current Green Paper and consultation regarding EU contract law (COM (2010) 348 final [ ]), the flaws of which are too numerous and too depressing to address here. 5

10 Policy Department C: Citizens' Rights and Constitutional Affairs 1. THE ABOLITION OF EXEQUATUR KEY FINDINGS Reform of the procedural mechanism for the enforcement of judgments (exequatur) should be de-coupled from reform of the substantive grounds for opposing recognition or enforcement. The requirement of exequatur should be abolished for all judgments in civil and commercial matters, and replaced with a requirement of service of a certificate of the judgment as a pre-condition to final enforcement measures to avoid unfair prejudice to the respondent, and to reduce the risk of fraud. The requirement of exequatur should remain for authentic instruments in any event. Member State courts should retain the ability to refuse to recognise or enforce judgments on the basis of their incompatibility with local public policy (ordre public). No distinction should be drawn between procedural and substantive public policy. Consumers should retain the right to challenge recognition or enforcement of a judgment based on a breach of the protective rules in Section 4 of Chapter II of the Regulation The Proposal in Outline In its Proposal, the Commission recommends abolition of the declaration of enforceability mechanism (commonly referred to as exequatur) as the medium for enforcement of judgments between Member States. It proposes that a judgment enforceable in its Member State of origin shall be enforceable and enforced in any Member State upon production of an authentic copy of the judgment and a certificate in the prescribed form 21 issued by the court of origin, without any intermediate procedure 22 or advance warning to the opposing party of the enforcement process. Instead, the opposing party, on learning of the judgment, has the following limited options available: - Art. 45: If he did not enter an appearance in the proceedings leading to judgment, to apply to the courts of the Member State or origin 23 to review the judgment 24 on the ground that either (a) he was not served with the claim document in sufficient time and in such a way as to enable him to arrange for his defence, or (b) he was prevented from contesting the claim due to force majeure or extraordinary circumstances without any fault on his part, 25 unless he failed to challenge the judgment when it was possible for him to do so Arts. 43 and 46: In other cases, to apply to the courts of the Member State of origin for a refusal of enforcement measures if enforcement would not be permitted by the 21 Annex I. 22 Art. 38(2) and Art. 42(1). Additional restrictions apply to the enforcement of provisional measures (see Arts. 2(a) and 42(2). 23 Directly or via the competent court in the member State of enforcement (Art 45(3)). 24 Art. 45(5). 25 Art. 45(1), a limited extension of the ground of opposition currently to be found in Brussels I Regulation, Art. 34(2). 26 The Art. 45 application must be made in the prescribed form (see Annex II), although this seems barely adequate for the purpose. The applicant is simply required to tick a box confirming which of the two Art. 45(1) grounds is relied upon no additional information or evidence is required. In contrast to Art. 46 (below), the text of Art. 45 does not expressly authorise the court to which the application is made to apply its own procedures in determining the application, and it is unclear how the application should proceed. 6

11 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson fundamental principles underlying the right to a fair trial, 27 or if the judgment is irreconcilable with another judgment between the same parties given in the Member State of enforcement or with an earlier judgment given in another Member State or in a third State in proceedings between the same parties and involving the same cause of action and which meets the conditions necessary for its recognition in the Member State of enforcement. 28 Notably, the Commission proposes that the current right to challenge recognition or enforcement of a Member State judgment on the ground of manifest incompatibility with the enforcing/recognising Member State s public policy should be removed, being replaced by the limited fair trial ground in Art Further, with one very narrow exception, no review of the jurisdiction of the court of origin would be permitted, even in the limited circumstances currently envisioned by the Brussels I Regulation (non-compliance with consumer, insurance or exclusive jurisdiction requirements). 30 The Commission recommends, however, that the exequatur requirement should remain for two categories of judgment, at least on a transitional basis: (1) judgments concerning noncontractual obligations arising out of violations of privacy and rights relating to personality, including defamation, 31 and (2) judgments in collective redress proceedings concerning the compensation of harm caused by unlawful business practices Appraisal Reform of the procedure for enforcement A strong political 33 and economic 34 case exists for the abolition of exequatur. Taking into account the empirical evidence presented by the Commission, it appears unduly burdensome to judgment creditors and a source of unnecessary cost and complexity. Nevertheless, as the European Parliament recognises, 35 removal of this barrier must be accompanied by adequate safeguards for judgment debtors, whose assets may be seized and disposed of without warning. In this case, facilitating the free movement of judgments across borders by removing a layer of judicial scrutiny may also create a risk of fraudulent activity which is higher than that present in purely domestic cases. To address these, it should be a requirement that the applicant serve on the respondent a copy of the certificate required under Art. 42 before taking final enforcement measures. 36 Unless the applicant can demonstrate that service is impracticable (for example, because the respondent has disappeared), no measures other than provisional measures would be allowed until a short prescribed period (e.g. 7 or 14 days) has elapsed after the date of service (see Annex, Drafting Proposal 1). 27 Art. 46(1), a provision which is intentionally narrower than the public policy ground currently to be found in Brussels I Regulation, Art. 34(1) (see pp below). 28 Art. 43, corresponding to the grounds of opposition currently to be found in Brussels I Regulation, Art. 34.(3)- 34(4). 29 Text to note 27 above. 30 Art. 35 of the Brussels I Regulation is to be removed from the new Regulation, although Member States may still fulfil treaty obligations towards third states not to recognise judgments based on the exorbitant grounds of jurisdiction set out in Art. 3(2) of the 1968 Brussels Convention (Art 83). 31 Art. 37(3)(a), an exception corresponding to the exclusion of these matters from the material scope of the Rome II Regulation, Art. 1(2)(g) (see Recital (33)). 32 Art. 37(3)(b), imposing certain requirements as to the nature of the proceedings. 33 See, in particular, the Stockholm Programme (OJ C115/1 [ ]), para Impact Assessment, 18, and Annex IV. 35 European Parliament resolution of 7 September 2010 on the implementation and review of the Brussels I Regulation (2009/2140(INI)) ( EP Resolution ), Recitals C-G and paras In accordance with the Service Regulation (Regulation (EC) No. 1393/2007). 7

12 Policy Department C: Citizens' Rights and Constitutional Affairs To avoid wasted costs, provision should also be made for an application to the courts of the Member State of enforcement under Art. 46 to be stayed while a parallel application to the Member State of origin under Art. 45 is pending (see Annex, Drafting Proposal 2). Whether or not exequatur is abolished for Member State court judgments, it should remain for authentic instruments, which are not the product of a judicial determination and are more likely instruments of fraud. Arguably, the existing regime in Art. 57 of the Brussels I Regulation already goes too far in giving a cross-border effect to these instruments, and their privileged position should advance no further. Accordingly, the amendments proposed in Art. 70 of the Commission s Proposal should be rejected Reform of the grounds for opposing recognition and enforcement Removal of the public policy exception Reform of the procedure for enforcement (1.2.1 above) should be decoupled from reform of the grounds for challenging enforcement. The Commission has accepted that the free movement of judgments within the EU cannot be accepted without limits. It proposes, however, to allow opposition on the basis of a fundamental procedural defect in the underlying proceedings (the rights of defence (Art. 45) and fair trial (Art. 46)) or res judicata (Art. 43), 37 while removing the other grounds of challenge currently to be found in Arts of the Brussels I Regulation. In support of this restriction, the Commission relies on advances in judicial co-operation and the level of trust among Member States. 38 However, neither legislative precedent nor the principle of mutual trust nor practical experience can justify the Commission s attempted distinction between procedural and substantive public policy. It must, of course, be acknowledged that the public policy exception has been removed in other recent EU procedural instruments: the instruments relating to uncontested claims, 39 the Small Claims Regulation 40 and the Maintenance Regulation. 41 The Brussels I Regulation, however, is of a different order, in terms both of the breadth of its subject matter and the potential scale, value and complexity of the matters giving rise to enforceable judgments. The Commission acknowledges as much in its reasoning supporting the retention of the intermediate procedure with respect to privacy and defamation and collective redress judgments, recognising "the divergences between Member States' systems and the particular sensitivity" of these matters. 42 These fundamental differences and sensitivities extend, however, across other areas of civil liability within the material scope of the Brussels I Regulation, as the CJEU s and ECHR case law highlights: for example, the enforcement of contracts concerning activities which may be considered as illegal, immoral or anti-social, 43 freedom of religious expression 44 or the status or activities of religious 37 Art. 43 refers only to the Member State of enforcement suggesting that res judicata is unavailable as a ground for objecting to recognition of a judgment. This seems likely to be a drafting error. 38 Commission Proposal, Regulation (EC) No 805/2004 establishing a European enforcement order for uncontested claims (OJ L143/15 [ ]); Regulation (EC) No 1896/2006 establishing a European Order for Payment Procedure (L399/1 [ ]). 40 Regulation (EC) No 861/2007 creating a European Small Claims Procedure (OJ L199/1 [ ]). 41 Regulation (EC) No 4/2009 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations (L7/1 [ ]). 42 Recital (23). See also Explanatory Memorandum, e.g. contracts relating to internet gaming (cf. Case C-42/07, Liga Portuguesa de Futebol Profissional v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa [2009] ECR I-7633, para. 57) or the sale or importation of wartime memorabilia, pornographic materials or goods glorifying violence (cf. Case 34/79, R v Henn and Darby [1979] ECR 3795, para. 16; Case C-36/02, Omega Spielhallen- und Automatenaufstellungs- GmbH v Oberbürgermeisterin der Bundesstadt Bonn [2004] ECR I-9609), prostitution (cf. Case 116/81, Adoui and Cornuaille v Belgian State [1982] ECR 1665, para. 8) or the promotion of abortion (cf. Case C-159/90, Society for 8

13 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson bodies, 45 liability for wrongful conception or wrongful life, 46 disputes concerning the right to life or death and other questions of medical ethics, 47 the use of gene technology, 48 the operation of nuclear installations, 49 or the award of punitive damages for a tort. 50 These examples are not intended to constitute a definitive or exhaustive list of further possible exceptions to the abolition of exequatur. Rather, they are intended to illustrate the point made above, that defamation/privacy and collective redress judgments do not merit separate and special treatment there are many other sensitive areas in which Member States may legitimately balance the competing policy interests in different ways, reaching solutions which may prove unpalatable to each other despite common ties and values. A fundamental discord exists between the Commission s approach to the free movement of judgments and the acknowledged limits upon the fundamental freedoms of EU law (goods, services, persons, capital). Although the principle of mutual recognition of judgments has now taken its place at the high table of EU law, by its inclusion in the text of TFEU, Art. 81, it remains a derivative principle whose subservience to the fundamental freedoms is emphasised by the reference in TFEU, Art. 81(2) to the EU s power to civil justice measures being available particularly when necessary for the proper functioning of the internal market. Against this background, and however one views the current relationship between the area of justice and the fundamental freedoms of EU law, the following question arises: why should the public policy exception be taken away from the Member States in connection with the free movement of judgments when they remain entitled under the Treaties to impose unilateral controls on the free movement of goods, persons, services and capital based on public policy or other mandatory requirements? 51 In these areas, the CJEU has long recognised that EU law does not impose upon the Member States a uniform scale of values as regards the assessment of conduct which may be considered as contrary to public policy. 52 The Commission gives no good reason for treating the cross-border recognition and enforcement of judgments any differently. Neither the principle of mutual trust, nor the constitutional status of the EU Charter of Fundamental Rights, can close this gap. They are concerned with the application of EU law, 53 whereas public policy remains principally the province of national law. Further, the Charter does not, 54 and cannot be taken to, permit the Member States to give up the power to refuse enforcement on public policy grounds if there has been a manifest breach of the European Convention on Human Rights, to which all Member States are parties. 55 the Protection of Unborn Children v Grogan [1991] ECR I-4865) or contracts with counterparties upon whom a Member State has imposed unilateral trade sanctions. 44 e.g. the right of an employee to wear a symbol of his or her religious faith. See also the decision of the European Court of Human Rights in Lautsi v Italy, App. No /06 (18 March 2011). 45 e.g. the right to use a building for the purposes of worship. 46 C van Dam, European Tort Law (Oxford, 2006), pp e.g. liability for assisted suicide, human organ donation or the duty to provide or withdraw medical treatment without the patient s consent. 48 e.g. the growing of, and liability for, genetically modified crops. 49 Case C-343/04, Land Oberösterreich v CEZ [2006] ECR I EGBGB, Art. 40(3) (Germany); Rome II Regulation, Recital (32). 51 TFEU, Arts. 36, 45(3), 52(1), 62, 65(1), 202. These derogations are, of course, restrictively interpreted (see, e.g., Case C-441/02, Commission v Germany [2006] ECR I-3349, paras ). 52 Adoui and Cornuaille v Belgian State, note 43 above, para TEU, Arts. 4(3) and 6; Charter of Fundamental Rights, Art. 51; Protocol on the Application of the Charter of Fundamental Rights of the European Union to Poland and the United Kingdom; Case C-400/10 PPU, J McB v LE [2010] ECR I-0000, paras Cf. Case C-491/10 PPU, Zarraga v Pelz [2010] ECR I-0000, para Charter of Fundamental Rights, Art Bosphorus Hava Yolları Turizm ve Ticaret Anonim Şirketi v Ireland [2005] 42 EHRR 1, paras (Grand Chamber), a case concerning the right to property in Art. 1 of Protocol 1 to the ECHR (an aspect of substantive public policy ). 9

14 Policy Department C: Citizens' Rights and Constitutional Affairs Finally, the Rome I and Rome II Regulations, as well as national systems of private international law, recognise the right of Member State courts to refuse to apply a foreign law where its application would contradict the forum s public policy or mandatory rules. 56 If the Member State of origin can do so, there seems no reason why the Member State of enforcement should not equally have this entitlement. To enable public policy to be applied by one, but not the other court, appears liable to encourage forum shopping to obtain a favourable public policy regime, which would undermine one of the primary aims of the Brussels I, Rome I and Rome II regimes. 57 In summary, there appears to be no good legal or economic reason why the current public policy exception in the Brussels I Regulation should not be retained. The exception provides an essential safety valve, 58 and should be seen not as facilitating, rather than detracting from, the free movement of judgments. It can be easily accommodated within the Commission Proposal and has the advantage that the exequatur procedure could be removed for all judgments, avoiding the problematic and arbitrary special categories listed in Art. 37(3) of the Proposal (see Annex, Drafting Proposal 3). Reviewing the jurisdiction of the Member State of origin By contrast with the public policy exception, the Commission s proposal to remove any right to challenge a judgment on the ground that the Member State court of origin did not have jurisdiction under the Regulation can be justified on the basis of the principle of mutual trust in the application of EU law. Nevertheless, it is submitted that two of the existing exceptions 59 should remain. First, in the case of consumers, Art. 12 TFEU requires consumer protection to be taken into account in defining and implementing EU policies and activities and Art. 169 of the same Treaty targets a high level of consumer protection. The jurisdictional protection which the Brussels I regime gives to consumers 60 may, however, be rendered illusory or of little value in individual cases if, in the event that proceedings are commenced by a counterparty in contravention of the Regulation in a Member State court outside the consumer s domicile, the consumer is required to travel, and/or to instruct a legal representative, to make a jurisdictional plea (and, perhaps, to participate in the proceedings up to trial) in a legal system with which he or she will likely have no familiarity. Enabling a judgment to be challenged in the Member State of enforcement on the ground of a breach of the rules set out in Section 4 of the proposed Brussels I bis Regulation would reinforce the effectiveness of the consumer protection that those rules afford, and deter vexatious proceedings. Again, a small amendment is all that would be needed to achieve this (see Annex, Drafting Proposal 3). Secondly, and consistently with TFEU, Art. 345, 61 a right to review jurisdiction at the enforcement stage could also be supported in the case of judgments relating to rights in rem in immovable property, where the Member State of origin has violated the exclusive jurisdiction of another Member State where the land in question is situated Rome I Regulation, Arts. 9(2) and 21; Rome II Regulation, Arts. 16 and Brussels I Regulation, Recital (11); Rome I Regulation, Recital (6); Rome II Regulation, Recital (6). 58 Guardianship of Infants (The Netherlands v Sweden) (1958) 25 ILR 242, 268 (Sir Hersch Lauterpacht). 59 Brussels I Regulation, Art Brussels I Regulation and Commission Proposal, Arts The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership. 62 Brussels I Regulation and Proposal, Art. 22(1)(a). 10

15 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 2. THE REGULATION IN THE INTERNATIONAL LEGAL ORDER KEY FINDINGS The Commission s case for extending the Regulation s rules to non-eu domiciled defendants is unconvincing. This element of the Proposal should not be accepted, at least in its present form. The Commission's proposed "mildly exorbitant" rules for non-domiciled defendants (Arts ) are in any event problematic The Proposal in Outline The Commission perceives two, related, problems with the functioning of Art. 4 of the Brussels I Regulation, and the diverse national rules of jurisdiction to which it leads. First, the situation is liable to create distortions of competition in that companies from Member States with restrictive rules of jurisdiction will usually incur higher business risk and higher legal costs than companies based in Member States which grant broader access: being unable to sue in their home court, they must litigate in a foreign, unfamiliar legal system with the risk that they may not get a fair trial, particularly in countries where the judiciary cannot be considered to be independent or is riven by corruption. 63 Secondly, the absence in many Member States of a right for weaker parties sue in their home jurisdiction creates an additional burden for those parties and is likely to deprive them of the protection granted by mandatory European legislation. 64 Against this background, having considered various policy options including retention of the status quo, minimum harmonisation of the Member States rules on jurisdiction for non-eu defendants and full harmonisation, the Commission elects to steer the latter course. It proposes, therefore, that the Regulation s jurisdictional rules be applied with mandatory effect also to non-member State domiciled defendants, thereby displacing the Member States existing national grounds of jurisdiction in such cases. 65 Recognising that this may substantially reduce access to the courts in many Member States, and that the general domicile based ground of jurisdiction (Art 2) would not be available, the Commission proposes the following two mildly exorbitant 66 supplementary grounds of jurisdiction for non-eu domiciled defendants. First, for suit in the courts of a Member State where moveable assets belonging to the defendant are located, provided that (1) no other Member Stare court has jurisdiction under the preceding rules in the Regulation (Arts 2-24), (2) the value of the property is not disproportionate to the value of the claim, and (3) the dispute has a sufficient connection with the Member State of the court seised. 67 Secondly, on an exceptional basis, the right to bring proceedings before a Member State court with which the dispute has a substantial connection, if the right to a fair trial or the right of access to justice so requires and if no other Member State court has jurisdiction under the preceding rules in the Regulation. In particular, it is contemplated that proceedings may be brought under these circumstances (a) if proceedings would be impossible or cannot reasonably be brought or conducted in a third State with which the dispute is closely connected, or (b) if a judgment given in a third State would not be entitled to recognition and 63 Impact Assessment, Impact Assessment, 21, referring not only to consumers, employees and insured but also to commercial agents and victims of defective products. 65 Explanatory Memorandum, Impact Assessment, 24, Art

16 Policy Department C: Citizens' Rights and Constitutional Affairs enforcement in the Member State of the court seised and such recognition and enforcement is necessary for the claimant s rights to be satisfied. 68 In addition, the Commission proposes, in Art. 34, a new rule enabling Member State courts to stay proceedings where proceedings involving the same parties and the same cause of action are already pending before the courts of a third State. This rule creates, it would appear, a solitary exception to the mandatory status of the Regulation's rules in situations having a connection to State not party to the Brussels or Lugano Regimes Appraisal Extending the Regulation's rules to non-eu domiciled defendants The Commission's case for extending the Regulation's rules to non-domiciled defendants appears weak. The Commission lacks any clear political mandate for this reform, 70 and admits that the negative economic impact on companies is difficult to quantify, and admits that there is little quantitative evidence that the existing divergences between the national laws of Member States lead to distortions of competition and that the absence of access to EU courts entails significant losses for consumers and other weaker parties. 71 It must be acknowledged that the Brussels I regime in its present form does little to protect non-eu domiciled defendants. The Regulation subjects them to the Member States' "exorbitant" national rules of jurisdiction (Art. 4), while enabling any judgment against them to be enforced in every other Member State without (in most cases) the possibility of review of the jurisdiction of the Member State of origin (Art. 35(3)). It seems likely that the Commission's proposal, if adopted, would substantially increase the protection available to these defendants. In (mostly) aligning rules for non-eu domiciled defendants with those for EU domiciled defendants, the Commission s Proposal would likely accord to those defendants the same high level of protection, justifying a restrictive interpretation of rules which constitute exceptions to suit before the courts of the defendant s (non-eu) domicile. 72 In the interests of legal certainty, it seems inevitable that the common rules (Arts 5 to 24) that would apply to both EU and non-eu defendants would be given the same interpretation for both groups and that, if the protection given to EU defendants is not to be diluted by this reform, the Regulation would therefore favour suit in the defendant s home court. Further, it seems entirely possible that the Commission s Proposed mildly exorbitant additional rules in Arts , 73 including the requirement of a sufficient connection to the Member State of the court seised, would also be given a restrictive interpretation by the CJEU as exceptional rules. Moreover, in one important respect, the text of the Commission s Proposal presently treats non-eu domiciled defendants more favourably than their EU counterparts, in that the codefendants jurisdiction in Art. 6(1) is available only against defendants domiciled in a Member State. No reason is given for this distinction, which cannot on any view be supported Art Cf. Case C-281/02, Owusu v Jackson [2005] ECR I-1383; Opinion 01/03, Lugano Convention [2006] ECR I- 1145, para. 153 and the comments of Adv. Gen. Kokott in Case C-420/07, Apostolides v Orams [2009] ECR I- 3571, Opinion, para The European Parliament, in particular, considered that it would be premature to extend the Regulation in this way without further study, consultations and political debate (see EP Resolution, para. 15), a position maintained in the recent Draft Report of the Parliament s Legal Affairs Committee (note 6 above, p. 47). 71 Impact Assessment, 22, Recitals (12) and (13). See also, e.g., Case C-533/07, Falco Privatstiftung v Weller-Lindhorst [2009] ECR I- 3327, para Arts. 25 and 26 (see text to notes above). 74 If the Commission s harmonisation agenda is to be pursued, Art. 6(1) should apply equally to EU and non-eu domiciled defendants, allowing related claims to be brought against them before the courts of any Member State where one or more of them are domiciled. 12

17 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson The Commission does not, however, seek to justify its proposal on the basis of equal treatment of EU and non-eu domiciled defendants. Instead, it argues that full harmonisation is necessary to ensure that EU domiciled business claimants are treated alike (to avoid distortions of competition) and that EU consumers and other "weaker parties" may have a right of access to their home courts to enforce their rights under EU legislation. As to the latter justification, it can be argued that the principle of effectiveness requires that rights conferred by the EU consumer acquis should not be rendered illusory by the lack of a competent court in any Member State. However, the proposed extension of the Brussels I Regulation is a very blunt instrument with which to achieve this object. The Regulation contains, in Chapter I, rules which strengthen the judicial protection afforded to insured parties, consumers and employees, 75 but not other categories of weaker party identified by the Commission, including commercial agents and victims of defective products. 76 The application of these rules does not depend on the application to the dispute of EU law, and the rules cannot therefore be directly linked to the effectiveness of EU legislation in these areas. The rules currently apply, inter alia, when a protected party deals with a branch, agency or other establishment within the EU of a non-eu domiciled counterparty. 77 In such a case, there exists a sufficiently strong connection with the EU to justify the Member States collectively in taking jurisdiction on a protective basis over these non-eu domiciled defendants and in applying EU/Member State mandatory rules to them. 78 The Commission s proposed extension of the rules to all non-eu domiciled defendants would, however, produce a situation where an insurer, B2C counterparty or employer could be brought before the courts of the insured s or consumer s Member State of domicile 79 even if the underlying contract and its performance has no connection with the EU. 80 This kind of exorbitant jurisdiction requires a compelling justification. The mere fact that the claimant is perceived as a weaker party does not appear sufficient, especially if (as in most cases) the claimant will not rely on any substantive rule specifically designed to protect him but instead on general rules governing the contractual or non-contractual liability of his counterparty. Moreover, jurisdiction and applicable law are, of course, two separate questions: the territorial scope of protective EU legislation can only be determined from the text of the instruments themselves, 81 and no amount of meddling with the Brussels I regime can remedy lacunae in existing legislation. Against this background, it seems highly desirable for the EU to take a holistic approach to the protection of weaker parties by ensuring that legislative instruments having this objective (including those within the consumer acquis) contain specifically tailored rules of jurisdiction and a clear statement of their territorial effect. The fragility of the Commission s arguments in this regard is highlighted by the supporting example given in its Impact Assessment of an English resident buying a timeshare in Turkey. 82 The Timeshare Directive, 83 to which the Commission refers, would not apply to 75 Brussels I Regulation, Chapter I, Sections 3, 4 and See Impact Assessment, Brussels I Regulation. Arts. 9(2), 15(2) and 18(2). 78 Whether commercial parties are genuinely in need of protection when concluding insurance contracts remains highly debatable. In many cases, the size and bargaining power of the insured will significantly exceed that of the insurer. The Commission does not, however, propose any change to the insurance provisions. 79 Art. 9(1) (insurance) and Art. 16(1) (consumer contracts). The employment contract provisions do not, on the other hand, give a general right of suit in the employee s country of domicile. 80 For consumer contracts other than the sale of goods on consumer credit terms, or credit agreements relating to such sales, Art. 15(c) requires that the counterparty pursues commercial or professional activities in the Member State of the consumer s domicile or, by any means directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities. This may be argued to provide a sufficient connection to justify protective jurisdiction in all cases even as against defendants without any EU establishment. 81 See, e.g., Case C-381/98, Ingmar GB Ltd v Eaton Leonard Technologies [2000] ECR I-9305 (a case concerned with the Commercial Agents Directive (Directive (EC) No 86/653) to which the protective rules in the Brussels I Regulation did not apply). 82 Impact Assessment,

18 Policy Department C: Citizens' Rights and Constitutional Affairs this situation, unless the law applicable to the contract is the law of a Member State. 84 Under Art. 10(2) of the Directive, its provisions are given overriding mandatory effect only if (a) the immovable property in question is situated in a Member State, or (b) in the case of a contract not directly related to immovable property, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities. Neither of these conditions is satisfied in the Commission s example. As to the former justification, the Commission's proposal would undoubtedly level the playing field, but would do so by disadvantaging all Member State businesses equally by placing severe restrictions upon the circumstances in which they could sue non-eu domiciled counterparties within the EU. In this connection, the Commission's example in its Impact Assessment of an Italian company unable under Italian national rules of jurisdiction to sue a Saudi Arabian company in its home courts is telling, as Italy is the only Member State to have applied the rules in Sections 2 to 4 of the 1968 Brussels Convention to claims against non-eu domiciled defendants. 85 Against this background, the Commission s assertions that [t]he full extension of the Regulation s rules on jurisdiction to litigate in the EU would increase the possibilities for EU companies to litigate in the EU rather than abroad, and that that costs and delays will reduce because litigation within the European area of justice is generally cheaper and simpler than in a country outside the EU 86 appear, at best, unduly optimistic. If the Commission s Proposal is adopted in its present form, there appears a significant likelihood that it will adversely affect the EU economy in at least three ways. First, by requiring EU businesses, which are currently able to litigate against non-eu trading partners before their own courts - for example, on the basis of a choice of English law in a commercial agreement 87 or their French nationality 88 - to litigate abroad, with all the costs and inconvenience that the Commission identifies. 89 Secondly, by depriving an EU claimant wishing to sue an EU domiciled defendant and a non-eu domiciled defendant in the same action of the opportunity to bring them both before the same court, as Art. 6(1) would not be available as against non-eu defendants. Thirdly, as a result of a net outflow of litigation, the loss of income for EU providers of legal and other dispute resolution services. These risks do not presently appear to be worth taking in order to iron out distortions of competition which seem more apparent than real. 90 From a wider political viewpoint, the policy also seems dubious. Total harmonisation of the rules of jurisdiction for EU and non- EU defendants would require more EU claimants to seek a judicial remedy outside the EU, without any guarantee that the courts of the defendant s domicile would be able or willing to accept jurisdiction on a reciprocal basis. 91 The Commission's reasoning for choosing a supplemental rule based on the location of assets also appears questionable. The Commission suggests that 14 partially identical Member States consider the presence of the defendant s assets to suffice to establish 83 Directive (EC) No 2008/122 on the protection of consumers in respect of certain aspects of timeshare, longterm holiday product, resale and exchange contracts (OJ L33/10 [ ]). 84 Under Art. 10(1) of the Regulation, Member States must ensure that, where the law applicable to the contract is the law of a Member State, consumers may not waive the rights given to them by the Directive. 85 Nuyts Report, note 17 above, para Impact Assessment, Civil Procedure Rules 1998, PD6B, para. 3.1(6)(c). 88 Code Civil, Art. 14. See also Brussels I Regulation, Art. 4(2). 89 Impact Assessment, Text to note 71 above 91 For discussion an increasing tendency in the United States to decline jurisdiction against US corporations with respect to conduct abroad, see C Robertson, Transnational Litigation and Institutional Choice (2010) Boston College Law Review Arguably, the best known example of this is the decision to stay on forum conveniens grounds proceedings brought in New York by victims of the Bhopal disaster in India against Union Carbide Corporation, a New York corporation (see Re Union Carbide Corporation Gas Plant Disaster at Bhopal, India in December 1984 (634 F Supp 842 (SDNY 1986), affd. 809 F 2d 195 (2nd Circuit 1987), cert. denied 484 US 871 (Sup Ct 1987)). 14

19 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson jurisdiction. 92 Closer analysis, however, of the Nuyts Report, to which the Commission refers indicates that only in 10 legal systems within the Member States 93 is the presence of assets generally taken to be a basis of jurisdiction. Moreover, in some of those jurisdictions (and in contrast to the Commission s Proposal) it is not the presence of the asset, but its seizure into legal custody at the instance of the claimant (arrestment) 94 which provides the basis of jurisdiction. Other differences emerge between the regimes in force, in particular, as to whether the claim must have a connection to the forum, 95 and whether the value of the asset must be proportionate to the amount of the claim. 96 The Commission rejects the requirement of arrestment, but adopts the requirements of substantial connection and proportionality, adding a further requirement that no other Member State court has jurisdiction under the Regulation. The end product appears more restrictive than the position adopted in any of the Member States. Even if a significant minority of Member States can be shown to have a similar residual rule of jurisdiction, it seems highly unsatisfactory to blend those rules and to serve the resulting concoction up for general consumption, without considering the suitability of its ingredients. In the modern world, where assets are (at least in terms of financial value) mostly intangible, and can be moved between jurisdictions at the press of a button, 97 the location of assets appears a rather flimsy and outmoded basis for asserting jurisdiction. The best that can be said of it is that the assets in question may be available for the enforcement of any future judgment, but this does not offer any guarantee that a judgment can be enforced in the State where it was issued. 98 That factor should, in any case, be of limited concern in an instrument which exists to promote the cross-border enforcement of judgments within the EU. Overall, the assets based rule seems more suited to the 18 th or 19 th Century than the 21 st. The Commission s proposed forum necessitatis rule (Art 26), 99 although well-intentioned, is also restrictively formulated, operating only on an exceptional basis and if the right to a fair trial or the right to access to justice so requires. If there is an available forum in a non-member State with which the dispute is closely connected, the claimant must demonstrate that proceedings cannot reasonably be brought or conducted or would be impossible. These requirements would appear to impose a significant legal and evidential burden on the claimant simply to get proceedings off the ground. Moreover, the need to determine whether the claimant will obtain a fair trial in a non-member State seems liable to draw Member State courts into an area where, at the very least, they may feel some discomfort, and where they may be called on to make undesirable judgment calls, which may impact on foreign relations. In light of the foregoing considerations, this element of the Commission's proposal should not be accepted, at least without significant revision. If harmonisation of the Member States residual rules of jurisdiction is to remain on the agenda, partial harmonisation (i.e. extending some or all of the Regulation's rules to non-eu domiciled defendants on a non- 92 Impact Assessment, Austria, Czech Republic, Denmark, Estonia, Finland, Germany, Lithuania, Poland, Scotland and Sweden. In England and Wales, Latvia, Slovenia and Slovakia, the claim must be related to the relevant asset for the relevant rule to apply. See Nuyts Report, paras. 77, 80. Contrary to the Commission s data (Impact Assessment, 64), England and Wales does not recognise an unrestricted, asset based jurisdiction, but merely gives its courts a discretion to allow a claim form to be served outside the jurisdiction if the claim is related to property within the jurisdiction (Civil Procedure Rules 1998, PD6B, para. 3.1(11)). 94 This is the case, for example, in Scotland (Civil Jurisdiction and Judgments Act 1982 (UK), Sch 8, para. 2(h)). 95 e.g. in Germany, under Zivilprozessordnung (ZPO), 23, a sufficient national connection is required (see BGH , NJW 1991, 3092). According to Professor Nuyts (Nuyts Report, para. 77), German courts decline jurisdiction if the centre of gravity of the dispute is clearly and distinctly located in a foreign country. 96 e.g. in Germany, Austria and Sweden (Nuyts Report, para. 77). 97 Indeed, it might be thought that the proposed rule would encourage those wishing to evade their obligations to move their assets outside the EU. 98 Proposal, Text to note 68 above. 15

20 Policy Department C: Citizens' Rights and Constitutional Affairs exclusive basis) would seem a more satisfactory way of ensuring that EU domiciled claimants have effective judicial protection (see Annex, Drafting Proposal 4). In terms of supplemental EU rules of jurisdiction (if required), it would seem preferable to focus on activities of the non-eu defendant within the forum Member State that are linked to the dispute as demonstrating a sufficient connection with that State and with the EU to justify the residual exercise of jurisdiction (see Annex, Drafting Proposal 5) Relations with third State courts Art. 34, which addresses the problems which arise when proceedings are pending in both a Member State and a third State, 100 is to be welcomed. It is, however, limited to cases in which the two sets of proceedings involve the same parties and the same cause of action, mirroring the requirements of Art. 27 of the Brussels I Regulation. 101 Given the discretionary nature of the power conferred on a Member State court which is seised second, there would appear no obvious reason why the provision should not be extended to proceedings which are "related" within the meaning of Art The Proposal also does not address other situations where a close connection between a dispute and a third State or its legal system might be thought to warrant giving Member State courts the power to decline jurisdiction. Perhaps most significantly (and worryingly), the proposed Brussels I bis Regulation contains no mechanism that would enable a Member State court to decline jurisdiction or to stay proceedings so as to give effect to an exclusive choice of court agreement designating a court in a third State. This omission would appear to strengthen the argument, which the CJEU appears to support, 103 that no such power exists within the mandatory framework of the Regulation. Nor would a future ratification of the Hague Convention resolve the difficulties, as many choice of court agreements would fall outside the scope of the Hague regime 104 and the Brussels I regime would continue to determine the effectiveness of such agreements as between EU residents in the event that the EU were to ratify the Hague Convention. 105 This issue should be addressed as a priority, taking inspiration from the formulation of a non-chosen court s obligation to decline jurisdiction in Art. 6 of the Hague Convention (see Annex, Drafting Proposal 6, which also accommodates situations corresponding to those for which Member States have exclusive jurisdiction under Art. 22). In the present author's view, however, Member State courts should not be given a general power to stay proceedings in favour of the courts of a third country on a more appropriate forum (forum conveniens) or similar basis, as the European Parliament suggested in its 2010 Resolution on the Brussels I review. 106 Recent experience of applications of this kind in England suggests that they are costly and time consuming, and liable to involve courts in judgments as to the quality of justice available in foreign courts, which may have foreign relations implications Cf. Goshawk Dedicated Limited and Kite Dedicated Limited v Life Receivables Ireland Limited [2009] IESC 7 (Irish Supreme Court). A reference to the CJEU was not pursued. 101 See Proposal, Art See Proposal, Art Text to note 69 above. 104 Hague Choice of Court Convention, Art Hague Choice of Court Convention, Art EP Resolution, para Cf. AK Investment CJSC v Kyrgyz Mobil Tel Ltd & Ors (Isle of Man) [2011] UKPC 7, [7] [89-102] (Lord Collins of Mapesbury). 16

21 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 3. CHOICE OF COURT AND ARBITRATION AGREEMENTS KEY FINDINGS The Commission s objective, of supporting the effectiveness of choice of court and arbitration agreements, and its policy direction, of giving priority to the chosen court or to the arbitration tribunal or courts of the designated seat of the arbitration, should be strongly supported. Significant drafting changes are required to ensure that this objective is met The Problem Stated The current Brussels I Regulation framework currently suffers from a fundamental flaw: a party to a commercial contract which contains, or which is argued to contain, a provision requiring disputes to be determined by a particular binding mechanism (by court proceedings in a designated forum or by arbitration proceedings) may test the validity of the dispute resolution agreement by commencing proceedings before any non-chosen Member State court. That court, assuming that its jurisdiction is contested on the basis of the choice of court or arbitration agreement, must proceed to consider the validity and effectiveness of that agreement with respect to the proceedings in question in order to determine its own jurisdiction. In light of the CJEU s controversial West Tankers decision, 108 its decision on those questions, whether given at trial 109 or as a preliminary issue, is one which courts in the other Member States must recognise. As a result, a finding by a nonchosen court that the agreement is not binding, or does not apply to the dispute in question, will destroy the legal basis upon which the designated court or arbitral tribunal would assert jurisdiction. Even if the agreement is upheld, and the non-chosen Member State court declines jurisdiction, the defendant in those proceedings has been disadvantaged, in that he has been put to the cost and inconvenience of having to appear before a forum to which he has not consented and before which the other party has agreed not to summon him. Further, in the case of choice of court agreements, the effect of the CJEU s Erich Gasser decision 110 is that the proceedings before the non-chosen court block the possibility of any proceedings before the chosen court involving the same parties and the same cause of action unless and until the non-chosen court has declined jurisdiction. 111 As the Brussels I Regulation imposes no time limit for a court seised of a dispute to determine a jurisdiction challenge, and does not require that questions of jurisdiction be determined separately from the merits of the claim as a preliminary issue, the delay in vindication of a claiming party s rights may be severe The Proposal in Outline Choice of court agreements The Commission acknowledges concerns that the Court of Justice s decision in Erich Gasser encourages abusive litigation tactics to undermine choice of court agreements. 112 The Commission proposes two amendments aimed at supporting their effectiveness. First, to give priority to the (putatively) chosen court to decide on its jurisdiction, regardless of whether it is first or second seised. Any other court would be required to stay 108 Case C-185/07, Allianz SpA v West Tankers Inc [2009] ECR I The Brussels I Regulation does not require that questions of jurisdiction be determined as a preliminary issue. 110 Case C-116/02, Erich Gasser GmbH v Misat Srl [2003] ECR I The borrower s German action in JP Morgan Europe Ltd. v Primacom AG [2005] EWHC 508 (Comm); [2005] 2 Lloyd s Rep 665 provides a good example of this tactic. 112 Impact Assessment,

22 Policy Department C: Citizens' Rights and Constitutional Affairs proceedings until the chosen court has established or in case the agreement is invalid declined jurisdiction. 113 The Commission s principal tool for achieving this end is Art. 32(2), which provides that where an agreement referred to in Article 23 confers exclusive jurisdiction to (sic) a court or the courts of a Member State, the courts of other Member States shall have no jurisdiction over the dispute until such time as the court or courts designated in the agreement decline their jurisdiction. 114 Secondly, by introducing a harmonised conflict of law rule on the substantive validity of choice of court agreements, designating the law of the Member State chosen. 115 The Commission takes the view that these two modifications reflect the solutions established in the 2005 Hague Convention [on choice of court agreements] thereby facilitating a possible conclusion of the Convention by the European Union Arbitration agreements The Commission also expresses concerns that the CJEU s decision in West Tankers creates a real risk for abusive litigation tactics, which may undermine the attractiveness of arbitration as a method of dispute resolution within the EU. 117 To address this problem, the Proposal contains three elements, as follows: 1. First, the arbitration exception in Art. 1(2)(d) is to be qualified by addition of the words save as provided for in Articles 29, paragraph 4 and 33, paragraph Secondly, a new Recital (11) reinforces the arbitration exception, with particular reference to the exclusion of the form, existence, validity or effects of arbitration agreements, the powers of the arbitrators, the procedure before arbitral tribunals, and the validity, annulment, and recognition and enforcement of arbitral awards. 3. Thirdly, for situations in which the jurisdiction of a Member State court is contested on the basis of an arbitration agreement, Art. 29(4) 119 requires that court to stay its proceedings once either the courts of the Member State where the seat of the arbitration is located or the arbitral tribunal has been seised 120 of proceedings to determine the existence, validity or effects of the arbitration agreement, whether as their main object or as an incidental question. That court must also decline jurisdiction where the existence, validity or effects of the arbitration agreement are established, 121 and it may also do so if its national law so requires. 122 As its opening words make clear, Art. 29(4) applies only if the agreed or designated seat of the arbitration is in a Member State Commission Proposal, In addition, the lis pendens provision, currently Art. 27 of the Brussels I Regulation but now to be found in Art. 29 of the Proposal, is expressed to be without prejudice to Art. 32(2). See also Recital (19). Art. 32(2) does not apply to agreements subject to the special regimes for insurance, consumer and employment contracts in Sections 3, 4 and 5 of Chapter II of the Regulation. 115 Art. 23(1) ( unless the agreement is null and void as to its substance under the law of that Member State ). 116 Commission Proposal, Impact Assessment, As appears below (note 120), Art. 33(3) is an interpretative provision, which only relates to Art. 29(4). An additional reference to Art. 36, referring to the possibility of provisional measures in support of arbitration proceedings, would appear sensible. 119 See also Recital (20). 120 Art. 33(3) provides that an arbitral tribunal is deemed to be seised when a party has nominated an arbitrator or when a party has requested the support of an institution, authority or a court for the tribunal's constitution. 121 Art. 29(4), para Art. 29(4), para Further, it does not apply in disputes concerning insurance, consumer or employment contracts falling within Sections 3, 4 and 5 of Chapter II of the proposed Regulation. 18

23 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 3.3. Appraisal The Commission s policy There is a general consensus that the current legal framework does not adequately support party autonomy with respect to dispute resolution. The current opportunities for tactical or abusive litigation have engendered a pre-emptive strike mentality among litigants, which in turn increases recourse to court proceedings and seems likely to deter settlement. Against this background, the Commission s policy of giving priority to the forum chosen by the parties, enabling it to determine its own jurisdiction, should be supported. In cases where the validity of the dispute resolution provision is upheld, this solution accords with the parties agreement and minimises the disruption caused by proceedings brought in breach of that agreement. In all cases, even if the validity of the provision cannot be supported, it provides a solution that is neutral as to the order in which proceedings are brought, and reduces the incentive to rush to court. It must, of course, be acknowledged that a party may seek to abuse the proposed priority mechanism, by asserting the existence of a dispute resolution agreement without reasonable grounds. Such abuses can, however, be addressed (1) by requiring a party contesting jurisdiction to commence proceedings in the chosen forum to determine that it has jurisdiction over the dispute, and (2) by an appropriate costs sanction (see Annex, Drafting Proposals 7, 8 and 9) Drafting of the Proposal Priority mechanisms It seems, however, very doubtful whether the changes proposed by the Commission, and in particular the new Art. 32(2), will achieve their desired purpose. First, Art. 32(2) does not, contrary to the Commission s claims, require in terms that the non-chosen court stay its proceedings while the chosen court(s) consider whether to accept jurisdiction. Instead, it provides that non-chosen courts shall have no jurisdiction over the dispute until such time as the court or courts designated in the agreement decline their jurisdiction. Read together with the proposed Art. 27, it would appear to require the nonchosen court to declare that it has no jurisdiction, and to bring an immediate end to proceedings whatever the chosen court may decide. 124 Secondly, the duty of a non-chosen court to decline jurisdiction (or stay) applies only if an agreement referred to in Article 23 confers exclusive jurisdiction upon a court or the courts of another Member State. This wording would appear to leave it open to the non-chosen court to investigate for itself whether (a) there is an agreement falling within Art. 23, and (b) whether it confers exclusive jurisdiction with respect to a particular dispute. If that interpretation were to be accepted by (or even asserted before) Member State courts, it drive a coach and horses through the Commission s policy objective, encouraging speculative proceedings. In light of the wording of Recital (19), it may be thought unlikely that the CJEU would accept so wide a loophole. Nevertheless, on the current formulation of Art. 32(2), there is significant room for doubt as to whether, for example, the court first seised could determine that the choice of court agreement is manifestly invalid and refuse to stay. The new Regulation should be clear that this is not allowed under any circumstances. 124 As a result, a party who successfully contests a choice of court agreement before the chosen court may encounter problems in re-starting the claim before his favoured court, most obviously as a result of torpedo proceedings by his opponent or because the claim is time barred. 19

24 Policy Department C: Citizens' Rights and Constitutional Affairs Thirdly, Art. 32(2) does not explicitly give the chosen court a green light to proceed in circumstances where it is not the court first seised. The lis pendens rule in Art. 29(1) (Art. 27(1) of the Brussels I Regulation) is expressed to be subject to Article 32(2) and Recital (19) emphasises the wish to give priority to the designated court whether it is first seised or second seised. In terms, however, Art. 32(2) does not disapply the obligation of any court other than the court first seised to stay proceedings or decline jurisdiction in proceedings involving the same parties and the same cause of action. What happens, therefore, if the court first seised does not decline jurisdiction, as required by Art. 32(2)? What happens if, instead, it makes a preliminary ruling that the choice of court agreement is invalid or does not apply to the dispute? In the latter case, it appears, the chosen court would be obliged under the Regulation, as a result of the CJEU s decision in West Tankers, 125 to recognise that decision and to decline jurisdiction itself, in accordance with Art. 29(3). Again, achievement of the Commission s policy objectives would be frustrated. In comparison with Art. 32(2), the drafting of the new rule in Art. 29(4) for arbitration agreements appears much more satisfactory. Art. 29(4) imposes an obligation on a Member State court to stay proceedings (1) if its jurisdiction is challenged on the basis of an arbitration agreement, and (2) either the arbitral tribunal or the courts of the Member State of the seat have been seised or proceedings to determine, as their main object or as an incidental question, the existence, validity or effects of that arbitration. There is evident sense in this mechanism, as it requires a party who asserts that there is a binding arbitration agreement not only to invoke that agreement before the Member State court in which proceedings are brought in alleged contravention of the agreement but also (if he has not done so already) to set in train the process for determining the validity and effectiveness of the arbitration agreement before the arbitral tribunal or the courts of the seat of the arbitration. There seems no reason why that mechanism could not usefully be adapted for choice of court agreements, in place of Art. 32(2) in its present form (see Annex, Drafting Proposal 7). Nevertheless, improvements can be suggested to the drafting of Art. 29(4) and the other provisions concerning arbitration agreements (see Annex, Drafting Proposal 8). First, the trigger mechanism in Art. 29(4) appears inadequate insofar as it requires only proceedings to determine the existence, validity or effects of the arbitration agreement. It does not, presently, require that the precise question as to whether the agreement applies to the subject matter of the dispute before the Member State court that is required to stay proceedings. Equally, the obligation to decline jurisdiction [w]here the existence, validity or effects of the arbitration agreement are established is insufficiently precise in its relationship to the dispute before the Member State court which is required to take that step. Secondly, and more fundamentally, neither Art. 29(4) nor the changes to the formulation of the arbitration exception and the accompanying Recital (11) address the specific problem arising from the West Tankers decision. Indeed, Art. 29(4) may be thought to entrench this, insofar as it expressly permits a court whose jurisdiction is contested to decline jurisdiction under national law, including any national law giving effect to the New York Convention. What happens if a Member State court, exercising this privilege, determines that the arbitration agreement is not valid or does not apply to the dispute in question? Does Art. 29(4) still require it to stay its proceedings until the arbitral tribunal or courts of the seat have made their own ruling? More importantly, on what basis could the courts of the seat reach a different conclusion, given their apparent obligation following West Tankers to recognise the first seised court s preliminary determination in proceedings which 125 Note 108 above. 20

25 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson fall within the material scope of the Regulation? In this connection, it must be noted that, although Art. 29(4) makes clear that a Member State court s duty to stay applies whether the validity of the arbitration agreement is to be determined as the main object or as an incidental question by the tribunal or the courts of the seat, there is nothing in the Commission s Proposal which reverses this aspect of the CJEU s West Tankers ruling so far as to the courts of the seat are concerned. To avoid this conclusion, Recital (11) must be amended to make clear that the Regulation does not apply to issues relating to arbitration, whether they arise as the main object or as a preliminary issue in proceedings. Thirdly, Art. 29(1) should be expressed to be subject to Art. 29(4) (as well as Art. 32(2) or its replacement) so as to make clear that the courts of the seat may proceed to determine questions concerning the effectiveness of the arbitration agreement even if they are second seised and if the proceedings before them fall within the material scope of the Regulation. Finally, neither Art. 29(4) nor Art. 32(2) require the chosen court(s), in the case of choice of court agreements, or the arbitral tribunal or courts of the seat, in the case of arbitration agreements, to determine questions concerning the validity or effectiveness of dispute resolution agreements within a particular time period. As a result, proceedings before a non-chosen court which have been stayed may be significantly delayed, and this might incentivise speculative, false or fraudulent claims that the dispute falls within the scope of a binding dispute resolution agreement. To avert this, it is suggested that the new requirement in Art. 29(2) that, in lis pendens cases, the court first seised shall establish its jurisdiction within six months except where exceptional circumstances make this impossible should be rendered of general application in cases where the jurisdiction of a Member State court is challenged. This provision could be added to Art. 27, dealing with the obligation to decline jurisdiction (see Annex, Drafting Proposal 9). 126 Law applicable to substance of choice of court agreement The Commission s proposed choice of law rule, embedded in Art. 23(1), seems unnecessary. The case law of the CJEU had already achieved a high level of legal certainty by (1) affirming the severability of an agreement under Art. 23(1), 127 and (2) emphasising that the consent of the parties is to be determined solely by reference to the requirements of Art. 23(1) and not by reference to national law. 128 By assigning questions of nullity and voidness to national law, without apparent restriction, the Commission s Proposal threatens to undermine the effectiveness of choice of court agreements by re-opening these debates as to separability and the permissible role of national law in determining the validity of choice of court agreements. The proposed wording may be argued to enable the law of the chosen Member State court to permit a challenge to the validity of a choice of court agreement, for example, on grounds relating to the legality of the contract of which it forms part (severability) or the equality of bargaining power between the parties (consent) and, in effect, to reverse the CJEU s rulings on these points. If, notwithstanding the above, a new rule is considered desirable, the pro-validity proposals set out in Arts. 23a-23b of the European Parliament s Draft Report 129 appear a more appropriate starting point (see Annex, Drafting Proposal 10). 126 This change would also remedy an undesirable feature of Art. 29(2) in its current form, in that it appears that a second set of proceedings is required to set the clock running, thereby encouraging unnecessary duplicative litigation in order to force the pace of the proceedings before the court first seised. 127 Case C-269/95, Benincasa v Dentalkit Srl [1997] ECR I-3767, para Case C-159/97, Trasporti Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA [1999] ECR I-1597, paras Note 6 above. 21

26 Policy Department C: Citizens' Rights and Constitutional Affairs Hague Convention on Choice of Court Agreements The question whether the EU should ratify the Hague Convention can be separated from the Brussels I review, and falls outside the scope of this briefing note. As noted, the Brussels I bis Regulation would continue to be applied between Member State domiciled parties even if the EU were to ratify the Convention Hague Convention on Choice of Court Agreements, Art

27 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 4. A NEW BASIS OF SPECIAL JURISDICTION RIGHTS IN REM IN MOVEABLE PROPERTY (ART. 5(3)) KEY FINDINGS The proposed new Art. 5(3) may be a useful addition to the grounds of special jurisdiction in the Regulation, although it is not essential. To increase legal certainty, the provision should be limited to tangible moveable property, and qualified to prevent forum shopping by the movement of property. The order of Art. 5(2) and 5(3) should be swapped to maintain the current numbering of the grounds of special jurisdiction which have been retained The Proposal In Outline The Commission proposes an addition to the existing grounds of special jurisdiction in Art. 5 in proceedings as regards rights in rem in or possession in moveable property. In such cases, the courts for the place where property is situated would also have jurisdiction Appraisal The proposed new rule may prove useful, for example in situations where the lessor of an aircraft, or a seller of goods who has retained title, seeks to vindicate his title to, or to recover possession of, the aircraft or the goods sold in circumstances where they have been moved to a Member State other than that where re-delivery was due to take place (in the case of the aircraft) or the goods were originally delivered (in the case of the goods sold). 131 The rule does not, however, appear essential. First, the courts of the Member State of location may have jurisdiction over the substance of the dispute in any event, for example under Art. 5(1) if there is a contractual relationship between the parties 132 or Art. 5(3) if a refusal to re-deliver on demand constitutes an actionable wrong. Secondly, even if the courts of that Member State do not have substantive jurisdiction, an application may still be made to those courts for provisional measures to secure the asset while the dispute is being resolved. 133 To promote legal certainty, some limits should be placed on the new rule, as follows: (1) the provision should be limited to tangible moveables, such as aircraft and consumer goods (thereby avoiding the difficulties of ascribing a location to intangible property, such as shares, intellectual property and debts), 134 and (2) to avoid manipulation, the provision should be subject to an exception in a case in which property has been moved to a Member State with the object of establishing jurisdiction (see Annex, Drafting Proposal 11) The courts of the place of re-delivery/delivery would likely have jurisdiction under Art. 5(1) in a dispute between lessor/lessee or seller/buyer. 132 See the preceding footnote. 133 Brussels I Regulation, Art. 31; Proposal, Art A uniform situs rule, such as that contained in Art. 2(g) of the Insolvency Regulation, 134 could help matters but would introduce further legal complications. 135 Cf. Brussels I Regulation, Art. 6(3). 23

28 Policy Department C: Citizens' Rights and Constitutional Affairs 5. RINGFENCING THE RIGHT TO STRIKE (ART. 85) KEY FINDINGS The precise intention underlying Art. 85 is unclear. It is, in any event, unwarranted and should be deleted, along with the second sentence of Recital (27) The Proposal The Commission proposes a new Art. 85 in the following terms: This Regulation shall not affect the right of workers and employers, or their respective organisations, to engage in collective action to protect their interests, in particular the right or freedom to strike or to take other actions. The linked Recital (27) states: This Regulation should ensure full respect for fundamental rights as set out in the Charter of Fundamental Rights of the European Union, in particular the right to an effective remedy and the right to a fair trial guaranteed in Article 47 of the Charter. Nothing in this Regulation should affect the freedom of expression and information (Article 11), the right to private and family life (Article 7), nor the right of workers and employers, or their respective organisations, in accordance with Union law and national law and practices, to negotiate and conclude collective agreements at the appropriate levels and, in cases of conflicts of interest, to take collective action to defend their interests, including strike action (Article 28) Appraisal The Commission offers no explanation of, or justification for, Art. 85 in its Proposal or Impact Assessment, beyond reference to the Charter of Fundamental Rights and, in particular, Art Given the role of the Charter of Fundamental Rights in shaping EU law, 137 and the subject matter of the Brussels I regime, no objection can be taken to the first sentence of Recital (27). As to the second sentence of Recital (27) and Art. 85 itself, it is unclear why the rights referred to should be singled out in the proposal. On the face of the Proposal, it appears that the EU appears to value the right to strike above the rights to life, liberty and security and other fundamental rights recognised by the Charter and the European Convention on Human Rights. That impression should be avoided. Moreover, it is difficult to see how a Regulation which deals only with questions of jurisdiction and the recognition and enforcement of judgments could affect the right to strike, or what precise function Art. 85 is intended to serve. If it is to remain, its intended purpose and effect should be made much clearer. Is it, for example, intended to provide an additional (substantive public policy?) ground for refusal to enforce a Member State judgment, such as an injunction restraining industrial action? 138 If so, that should be clearly and precisely stated, and not deduced from an unheralded provision tucked away in the boilerplate of the Regulation. If, as proposed above, the public policy exception in the Brussels I regime is restored, 139 Art. 85 would appear redundant. It should, in any event, be deleted and the first sentence only of Recital (27) retained, as a signal that the EU values equally all fundamental rights, and does not place the rights of workers above the rights of others (see Annex, Drafting Proposal 12). 136 Commission Proposal, 11. It is notable that the Impact Assessment (pp. 9-11), while referring individually to several provisions of the Charter makes no reference to Art. 28 or the right to strike. 137 Text to note 53 above. 138 See, e.g., Viking Line ABP v International Transport Workers Federation [2005] EWHC 1222 (Comm), followed by a reference to the CJEU in Case C-438/05 (see [2005] EWCA Civ 1299; [2006] 1 Lloyd s Rep 303 and [2007] ECR I-10779). 139 See Section 1, pp above. 24

29 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson ANNEX - DRAFTING PROPOSALS Amendments to the text of the Commission Proposal are shown as underlined (for additions) or strike out (for deletions) Proposal 1 Requirement for service on respondent before taking enforcement measures other than provisional measures Article An enforceable judgment shall carry with it by operation of law the power to proceed to any protective measures which exist under the law of the Member State of enforcement. 2. With the exception of protective measures under paragraph 1, no measures of enforcement shall be taken unless either: (a) the applicant has, not less than [7 or 14] days before the date upon which the enforcement measure is sought, served on the party against whom the enforcement measures is sought a copy of the certificate referred to in Article 42(1) or (2) in accordance with the requirements of Regulation (EC) No. 1393/2007, where applicable; 140 or (b) it is impracticable to serve judicial documents on the party against whom enforcement measures are sought, and the applicant has taken reasonable steps to notify the contents of the judgment to the party against whom enforcement measures are sought. Article For the purposes of enforcement in another Member State of a judgment other than those referred to in paragraph 2, the applicant shall provide the competent enforcement authorities with: (a) a copy of the judgment which satisfies the conditions necessary to establish its authenticity; (b) the certificate in the form set out in Annex I issued by the court of origin, certifying that the judgment is enforceable and, containing, where appropriate, an extract of the judgment as well as relevant information on the recoverable costs of the proceedings and the calculation of interest; and (c) if the competent authority of the Member Stare of enforcement requires, a certificate using the form set out in Annex [ ] confirming that the requirements of Article 40(2) have been satisfied The Annex I certificate should contain a statement that the applicant intends to proceed to enforcement measures in accordance with the Regulation, and a summary of the recipient s rights under Articles 45 and In the case that service of the certificate is impractical, the certificate in the Annex would request information as to the steps taken to serve these documents on, or bring them to the notice of, the person against whom enforcement measures are sought. 25

30 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 2 Relationship between parallel Art. 45 and Art. 46 applications Article 46 bis 1. A party who makes applications under both Article 45 and Article 46 with respect to the same judgment shall promptly notify the courts in the Member State of origin and the Member State of enforcement of that fact. 2. Upon receiving the notification under paragraph 1, the court in the Member State of enforcement shall stay the application under Article 46 until the court in the Member State of origin determines the application under Article If paragraph 1 applies, the court in the Member State of origin shall promptly notify the court in the Member State of enforcement of the outcome of the application under Article

31 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson Proposal 3 Broader grounds for opposing recognition or enforcement Article 43 deleted Article In cases other than those covered by Article 45, the Member State of enforcement shall refuse recognition or enforcement of a judgment if: (a) such recognition or enforcement is manifestly contrary to public policy (ordre public) in the Member State in which recognition is sought; (b) it is irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought; (c) if it is irreconcilable with an earlier judgment given in another Member State or in a third State involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in the Member State addressed in which recognition is sought; or (d) the judgment was given in breach of the requirements of Section 4 of Chapter I or of Article 22(1). 1a. In its examination of the grounds of jurisdiction referred to in paragraph 1(d), the court or authority applied to shall be bound by the findings of fact on which the court of the Member State of origin based its jurisdiction. 1b. Subject to the paragraph 1(d), the jurisdiction of the court of the Member State of origin may not be reviewed. The test of public policy referred to in paragraph 1(a) may not be applied to the rules relating to jurisdiction. Article 37(2)-(3) and Articles deleted Note: If, as proposed above (p. 8), the requirement of exequatur is to remain for authentic instruments, Arts would need to be adapted for this purpose and incorporated within Chapter IV. 27

32 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 4 Partial harmonisation of rules relating to non-eu domiciled defendants Article 4 1. Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter. 2. Persons domiciled in a Member State may also avail themselves of the rules set out in Sections 2 to [7/8] of this Chapter as against a defendant not domiciled in a Member State. 3. Without prejudice to paragraph 2 and subject to Articles 22 and 23, the jurisdiction of the courts of each Member State as against a defendant not domiciled in a Member State shall be determined by the law of that Member State. 4. As against a defendant not domiciled in a Member State, persons domiciled in a Member State may, whatever their nationality, avail themselves in that State of the rules of jurisdiction there in force in the same way as the nationals of that State. Article 6 A person may also be sued: 1. where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings Article 8 In matters relating to insurance, jurisdiction shall be determined by this Section, without prejudice to Article 4(3) and Article 5(5). Article In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section, without prejudice to Article 4(3) and Article 5(5), if: Article In matters relating to individual contracts of employment, jurisdiction shall be determined by this Section, without prejudice to Article 4(3), Article 5(5) and Article 6(1). 28

33 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 29

34 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 5 Alternative supplemental rules of jurisdiction (if required) Article 25 deleted Article 25 Where no court of a Member State has jurisdiction in accordance with Articles 5 to 24, a Member State court shall have jurisdiction as against a defendant domiciled in a Member State: 1. in matters relating to a contract concluded with a defendant who pursues commercial or professional activities, or by any means directs such activities to that Member State [or to several States including that Member State], if the contract falls within the scope of such activities; in matters relating to a non-contractual obligation which is closely connected with the commercial or professional activities of the defendant in, or directed to, that Member State [or to several States including that Member State; 3. in matters relating to a non-contractual obligation which is closely connected to a contract between the parties, if the Member State court has jurisdiction in matters relating to that contract under Article 5(1); [4. in matters relating to a contract, if the law of that Member State has been chosen by the parties to govern the contract between them]. Article 26 Where no court of a Member State has jurisdiction under this Regulation, the courts of a Member State shall have jurisdiction, on an exceptional basis, as against a defendant domiciled in a Member State if the right to a fair trial or the right to access to justice so requires, in particular: (a) if proceedings cannot reasonably be brought or conducted or would be impossible in a third State with which the dispute is closely connected; or (b) if a judgment given on the claim in a third State would not be entitled to recognition and enforcement in the Member State of the court seised under the law of that State and such recognition and enforcement is necessary to ensure that the rights of the claimant are satisfied; and the claimant is domiciled in the Member State of the court seised. Article 22 The following courts shall have exclusive jurisdiction regardless of domicile: 144 [See also amendment to Article 23 in Proposal 10 below] 143 The wording of this provision is inspired by Art. 15(c) of the Regulation (consumer contracts). 144 Note that, even with this wording, there have been isolated examples of Member State courts refusing to give full effect to Art. 22(1) as against non-eu domiciled defendants (see, in particular, Choudhary v Bhatter [2009] EWCA Civ 1176). This approach seems unjustifiable. 30

35 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson 31

36 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 6 Discretionary stay in favour of non-member State courts based on exclusive jurisdiction criteria Article Notwithstanding the rules in Articles 3 to 7, a court in a Member State may stay its proceedings [if the court is satisfied that it is necessary for the proper administration of justice to do so] and if: (a) related proceedings are already pending before a court in a third State and the court in the third State is likely, within a reasonable time, to render a judgment that will be capable of recognition and, where applicable, enforcement in that Member State; (b) the parties have agreed that a court or the courts of a third State are to have exclusive jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship unless: (i) the agreement is null and void under the law of the State of the chosen court; (ii) a party lacked the capacity to conclude the agreement; (iii) giving effect to the agreement would lead to a manifest injustice or would be manifestly incompatible with the public policy of the Member State of the court seised; (iv) for exceptional reasons beyond the control of the parties, the agreement cannot reasonably be performed; or (v) the chosen court has decided not to hear the case; 145 (c) the subject matter of the proceedings is connected to a third State in such a way that, if the relevant connection were to a Member State, Article 22 would confer exclusive jurisdiction on the courts of that Member State.. 2. During the period of the stay, the party who has seised the court in the Member State shall not lose the benefit of interruption of prescription or limitation periods provided for under the law of that Member State. 3.The court may discharge the stay at any time upon application by either party or of its own motion if the stay is no longer required for the proper administration of justice. 145 The qualifications follow the wording of Art. 6 of the Hague Choice of Court Convention. The words under the law of the State of the court seised have been omitted in sub-rule (ii). 32

37 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson Proposal 7 Priority mechanism for choice of court agreements (revised) Article 32 Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court. [Paragraph 2 deleted] New Article 29(3a) The courts of Member State whose jurisdiction is contested on the ground that the parties have agreed that the court or courts of another Member State have exclusive jurisdiction under Article 23(1) shall, unless their own jurisdiction is based on Article 22 or Article 23, stay proceedings 146 once the Member State court or courts which are claimed to have been chosen are seised of proceedings to determine, as their main object or as an incidental question, the existence, validity or effects of the choice of court agreement with respect to the dispute between the parties. This paragraph shall apply regardless of which court was first seised. This paragraph does not apply in disputes concerning matters referred to in Sections 3, 4 and 5 of Chapter II. 146 An additional provision requiring the non-designated court to decline jurisdiction once the jurisdiction of the designated court is established seems unnecessary, especially as the judgment of the latter court would be binding under the Regulation. 33

38 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 8 Priority mechanism for arbitration agreements (revised) Recital (11) This Regulation does not apply to arbitration, save to the limited extent expressly provided for therein. In particular, subject as expressly provided, it does not apply to the form, existence, validity or effects of arbitration agreements, the powers of the arbitrators, the procedure before arbitral tribunals, and the validity, annulment, and recognition and enforcement of arbitral awards, whether raised as the main object of proceedings or as a preliminary or incidental question. Article 1 (d) arbitration, save as provided for in Article 29, paragraph 4 [, Article 33, paragraph 3] and Article 36 Article Subject to paragraphs 3a and 4, where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. [Article 29(2) to be amended see Proposal 9 below] 3. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court. [New Article 29(3a) see Proposal 7 above] 4. Where the agreed or designated seat of an arbitration is in a Member State, the courts of another Member State whose jurisdiction is contested on the basis of an arbitration agreement shall stay proceedings 147 once the courts of the Member State where the seat of the arbitration is located or the arbitral tribunal are seised of proceedings to determine, as their main object or as an incidental question, the existence, validity or effects of that arbitration agreement with respect to the dispute between the parties. This paragraph does not prevent the court whose jurisdiction is contested from declining jurisdiction on the basis of an arbitration agreement if its national law so prescribes, but (unless the parties otherwise agree in writing) any judgment of that court concerning the existence, validity or effects of that arbitration agreement shall not be binding on the courts of the Member State where the seat of the arbitration is located or on the arbitral tribunal. This paragraph shall apply regardless of which court or arbitral tribunal was first seised. 147 An additional provision requiring court to decline jurisdiction once the validity and effectiveness of the arbitration agreement is established seems unnecessary. The New York Convention does not so require. 34

39 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson This paragraph does not apply in disputes concerning matters referred to in Sections 3, 4, and 5 of Chapter II. 35

40 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 9 Procedural requirements for addressing questions of jurisdiction Article 29(2) Upon request by any other court seised of the dispute, the court first seised shall inform that court of the date on which it was seised and of whether it has established jurisdiction over the dispute or, failing that, of the estimated time for establishing jurisdiction.article Where a court of a Member State is seised of a claim which is principally concerned with a matter over which it has no jurisdiction under this Regulation, it shall declare of its own motion that it has no jurisdiction. 2. If the jurisdiction of a court of a Member State is challenged, the court shall determine its jurisdiction as a preliminary issue (without requiring the defendant to respond to the substance of the claim) and within 6 months, or as soon as possible thereafter where exceptional circumstances make this impossible. 3. A party who commences proceedings in a Member State court without reasonable grounds for believing that the court has jurisdiction under this Regulation shall bear the costs of the proceedings, including the legal costs of the other party. 4. A party who challenges the jurisdiction of a Member State court without reasonable grounds for doing so shall bear the costs of the proceedings on the jurisdiction issue, including the legal costs of the other party. 36

41 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson Proposal 10 Rules addressing substantive validity of choice of court agreements Article If the parties, regardless of domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. New Article 23(1a)-(1d) (if required) 1a. Without prejudice to paragraph 1, an agreement conferring jurisdiction is materially valid if it is regarded as being such by either: (a) the law of any country in which any Member State court or courts designated by the agreement are located, or (b) the law chosen by the parties to govern the choice of court agreement or, in the absence of such choice, the law governing the contract or other relationship between the parties to which the choice of court agreement relates. The application of the law of any country designated by point (b) above means the rules of law in force in that State other than its rules of private international law, 148 and that law shall apply even if it is not the law of a Member State. 1b. The law designated by paragraph 1 shall not govern questions of legal capacity. [1c. A party who asserts that an agreement which satisfies the formal requirements in paragraph 1 is not materially valid shall bear the burden of proof.]1d. An exclusive choice of court agreement that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. The validity of the exclusive choice of court agreement cannot be contested solely on the ground that the contract is not valid See Rome I Regulation, Art. 20. The law applicable under point (a) is excluded because renvoi is not excluded under the Hague Choice of Court Convention. 149 See Hague Choice of Court Convention, Art. 3(d). 37

42 Policy Department C: Citizens' Rights and Constitutional Affairs Proposal 11 Amendments to rule conferring special jurisdiction in relation to moveable property Article 5 2. as regards rights in rem or possession in or control of tangible moveable property, the courts for the place where the property is situated[, unless the property was moved to that Member State with the object of establishing jurisdiction]; 3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur; 38

43 The Proposed Brussels I Bis Regulation: Professor Andrew Dickinson Proposal 12 Amendments to provisions relating to fundamental rights Recital (27) This Regulation should ensure full respect for fundamental rights as set out in the Charter of Fundamental Rights of the European Union, in particular the right to an effective remedy and the right to a fair trial guaranteed in Article 47 of the Charter. Article 85 deleted 39

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