PRACTICAL LAW MULTI-JURISDICTIONAL GUIDE 2012/13 VOLUME 1 The law and leading lawyers worldwide Essential legal questions answered in 32 key jurisdictions Rankings and recommended lawyers in 90 jurisdictions of critical legal issues AVAILABLE ONLINE AT WWW.PRACTICALLAW.COM/DISPUTE-MJG
Litigating in harmony: the standardisation of EU cross-border dispute resolution procedures www.practicallaw.com/2-520-4741 Michael Byrne Matheson Ormsby Prentice Like many areas of legal practice, litigation has evolved over time to adapt to its place in an increasingly globalised world. The everincreasing incidence of commercial disputes involving litigants in different jurisdictions has prompted supra-national legislators, including the institutions of the EU, to seek to improve the efficacy and ease with which cross-border disputes are handled. This article examines the key pieces of legislation that have been enacted by the EU towards harmonising litigation and dispute resolution procedures across its member states. The moves towards harmonisation have a firm basis in EU law. The terms of the EU s direct competence in the sphere of judicial co-operation in civil matters having cross-border implications are outlined in Article 81 of the Treaty on the Functioning of the EU (TFEU). Judicial co-operation in the EU was formerly part of the third pillar, such that policy-making in the area was driven solely by inter-governmental co-operation. Direct competence to legislate in this area on behalf of member states was provided for under Article 65 of the EC Treaty, which signalled the shift from third to first pillar. Co-operation on judicial matters in a cross-border context between member states has long been encouraged by the EU. However, the institutions lacked a direct competence to directly legislate in this sphere until the Treaty of Amsterdam was signed on 2 October 1997. The Treaty of Amsterdam modified the legal basis for co-operation in civil matters within the EU and led to the formal incorporation of several pre-existing agreements between the member states in this area. Subsequent additional instruments designed to improve dispute resolution mechanisms for citizens of the EU and companies doing business within its borders were also enacted. The harmonisation of dispute resolution procedures within the EU can be grouped broadly under six headings. These are: Jurisdiction. Mutual recognition and enforcement of judgments. Service of judicial and extrajudicial documents. Taking of evidence abroad. Debt recovery and small claims. Mediation and arbitration. of judgments in civil and commercial matters (Brussels I) and its predecessor, the convention on civil jurisdiction and the enforcement of judgments (Brussels Convention), choice of jurisdiction as between EU member states was determined by reference to national rules of jurisdiction and international law. The Brussels Convention was signed into law in the EU in 1968, and enacted into Irish law by the Jurisdiction of Courts and Enforcement of Judgments (European Communities) Act 1988, and re-enacted by the Jurisdiction of Courts and Enforcement of Judgments Act 1998. Brussels I was given full effect under Irish law by the European Communities (Civil and Commercial Judgments) Regulations 2002. Brussels I is now the principal instrument through which proper jurisdiction is determined under EU law. The rules of Brussels I apply to all EU member states, including Denmark by way of a separate, but similar agreement (Agreement between the European Community and the Kingdom of Denmark on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters approved by Council Decision 2006/625/EC, entered into force on 1 July 2007). A further sister agreement, Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (Lugano Convention), governs proper jurisdiction as between EU member states and those of the European Free Trade Association (EFTA) (Norway, Iceland, Switzerland and Liechtenstein), along similar lines to Brussels I. Application and rules of jurisdiction under Brussels I The type of dispute to which the rules of jurisdiction under Brussels I apply (that is, civil and commercial matters) is governed by Article 1 of the Regulation (Article 1, Brussels I). Certain categories of dispute are specifically excluded, including those relating to: Revenue and customs. Administrative matters. Bankruptcy. Matters of arbitration. Disputes involving individuals in their private capacities, such as marital disputes, social security and issues relating to wills and succession. JURISDICTION A fundamental question that arises with any piece of litigation involving parties based in different countries is the jurisdiction in which it should be litigated. Before the introduction of Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement Under Brussels I, the general rule of jurisdiction is that proper jurisdiction is governed by the defendant s domicile (Article 2, Brussels I). However, there are a number of exceptions to the general rule that a party should be sued in the member state in which it is domiciled. These exceptions are known as the Special This article is part of the Dispute Resolution 2012/13 multi-jurisdictional guide and is reproduced with the permission of the publisher, Practical Law Company.
Rules of Jurisdiction, and include the following (sections 2 to 7, Chapter II, Brussels I): In disputes based on contract, the action may be pursued in the jurisdiction which is the place of performance of the contract. In matters of tort, the proceedings may be issued in the jurisdiction in which the harm occurred. In connected proceedings or where there are multiple defendants domiciled in different member states, they may be sued in any member state where one, or more, of them is domiciled. In third party claims, the third parties to an action may be sued in the member state where the main proceedings are being litigated, even if this is not the jurisdiction in which they are domiciled themselves. In counterclaims, a party sued by way of counterclaim may be sued in the member state which has exercised jurisdiction in the original claim. In insurance actions, a policy holder can institute proceedings either in the member state where the insurer is domiciled or in its own member state. In consumer contract claims, consumers can bring proceedings either in the courts of their own member states or where the defendant is domiciled. In actions concerning employment contracts, an employer can be sued in the member state in which it is domiciled or in the member state where the employee habitually carries (or carried) out work. The employer can also be sued in the jurisdiction where its main centre of business is held, if different to its country of domicile. where third country litigants are involved. The aim of the amendments is to improve certainty as regards jurisdiction, improving access to justice for citizens of the EU as well as businesses operating in the EU. Improving the effectiveness of choice of court agreements. In theory, Brussels I allows for choice of court agreements between parties to regulate jurisdiction. Parties can, by agreement, choose the jurisdiction governing an agreement (the rule on prorogation of jurisdiction (Article 23, Brussels 1)). However, the courts have consistently stated that such clauses should be narrowly interpreted (see, for example, Clare Taverns v Gill [2000] 1 IR 286 and Leo Laboratories Limited v Crompton BV [2005] 4 IR 286) and in practice, they are not always observed. The problems facing choice of court agreements are compounded by Article 27 of Brussels I (the lis pendens rule). The lis pendens rule provides that where a court in more than one member state has accepted jurisdiction in the same cause of action between the same parties, the court which accepts jurisdiction second must suspend the proceedings to allow the jurisdiction of the court that first accepted jurisdiction to be established. Where jurisdiction of the first court is established, the court that accepted jurisdiction second must decline jurisdiction. Under the new proposals, if one of the courts in question was the subject of a choice of court clause within an agreement between the parties, the agreement would prevail and the chosen jurisdiction would take priority. A reform of this aspect of Brussels I would bring it into line with developments internationally, with increased deference to choice of court agreements also a feature of the Hague Convention of 30 June 2005 on Choice of Court Agreements. This proposal for reform is likely to be welcomed in particular by businesses, which have, to date, sometimes seen agreed contractual terms ultimately not being recognised in cross-border disputes. The issue of domicile for the purposes of Brussels I is a matter of each member state s domestic law (Article 59(2)). Proposals for reform of Brussels I The European Commission (Commission) presented a proposal for revision of Brussels I (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) on 14 December 2010, recommending some key changes insofar as it relates to jurisdiction, to tackle what are considered to be weaknesses in its application. Two of these recommendations are as follows: Extension of the jurisdiction rules to include third country defendants (not domiciled within the EU). Where a defendant to legal proceedings is not domiciled in an EU member state, then the rules of private international law, as applicable in the member states concerned, will determine jurisdiction (Article 4(1), Brussels I). In other words, the application of Brussels I is excluded. The exclusion of defendants domiciled in a third country from the remit of Brussels I has long been considered a significant shortcoming of Brussels I, since the fact that rules of private international law differ appreciably across the EU has led to uncertainties for those faced with litigation where parties domiciled in third countries are concerned. The proposed amendment in this regard is the bringing about of total harmonisation, whereby the rules of jurisdiction under Brussels I would apply generally, including Insolvency Regulation A common legislative framework for determining jurisdiction and related issues in insolvency proceedings in the EU was established by Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation). The Insolvency Regulation is principally concerned with preventing the trend of forum shopping in insolvency matters, which occurs where assets are transferred between jurisdictions in an effort by debtors to secure a more favourable position under local laws to the detriment of their creditors. The Insolvency Regulation directs the proper jurisdiction for insolvency proceedings and provides that this is the member state where the debtor has its centre of main interests (that is, the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties (Article 13, Insolvency Regulation)). It also allows for insolvency proceedings in one member state to be automatically recognised in another. There are, however, some limitations on the application of the Insolvency Regulation. Denmark is not party to it and it is not applicable where pre-existing obligations under another convention are irreconcilable with the Insolvency Regulation, or in the case of the UK, where existing arrangements with the Commonwealth are irreconcilable with the Insolvency Regulation. Furthermore, the Insolvency Regulation applies only at an intra- Community (EU) level, so it will not apply in cases where a party to proceedings has its centre of main interests outside of the EU.
MUTUAL RECOGNITION AND ENFORCEMENT OF JUDGMENTS Rules on recognition and enforcement under Brussels I In addition to regulating proper jurisdiction, Brussels I also provides for a unified procedure for the recognition and enforcement of civil and commercial judgments throughout the EU. The EFTA countries are not party to Brussels I and the original Brussels Convention still applies to those nations, setting out the rules governing recognition and enforcement of judgments. A judgment handed down in one member state will be automatically recognised in another member state without the need for any special procedure (Article 33, Brussels I). However, subject to limited exceptions (see below, European enforcement orders) for that judgment to be actually enforced, a process of rendering the judgment enforceable, known as exequatur, must be followed. Exequatur procedure The exequatur procedure involves an application to the competent authority in the member state in question (Article 39, Brussels I). In Ireland the competent authority is the Master of the High Court and provision is made for application to be made on an ex parte basis to the Master to have a judgment issued in another EU member state enforced in Ireland (Rule 42A, Rules of the Superior Courts) (RSC). The application is based on affidavit to which certain proofs must be exhibited, including: Judgment to be enforced (or a certified copy of the judgment). Documents from the issuing state confirming the enforceability of the judgment in that state. The affidavit grounding the application must also contain averments (that is, allegations of facts in a pleading) regarding: The amount of the judgment. Any interest recoverable. An address in the state for the party against whom judgment is being enforced. The grounds for making the application. A certificate must also be provided. A template for this certificate is provided in Annex V to Brussels I, which contains details such as (Articles 53 and 54, Brussels I): The member state of origin. The court which issued the certificate in that state. The court which delivered the original judgment. Details of the judgment. Parties to the judgment. The date of service of the document instituting proceedings and the text of the judgment. Once these details have been provided and all other requirements are satisfied, the judgment can be declared enforceable. The order of the competent authority, together with a Notice of Enforcement, can then be served on the party against whom enforcement is sought and has the same effect as it would in the member state where the judgment was issued. The Notice of Enforcement must: Contain details of the judgment. Contain the applicant s name and address. Provide details of the right of appeal for the party against whom the order is being enforced. A Notice of Enforcement can be appealed by the defendant within one month (Order 42A, RSC). Brussels I sets out the circumstances in which defendants can resist enforcement of a judgment (Article 34), which include instances where: The judgment would be contrary to public policy. The judgment was given in default of appearance by the defendant. There have been procedural deficiencies, such as a failure to correctly serve the proceedings on the defendant. The Commission proposal for revision of Brussels I (see above, Jurisdiction: Proposals for reform of Brussels I) has proposed the abolition of the exequatur procedure, except in the case of defamation and in collective compensatory proceedings, to make judgments issued in the courts of one member state automatically enforceable in another. Abolishing the exequatur procedure would eliminate the additional cost and delay associated with the validation of enforceability, further simplifying the enforcement process within the EU. European enforcement orders In uncontested claims for specific sums of money, a simplified procedure for the enforcement of judgments exists in other member states under Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims (European Enforcement Order Regulation) (EEO Regulation). The EEO Regulation applies to all member states except Denmark. Where the EEO Regulation applies, there is no requirement to follow the exequatur procedure (see above, Mutual recognition and enforcement of judgments: Exequatur procedure). An uncontested claim consists of claims where the debtor has done one or more of following (Article 3, EEO Regulation): Not objected to the claim during the course of the proceedings. Ceased to appear in court. Agreed expressly in court proceedings, by way of settlement or in an authentic instrument, that the claim exists and is justified. However, while the procedure is simplified, it is not automatic. In order to have a judgment certified as an EEO, certain procedural requirements must be satisfied. These requirements are as follows (Article 6, EEO Regulation): The judgment must be enforceable in the originating member state. The judgment must not conflict with jurisdictional rules under Brussels I. Proceedings in the court in which the judgment was issued must be compliant with the conditions as set down in Chapter III (Minimum Standards for Uncontested Claims Provisions) of the EEO Regulation. If a judgment was given against a debtor who is a consumer, the rules under Brussels I provide that judgment must be given in the debtor s member state of domicile.
The EEO Regulation sets down minimum standards which must be observed regarding the service of documents relating to the institution of proceedings in order for the judgment to be certified as an EEO (Articles 13 and 14). In Ireland, although the court cannot review the substance of an EEO once issued, a debtor can oppose the enforcement of the EEO in certain prescribed circumstances, such as where the judgment is irreconcilable with a judgment previously handed down in any member state or third country (Order 42B, Rule 12, RSC). SERVICE OF JUDICIAL AND EXTRAJUDICIAL DOCUMENTS Service of documents regulation The extraterritorial service of judicial and extrajudicial documents within the EU is a further element of legal procedure which has been harmonised and simplified by EU law. This is governed by Regulation (EC) 1393/2007 on the service in the member states of judicial and extrajudicial documents in civil and/or commercial matters (Service Regulation). The Service Regulation applies between all member states, including Denmark, which has confirmed its intention to be party to the provisions of the Service Regulation by declaration and by parallel agreement with the EU. Under the Service Regulation, various channels for transmission of documents are provided for, including by post and direct service and also through designated transmitting and receiving agencies within individual member states. A central body within each member state is responsible for co-ordinating the mode of transmission of documents to and from other EU members. In Ireland, the designated central body is the Master of the High Court. The annex to the Service Regulation provides template forms that must be used to accompany documents being served in other EU member states. The document in question can be in the language of the originating member state (or any language agreed between the parties in advance). However, if the language of the receiving state differs, a translation should be provided and the cost of this covered by the party serving the document. Recipients can refuse to accept service of a document where it is not in a language that they can understand and no translation is provided. The Service Regulation does not place restrictions on the different methods of service permissible for service to be deemed effective. National authorities must stipulate their own rules governing service and the methods of service of judicial/extrajudicial documents from transmitting agencies in other member states that they will accept. The Commission is responsible for maintaining a manual outlining the different forms and methods of service acceptable in each member state, and other applicable rules. Standard forms are exchanged between the transmitting and receiving agencies in the member states concerned. Where service is effected within one month, a standard certificate of completion is issued from the receiving agency to the transmitting agency. A standard notification of failure to serve will be issued where service has not been effected within that timeframe. THE TAKING OF EVIDENCE ABROAD A further issue that can arise in proceedings involving extraterritorial parties is the taking of evidence from witnesses located abroad. Often, the principal difficulty concerning extraterritorial witnesses is the ability of parties to the litigation to compel them to attend at a hearing to give evidence. International law has responded to this difficulty in the form of the Hague Convention on the taking of evidence abroad in civil and commercial matters 1970 (Hague Convention on taking of evidence). In common with a small number of other EU member states, including Austria and Belgium, Ireland is not a party to the Hague Convention of taking evidence and relies on local statutory rules to deal with the taking of evidence abroad in matters involving witnesses located outside the EU. However, Regulation (EC) 1206/2001 on co-operation between the courts of the member states in the taking of evidence in civil or commercial matters (Evidence Regulation) has been adopted to simplify the procedure to be followed where relevant witnesses are located within member states of the EU. Evidence regulation The Evidence Regulation is designed to facilitate the rapid and direct transmission of evidence between the courts of different member states and is based on the principle of taking evidence locally and directly transmitting it from the requested court to the requesting court. Requests for evidence can be made in all civil and commercial matters in the context of judicial proceedings, whether commenced or contemplated. This requirement seeks to ensure that requests for evidence should only be used in connection with the proceedings at issue, and not for any collateral purpose. Generally, a request for evidence can only be refused in exceptional circumstances, such as, for example, where the taking of such evidence is at odds with the law of the requested state. The Evidence Regulation stipulates that requests for evidence should be complied with within 90 days of the request issuing. If it is the case that the requested court refuses to execute the request, this must be communicated within 60 days of receipt of the request. A request can be refused for different reasons, including: Where the request does not fall within the scope of the Evidence Regulation. Where the request is improperly executed or incomplete. In circumstances where the party from whom evidence is sought has a legitimate reason for refusing to give evidence. The procedure for taking evidence must follow the legal procedure as set out in the court of the requested state. Members of the court in the requesting state can only be present if it is permissible under the rules of the requested court. The Evidence Regulation does not define the term evidence, and therefore, it arguably permits requests to be made for the inspection of documents for evidential purposes, as opposed to just oral evidence. However, The Practice Guide for the Application of the Regulation on the Taking of Evidence provides guidance and states that included within the remit of evidence are: Hearings of witnesses to fact and parties to proceedings. Verifications. Expertise. The production of documents. However, there is a clear distinction to be drawn between documentary evidence for direct use in proceedings and discovery disclosure. Therefore, requests for documentary evidence under the Evidence Regulation should not be framed so wide as to constitute requests for discovery. In terms of the extent of any
request for documentary evidence submitted under the Evidence Regulation, the requesting and requested courts must be satisfied that the request relates to documents that can be used directly in evidence. This issue is one that has arisen under national foreign evidence rules and courts have refused extraterritorial applications to take evidence from parties within their jurisdiction in circumstances where such requests extend beyond the realm of mere requests for evidentiary material (see Panayaiotou v Sony Music Entertainment (UK) Ltd [1994] Ch 142, which held that requests for documents must be restricted to documents that could be used as evidence directly in proceedings, and not represent a general request for wider information). The European Parliament (Parliament) has made certain recommendations with regard to the Evidence Regulation, owing to concerns that it is not being used as widely and effectively as it might be (European Parliament resolution of 10 March 2009 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters (2008/2180(INI))). In particular, it has been suggested that more effort is needed to draw the Evidence Regulation to the attention of the judiciary and practitioners throughout the EU. It is also recommended that modern communications devices, such as video-conferencing, should be used in an effort to make the procedure for taking evidence more convenient and expeditious. The Parliament has requested the Commission to make proposals aimed at resolving these issues, but, to date, no proposals have been forthcoming. issued, the EOP must be served on the debtor, who has 30 days to lodge any Statement of Opposition. Otherwise, where the EOP is unopposed, it falls on the Master of the High Court to issue a Declaration of Enforceability in relation to the EOP. As far as the EOP Regulation s scope is concerned, it can be applied in all civil and commercial matters broadly along the same lines as Brussels I. As such, personal and matrimonial matters are specifically excluded. Application for an EOP is optional, and claimants can still choose to proceed under national rules, the EEO Regulation or under Brussels I, at their own discretion. Small Claims Regulation An EU small claims procedure was established in 2007 under Regulation 861/2007 establishing a European Small Claims Procedure (Small Claims Regulation). The procedure is designed to simplify the process in low-value cross-border disputes in civil and commercial matters and can be used if the value of the claim does not exceed EUR2,000 (as at 1 July 2012, US$1 was about EUR0.78). The process is generally conducted entirely on paper and standard forms annexed to the Small Claims Regulation are used. Denmark is not party to the Small Claims Regulation, as with the Insolvency Regulation (see above, Jurisdiction: Insolvency regulation), the EEO Regulation (see above, Jurisdiction: European enforcement orders) and the EOP Regulation (see above, EOP Regulation). DEBT RECOVERY AND SMALL CLAIMS PROCEDURE EOP Regulation With the aim of establishing a stream-lined procedure for the recovery of debts within the EU, Regulation (EC) 1896/2006 creating a European order for payment procedure (European Order for Payment Regulation) (EOP Regulation) created a European Payment Order procedure. The EOP Regulation applies to all EU member states, except Denmark. In Ireland, the EOP Regulation is provided for under Order 42C of the RSC. The EOP Regulation provides a wide discretion to member states in terms of how they choose to give effect to its provisions. The current position is that an EOP can be applied for in the High Court only, the highest court of first instance. This is arguably unsuited to smaller debts and does little to serve the overarching objective of the EOP Regulation, which is to simplify and reduce the costs associated with foreign debt recovery. The procedure for applying for an EOP is standardised and the same forms are used, irrespective of the member states involved. In Ireland, if all requirements under Article 8 of the EOP Regulation are met, then the Master of the High Court will issue an EOP. The satisfaction of these requirements involves the submission of standard documents evidencing information, as sworn by the creditor. This information includes: The names and addresses of the parties. The value of the claim. Any applicable interest. The basis on which the court has jurisdiction. Evidence as to the cross-border nature of the claim. The court may accept or reject the claim entirely, or alternatively allow only part of the claim form the basis for an EOP. Once MEDIATION AND ARBITRATION Mediation Directive Directive 2008/52/EC on mediation in civil and commercial matters (Mediation Directive) was introduced to regulate access to alternative dispute resolution by all parties to cross-border civil and commercial disputes. The Mediation Directive was recently transposed into Irish law under the European Communities (Mediation) Regulations 2011. Some of the key features of the Mediation Directive include: Its unique application to cross-border disputes. The confidentiality of information in cross-border mediation. Enforceability of agreements reached through mediation. Another of the crucial provisions relates to the effect of mediation on limitation and prescription periods. While mediation is taking place, the European Communities (Mediation) Regulations prevent the applicable national law limitation periods from running and prevent a party from seeking recourse to the courts or arbitration (Statute of Limitations 1957 and/or the Statute of Limitations (Amendment) Act 1991). Arbitration The proposals presented by the Commission for revision of Brussels I include a plan for developing the interface between Brussels I and arbitration. Currently, Brussels I excludes arbitration from its remit. A party can bring court proceedings in a member state under Brussels I, even if there is an arbitration agreement in place (Allianz SpA v West Tankers (Case C-I85/07)). The new proposal aims to ensure that court proceedings taken under Brussels I should be stayed so that arbitration can take place and any applicable agreement in that regard observed. The proposal also aims to ensure that arbitration and court proceedings do not run concurrently in respect of the same matter.
CONCLUSION The legislation that has been introduced towards harmonising European cross-border litigation procedure has made a significant contribution towards simplifying the prosecution of actions with a cross-border element within the EU. However, the suspicion remains that knowledge of the full suite of the available mechanisms is not as widespread among legal practitioners as might have been hoped for at the time of their introduction, a point which has been recognised, in particular, by the Parliament in relation to the Evidence Regulation on the taking of evidence abroad. If the proposals that have been made by the Commission for the amendment of Brussels I are brought into effect, the provisions of Brussels I as regards jurisdiction will gain added importance for parties domiciled outside the EU. Therefore, it is not only those representing EU-domiciled entities who should be familiar with its provisions. MICHAEL BYRNE Matheson Ormsby Prentice T +353 1 232 2075 (direct line) T +353 1 232 2000 F +353 1 232 3333 E michael.byrne@mop.ie W www.mop.ie Qualified. Ireland, 2003; England and Wales, 2010, non-practising Areas of practice. General commercial litigation; financial services litigation; administrative law; product liability. Recent transactions CONTRIBUTOR DETAILS Represents a major international bank in connection with litigation arising from the fraud of Bernard L Madoff Investment Securities LLC. Represents an international financial services company with respect to allegations of mis-selling of financial services products. Represented a major Czech bank in connection with asset recovery litigation in Ireland. Represented a number of pharmaceutical companies in product liability claims arising from the use of their products. Represents a number of State bodies with respect to judicial review of their procedures.