The
Committee consisted of the following
Members:
Chair:
Mrs
Linda Riordan
†
Brake,
Tom (Carshalton and Wallington)
(LD)
Connarty,
Michael (Linlithgow and East Falkirk)
(Lab)
†
Djanogly,
Mr Jonathan (Parliamentary Under-Secretary of State for
Justice)
†
Duddridge,
James (Lord Commissioner of Her Majesty's
Treasury)
†
Flello,
Robert (Stoke-on-Trent South)
(Lab)
Godsiff,
Mr Roger (Birmingham, Hall Green)
(Lab)
†
Harris,
Rebecca (Castle Point)
(Con)
†
Lee,
Jessica (Erewash)
(Con)
†
Mordaunt,
Penny (Portsmouth North)
(Con)
†
Reynolds,
Jonathan (Stalybridge and Hyde)
(Lab/Co-op)
Shannon,
Jim (Strangford)
(DUP)
†
Truss,
Elizabeth (South West Norfolk)
(Con)
†
Turner,
Karl (Kingston upon Hull East)
(Lab)
Alison Groves, Committee
Clerk
† attended the
Committee
European
Committee B
Monday 28
March
2011
[Mrs
Linda Riordan
in the
Chair]
Recognition
and Enforcement of
Judgments
[Relevant
Document: 19th Report of Session 2010-11, HC 428-xvii, Chapter
4.]
4.30
pm
The
Chair:
Does a member of the European Scrutiny Committee
wish to make a brief explanatory statement about the decision to refer
the relevant document to this Committee?
Penny
Mordaunt (Portsmouth North) (Con):
It might help the
Committee if I take a few minutes to explain the background to the
draft regulation, and the reasons why the European Scrutiny Committee
recommended a debate on the UK’s opt-in.
The
regulation replaced the Brussels convention. It came into force on 1
March 2002, and it applies to all member states of the European Union
with the exception of Denmark. The regulation lays down uniform rules
to settle conflicts of jurisdiction and to facilitate the mutual
recognition and enforcement of judgments, court settlements and
authentic instruments within the EU in civil and commercial matters. It
also includes rules to assist courts in settling jurisdictional
matters.
Article
73 of the regulation places an obligation on the European Commission to
present a report on the application of the regulation within five years
of its coming into force. In May 2009, the European Commission
published its report, which was accompanied by a Green Paper. Overall,
the report concluded that the regulation had generally been a success,
facilitating cross-border litigation through the application of uniform
jurisdiction rules, including rules to regulate parallel proceedings
and rules to ensure the circulation of judgments. However, the report
also concluded that there is a need for improvement in certain specific
areas, which are reflected in the proposed amending
regulation.
I
shall give a brief outline of the Commission’s proposal. First,
with limited exceptions, it would abolish the intermediate procedure
for the recognition and enforcement of judgments between member states
in order to reduce unnecessary delay and cost. Secondly, it would
extend the jurisdiction rules of the regulation to disputes involving
defendants domiciled outside the EU; this, the Commission says, would
extend the possibility for companies and citizens to sue third-country
defendants in the EU as jurisdictional rules under the regulation, such
as the place of contractual performance, would become available.
Thirdly, it would enhance the effectiveness of choice-of-court
agreements by stipulating that the court chosen by the parties to
resolve their dispute should always have priority, regardless of
whether it was first or second seized. Fourthly, it would enhance the
effectiveness of arbitration agreements in Europe by obliging a court
seized of a dispute to stay proceedings, if its jurisdiction is
contested on the basis of an arbitration agreement.
Many
other proposals are included in the draft regulation, but time does not
permit me to go into them here, but the Minister may wish to comment
further. In his explanatory memorandum of December last year, the
Secretary of State for Justice described the impact of the proposed
regulation on the current law in the UK as significant. Not only would
it have a considerable impact, to the extent that national law has
implemented the regulation, but the addition of the proposed extension
of the rules of EU jurisdiction to defendants domiciled outside the EU
would preclude the operation of current national rules of jurisdiction
in this field. The Secretary of State had strong reservations about
this aspect of the proposal. However, it was clear from the explanatory
memorandum that the Government largely supported the majority of the
other changes proposed by the Commission.
The
Government launched a public consultation on whether the UK should opt
into the proposal, which ended in February. An overview of the
responses has been provided by the Government in the debate packs. It
was found that 86% of those who replied to the question whether it was
in the national interest for the Government to opt-in thought that it
was, the principal reason being that the advantages of opting in
clearly outweighed the disadvantages, and 94% supported the principle
of abolishing the intermediate procedure for the recognition and
enforcement of judgments between member states. In addition, 100% of
those who replied were concerned about the extension of jurisdiction to
third countries outside the EU, and 96% supported the
proposed change in choice-of-court agreements. Furthermore, 92% were
supportive of the proposals for enhancing arbitration
agreements.
The
European Scrutiny Committee concluded in its report that this proposal
was legally significant in view of its impact on national civil law,
and it therefore recommended that the decision whether to opt in be
debated in a European Committee. Today’s debate will give us the
opportunity to explore the issues that I have briefly outlined and to
consider whether the interests of the UK are likely to be best served
by opting into the draft directive at this stage, after the
negotiations are over and the proposal is adopted, or at all. It would
be useful to hear from the Minister on the following question: if the
UK opts into the negotiations now, but is unsuccessful in blocking or
mitigating the Commission’s proposals on extending jurisdiction
to defendants outside the EU—a policy which none of those who
responded to the consultation supported—what would be the
consequences for the UK? I hope that has been helpful to the
Committee.
The
Chair:
I call the Minister to make the opening
statement.
4.36
pm
The
Parliamentary Under-Secretary of State for Justice (Mr Jonathan
Djanogly):
Thank you, Mrs Riordan. I also thank my hon.
Friend the Member for Portsmouth North for her introductory comments,
which set the scene for today’s debate very
well.
I
will start by making some contextual comments of my own. The current
Brussels I regulation is the bedrock instrument in the area of judicial
co-operation in civil and commercial matters, and it is its legal
significance
that inspired today’s debate, as has been acknowledged. The
current instrument was agreed in 2001 as the successor to the Brussels
convention of 1968, so EU legislation in this area is well
established.
The
regulation sets out the rules governing which country’s courts
have jurisdiction in cross-border civil and commercial cases and
provides for the recognition and enforcement of such judgments. It is
the essential framework tool underpinning cross-border trade across the
EU. It is important to UK business interests, because it establishes a
regime for resolving cross-border disputes, providing legal certainty
and allowing parties to trade with confidence.
The general
consensus among those who use the regulation seems to be that it
provides vital legal infrastructure and generally works well. That is
not to say that it is perfect. In particular, subsequent judgments of
the European Court of Justice point to an interpretation of some of its
provisions that has allowed some uncertainty to creep in, opening the
door to some forms of tactical litigation, which can undermine its
effectiveness. I am sure that some of the specific cases will be raised
later in the debate, so I will not dwell on them
now.
The
current proposal seeks to address those issues head on, based on a
thorough and welcome review by the Commission of the practical
operation of the regulation, involving comprehensive in-depth academic
studies and public consultation. The proposal will repeal and replace
the current regulation. We consulted on the new proposal widely, in
particular with experts and specialists who make regular use of the
regulation and those who have a more general interest in it. The
overwhelming majority, which is some 86% of those who expressed a view
on the application of the opt-in protocol, said that they considered it
to be in the national interest to opt in. The Lord Chancellor’s
advisory committee on private international law, which is chaired by
Lord Mance and contains many eminent experts in the field, also advised
the UK to opt in, as has the House of Lords EU Select Committee. The
Government agree and are minded to confirm their decision to opt in to
the Council secretariat. The deadline for doing so is 4 April. In
making that decision, the Government recognise that the proposal as it
stands is not perfect, and in some aspects will need or at least
benefit from amendment. We consider, however, that the overall benefits
of the proposal far outweigh any disadvantages, and therefore conclude
that opting in is the best approach. Where there are issues that we
want to change, the fullest participation will better enable us to
secure those changes.
My hon.
Friend the Member for Portsmouth North asked an opening question
concerning the general process of the dossier, where we stand and what
is going to come next. Let me provide hon. Members with an idea of
where we are in the process. The proposal was published in December.
The UK and, indeed, Ireland’s protocol to the treaty allows us
three months to decide whether or not we will opt in. In this case,
that means that the final deadline for a decision is 4 April. That date
is not precisely three months after publication because there is
sometimes a delay between the publication of the proposal and the
completion of all the translations in the Council
secretariat.
Ministry
of Justice Ministers submitted an explanatory memorandum on the
proposal on 21 December, a copy of which is among the papers submitted
for today’s
debate. The following day, the Ministry of Justice issued a UK-wide call
for evidence document, which was made widely available by the Ministry
of Justice website and was also targeted at known interested parties.
The consultation period ended on 11 February. During that time, my
officials attended and hosted several meetings with people with a key
interest in the proposal to gather more evidence. One particularly
notable meeting was with the Lord Chancellor’s advisory
committee on private international law, chaired by Lord Mance, which
was convened to consider and advise on the proposal. The House of Lords
European Union Committee submitted its views on the opt-in to the
Government, as the Committees of both Houses are invited to do within
eight weeks of
publication.
Ministry
of Justice Ministers considered all the evidence and advice, and came
to the conclusion that the national interest was best served by opting
in to the regulation. Ministers take such decisions on a case-by-case
basis, and we recommended an opt-in to the European Affairs Committee,
which has agreed that the UK should opt
in.
The
Chair:
We have until 5.30 pm for questions to the
Minister. I remind Members that they should be brief and that it is
open to a Member, subject to my discretion, to ask related
supplementary
questions.
Robert
Flello (Stoke-on-Trent South) (Lab):
May I begin by saying
what a delight it is to see you in the Chair, Mrs Riordan, overseeing
our scrutiny of the proposed regulation? I have a number of questions,
which, with your permission, I intend to ask in batches of three. That
will give the Minister the opportunity to consider his
responses.
My
first question relates to the Government’s intention in relation
to the impact assessment. I understand from the briefing pack that an
impact assessment is being considered. When do the Government intend to
issue it? Secondly, what is the current estimate of the costs both of
opting in and of not opting in to the regulation? Does the Minister
have any figures—sterling, ideally—for those costs?
Thirdly, do the Government think that the existing safeguards, which
are in Brussels I, are sufficient to defend the rights of the party
against whom the enforcement is
sought?
Mr
Djanogly:
I will begin with the third question. I shall
refer to the proposed changes to the current regulation, and we can
then look at the Government’s views on them. The main changes
address the problems identified in the operation of Brussels I since it
was implemented and seek to bring it up to date. In short, the main
areas that will change are the primacy of choice of court agreements. A
European Court of Justice case, known as Gasser, cast doubt on the
primacy of such agreements and opened the door to tactical litigation.
The proposal therefore seeks to enforce the primacy of valid
agreements.
The
relationship with arbitral proceedings and another ECJ judgment, West
Tankers, confused the position of valid arbitral agreements. It allowed
parties to such agreements to frustrate the agreement by initiating
court proceedings in a court other than the one chosen. The proposal
seeks to regulate the position so that valid arbitral agreements are
respected. There are also proposals to abolish the exequatur process,
which is the intermediate
process whereby the court in the receiving country validates an incoming
judgement from another. Finally, there are rules to provide
jurisdiction for defendants not domiciled in the
EU.
To
answer the hon. Gentleman’s question directly, we strongly
support the change to reinforce the primacy of valid choice of court
agreements by closing the door on tactical litigation, a process
sometimes known as torpedo actions. That will re-establish the legal
certainty that the regulations should deliver. We welcome the fact that
the West Tankers problem in arbitral agreements is to be tackled, but
we would prefer the regulation to approach it by reinforcing the
exclusion of arbitration from its scope altogether. We will be pressing
for that as a better solution during negotiations. We welcome the
principle of removing unnecessary intermediate procedures in the
enforcement process as they can be costly. They are estimated at
£3,500 per case and they cause unnecessary delay. As the vast
majority of cases ultimately pass through the process trouble free, it
seems pointless at best. That is not to say that we should remove all
protections, which is one of the points that the hon. Gentleman was
getting at. I think that the proposed regulation goes too far in that
regard.
More
safeguards should be put in place, such as safeguards that enable
courts to decline to enforce any decision that conflicts with
substantive public policy; safeguards in which the defendant’s
basic rights to a fair trial may not have been met; and safeguards to
protect against fraud. We will seek the establishment of adequate
safeguards in the final proposal and are confident of an acceptable
outcome in this respect. The extension of jurisdiction to defendants
domiciled outside the EU is a difficult area, but we expect the
Commission and others to be flexible. The key will be to ensure that
any EU rules do not create legal lacunae. The current national rules
have been established over scores of years and work well. We want to
maintain the strength of those
rules.
As
regards the impact assessment, the draft was published and is a living
document. We will amend and revise it as we progress and I can send the
hon. Gentleman the latest estimated costs for opting in or out. Costs
for opting in would be reasonably neutral as the regulation is not
wholly new. We have not had a formal costed analysis for opting out,
but business tells us that it would be significant. As the business
conducted under the regulation is in the billions of pounds, the scope
for costs could be
huge.
Robert
Flello:
I am grateful to the Minister for those responses.
Does he believe that the additional safeguards, particularly as the
exequatur is being abolished, are sufficient? Is there perhaps scope
for further protection and safeguards to be put in place or is he
comfortable that they are sufficient? Secondly, do the Government agree
with the Commission’s explanatory note which states that the
level of trust among member states has reached a sufficiently high
degree of maturity that these proposals should be put in place? Does he
believe that the countries that acceded relatively recently have that
maturity? Thirdly, I have a more specific question about UK trusts. Are
the Government content with the interaction between a UK trust and
another legal or natural person under the proposed regulation? Is he
happy about the
way in which our co-countries in the European Union deal with trusts and
with the way in which the regulation looks at
that?
Mr
Djanogly:
First, going back to the problem areas of the
proposal and what should be done about them, the hon. Gentleman asked
whether it was only a few core aspects or whether there were wider
aspects. There are a number of smaller detailed aspects to the
proposals but certainly not ones that we think would be killer
questions for whether we opt in or not. We will, over time and as other
matters come to light, seek to improve and negotiate our way though
that. Our immediate headline negotiating position will seek to focus on
adjustments around three key aspects, and because of their importance I
will respond in more
detail.
The
first aspect relates to the extension of jurisdiction. In a case that
involves a defendant from a third state, the current practice of our
national courts is to use the UK’s own rules to determine
whether such a case should be heard here. The UK’s current rules
are very broad and were developed by jurisprudence in this area. For
example, the centre of activity in forming a contract can give grounds
of jurisdiction. There has been some suggestion that if any new EU
rules were narrower in the way suggested in the Commission’s
proposal, legal lacunae might be created and the amount of business
that comes to the London commercial court might be affected, which
would obviously be of significant interest to commerce. However, the
Government do not believe that that should be overstated, but seen in
context. The UK’s current rules in this area are not available
for cases falling within the current scope of the regulation, and that
does not appear to impose any undue limitation on the international
business of the London commercial
court.
Officials
from my Department will work closely with external experts, including
the legal interest in the City of London, with the aim of ameliorating
any adverse affect of the Commission’s proposals during the
negotiations. For example, we will try to persuade member states to
agree to the Commission’s extension of jurisdiction in
combination with retaining existing national grounds of jurisdiction,
such as those that currently exist in the UK and in other member
states. If that cannot be achieved, we will look to establish further
EU grounds for jurisdiction, which would be designed to fill any
significant gaps that would result from the repeal of our current
national grounds. From my officials’ discussions with the
Commission, as the proposal is developed, we think it probable that the
Commission will show some flexibility in that
area.
The
second aspect is the approach taken by the European Commission to
arbitration. Significant problems emerged as a result of the ECJ
decision in the West Tankers case. That decision reduced the ambit of
the exclusion of arbitration from the scope of the regulation, which in
turn allowed parties wishing to escape from their commitments to
initiate court proceedings in a member state other than the one in
which the seat of arbitration was located. The purpose was to
destabilise the integrity of the arbitration process, in particular by
seeking a court ruling that the arbitration agreement was void and then
enforcing that ruling around the EU. Consultation with UK arbitration
experts has indicated that they are broadly supportive, in principle,
of the
Commission’s attempt to remedy that issue, but there has also
been criticism that the proposal fails fully to resolve all the
uncertainties generated by the West Tankers case, and that it provides
the possibility of generating some degree of external EU competence in
that area. In negotiation, the Government would propose continuing to
negotiate for a fully comprehensive exclusion of arbitration from the
scope of the regulation. The negotiability of that approach, by the UK,
should be strengthened by the support of other member
states.
The
third point is the Commission’s proposal to abolish the
so-called exequatur process, which is the preliminary procedure for the
enforcement of foreign judgments. Abolition has been proposed as being
in the interests of access to justice, and in particular to remove the
unnecessary costs and delays that usually occur with such a procedure.
In principle, the UK can support the proposal, but it remains our view
that such abolition must be accompanied by fully satisfactory
safeguards to protect the interests of defendants and public policy,
which covers, for example, whether a contract is tainted by serious
illegality under our law. Early indications are that such protection
should be negotiable, as there are many member states that share the
UK’s
view.
There
was a further question about whether safeguards will be needed to
protect defendants or whether the proposed regulation satisfies the
requirements. Yes, some safeguards have been proposed for the
regulation, and they are designed to ensure that defendants do not have
foreign judgments enforced against them in circumstances in which it
would be unfair to do so. The Government need to explore the safeguards
further to ensure that they fully protect defendants’ interests.
It remains a key point for the Government to ensure that exequatur is
retained for public policy cases as a ground for assisting enforcement.
That view is supported by the respondents to the recent Ministry of
Justice
consultation.
Robert
Flello:
I am grateful to the Minister, but I wish to press
him on the question about the maturity of the relations between
nations, particularly those relations that are more recent. I am sure
that he will return to that in a
moment.
What
problems, if any, have the Government identified following regulation
4/2009, which abolished the exequatur procedure for claims for family
maintenance? Is the Minister aware of any problems, and if so what
are they?
I press the
Minister more specifically on what discussions the Government have had
with other nations regarding the jurisdiction rules involving
defendants domiciled outside the EU, under The Hague conference on
private international law. Will he be more specific about any
discussions the Government have had with other nations? How will the
regulation ensure that a third country will allow enforcement against a
third country defendant, where the forum necessitatis is used but the
assets are in the third country? The regulation refers to when assets
are in the European Union: what about when assets are still in that
third country? How does he see the regulation addressing that
issue?
Mr
Djanogly:
May I first go back to the hon.
Gentleman’s question on trusts? That is an area where there may
well be a need for some additional grounds for jurisdiction, if our
national grounds are repealed. We hope that we will not be required to
confront that situation, if we can
secure the minimum harmonisation approach that I have just mentioned. If
that approach is rejected, we will consider carefully, with experts,
whether any adjustments for trusts should be introduced into the
negotiations.
The
hon. Gentleman wanted further information in relation to the abolition
of exequatur. As I said before, that is the procedure that converts a
foreign judgment into a domestic judgment for enforcement purposes. Its
abolition would reduce litigation costs and delays for a party
enforcing a judgment across borders. As in every aspect of business,
the Government fully support deregulation and the stripping away of any
and all unnecessary bureaucracy. For the most part, this procedure is a
prime example of a process that we can and should do away with for most
cases. While it is important that we retain adequate safeguards to
protect, for instance, the legitimate interests of debtors, the vast
majority of decisions moving within the system are perfectly valid and
simply stand to be enforced. The process is costly and time-consuming
and, most often, to little purpose. The process is estimated to cost
£3,450 a case and it can take different amounts of time,
depending on where the claim is made. In the vast majority of cases, it
ultimately amounts to little more than a rubber stamp—albeit a
costly and slow one—since virtually all cases are currently
passed through the
process.
It
is also often a pointless extra hurdle. UK systems and businesses that
are owed money abroad will benefit from the streamlined procedures. Not
making these more effective procedures available to British businesses
would put them at an economic disadvantage to those that participate in
the new regime and can use them.
The hon.
Gentleman asked to what extent exequatur has been abolished in other
areas. It has been abolished in a number of instruments that have a
more restrictive scope. Those are the European Enforcement Order 2004,
which allows national judgments and uncontested claims to be recognised
automatically in other member states; the European order for payment, a
European procedure followed in a similar way in the courts of all
member states that allows orders arising in uncontested cases to be
recognised automatically in other member states; the European small
claims procedure, a European procedure followed in a similar way in the
courts of all member states that allows the circulation of judgments
for less than €2,000 in contested cases to be recognised
automatically by other member states.
All provide
safeguards for the defendant in the originating court, which must
comply with certain procedural guarantees. A defendant can call for a
review of the judgment if he or she was not aware of the proceedings
and did not have the opportunity to contest them. We have no evidence
that abolition has caused any problems. Use of these instruments is
growing in popularity and has enabled UK creditors to more easily
enforce judgments in other member
states.
I
can confirm that exequatur has also been abolished in the maintenance
regulation, which will enter into force later this year. That is on the
basis of agreement on the use of applicable law rules. As the UK will
not be using the applicable law rules, our judgments will still be
subject to that
principle.
Robert
Flello:
On page 138 of the debate pack, there is an
example in the Commission staff working paper impact assessment. The
example, which I am desperately
turning to—I can hear other hon. Members in the room also turning
to it—talks about someone who enters into a time share
agreement. First, given the example on page 138, what remedy would the
Government propose to address that situation, in the absence of
provisions in the draft regulation? Secondly, do they believe that the
proposal to retain the exequatur procedure for judgments in defamation
cases involving the media should be widened to include all defamation
cases? Thirdly, how does the Minister see the proposals interacting
with the draft Defamation Bill, which is currently going through
consultation?
Mr
Djanogly:
Negotiations on Brussels I may provide an
opportunity to achieve a reciprocal agreement to deal with the libel
tourism aspect of defamation by establishing a rule that would lead
courts to decline jurisdiction in such cases, if there is insufficient
connection. Subject to developments in relation to the draft Bill, if
an appropriate provision is not included on the issue in a new Brussels
I regulation, we could be placed in the position of having to repeal
provisions introduced through the substantive Defamation Bill shortly
after they have come into
force.
Libel
tourism, which is an important element in the coalition’s
commitment to reform defamation law, has a high profile in the media
and among those campaigning for reform, so there would be considerable
difficulties if that were to happen. The Government aim to ensure that
any issues arising from the review of Brussels I which have
implications in respect of libel tourism are considered in the context
of the provisions that we have included in the draft Bill, which has
recently been published for consultation and pre-legislative
scrutiny.
I
also need to address the point that the hon. Gentleman made about the
relationship with the Hague convention of 2005. We strongly support the
agreement, which will enhance the legal efficacy of commercial choice
of court agreements. We support the Commission’s approach to the
instrument, which is that it should be concluded by the EC as a whole
on conclusion of the Brussels I review. We view the issue in the same
way and believe that it should be taken as a
package.
I
am afraid that I will need to write to the hon. Gentleman on the
technical issue in respect of time
shares.
Robert
Flello:
You will be delighted to know, Mrs
Riordan, that these are my last three questions. [Hon.
Members: “More!”] I hear cries for more from
my hon.
Friends.
James
Duddridge (Rochford and Southend East) (Con):
More
brevity.
Robert
Flello:
Indeed, more
brevity.
Page
7 of the package
states:
“The
Government is giving careful consideration to which, if any, of these
national grounds should in some form be retained under the revised
Regulation”
in
third country
cases.
May
I press the Minister on the Government’s current thoughts about
which national grounds of jurisdiction should be retained under the
revised regulation? My second question is about discussions that they
have had
with representatives of the UK insurance industry about the UK as a
forum of choice for litigating international commercial disputes. The
Committee would be interested to know what discussions have taken place
with the UK insurance industry. Thirdly and finally, in a similar vein,
what have the Government done so far to consult the arbitration
community about the provisions regulating the interface between
regulation and
arbitration?
Mr
Djanogly:
On the first question, the impacts resulting
from a new legal framework are expected to be overwhelmingly beneficial
to business in general and the City of London in particular. A key
problem with the current regulation is the uncertainty over
choice-of-court agreements that has crept into the legal framework
following the ECJ Gasser judgment—this is the point that the
hon. Gentleman just made. The judgment undermines legal certainty and
allows tactical litigation by opening the possibility for parties to
undermine legitimate agreements by seizing another court, undoubtedly
one with a reputation for slowness. The regulation will remedy that,
and, since much business relies on such agreements and the confidence
that they bring, we expect a positive
outcome.
Likewise,
the regulation will address a similar problem in the arbitration field,
where the ECJ’s West Tankers judgment has similarly allowed
scope for parties to frustrate valid arbitral agreements with tactical
litigation. Although the way in which the Commission has opted to
resolve the problem may not be our preferred way, agreement clearly
exists that it is necessary to do so. If that is done, there will be
another benefit—as the hon. Gentleman has spotted—for UK
business, where we lead the world in arbitration services.
Some concern
has been expressed about the potential impacts of one aspect of the
proposal, namely the new rules on jurisdiction for defendants who are
not domiciled in the EU. The concern is that replacing our wide
national rules of jurisdiction with narrow EU rules will mean that the
London commercial court will not have jurisdiction for the same range
of cases as it now does, which could result in a loss of business
arising. We have tested that concern as thoroughly as possible, and we
have consulted specifically on that point with specialist regular users
of these rules. Indeed, a bespoke group of specialists was convened
under Lord Mance’s chairmanship to look at that very point. That
group’s conclusion was that although the issue would remain a
slight concern it was probably not significant, and in any case it was
far less significant than the gains that were to be made from full
participation, so it did not approach being a factor that would lead to
a decision not to opt in. We will, of course, take care during
negotiations to take steps to ameliorate any concern, and we will work
with experts in the field in doing so.
The
Chair:
If no more Members want to ask questions, we will
now proceed to the debate on the motion.
5.6
pm
Mr
Djanogly:
I beg to move,
That the
Committee takes note of European Union Document No. 18101/10 and
Addenda 1 and 2, relating to a Draft Regulation of the European
Parliament and of the Council on jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters; and endorses
the Government's decision about whether to exercise the UK opt-in
Protocol 21 to the Treaty on the Functioning of the European
Union.
I am grateful
that there has been an opportunity to have this debate. I am
particularly pleased to note the level of interest and the depth of
knowledge that has been displayed today by the hon. Member for
Stoke-on-Trent South on this topic. One thing that has come across loud
and clear during our debate today, and when I have discussed the
proposal in other formats, is that it is an important area of law that
has significant impacts on daily business and the UK economy as a
whole. It is a fundamental building block for EU and global
trade.
The hon.
Gentleman asked what specific consultations we have had with the
arbitration community, and I can tell him that we have had many
representations and meetings. The Lord Chancellor’s advisory
group contains specialist arbitrators, and I assure the hon. Gentleman
that we will continue to work closely with them during negotiations and
that several arbitrators responded to our consultation
exercise.
Although some
concerns may exist about various aspects of the proposal, I take away
the message that the benefits of participating in the final outcome are
clear and that they outweigh the disadvantages. Different views may be
taken about how we approach the negotiations and how we should amend
the proposal. I will take note of the points that have been raised here
today, but I think that a general agreement exists that we need an
effective legal framework in this sphere. The Government believe that
the new Brussels I regulation provides the best basis for that
framework. Indeed, as we have discussed, the option of not being in any
form of the regulation, or of being bound by the old regulation, could
be little short of disastrous for business and for the United Kingdom
economy at a time when UK global trade needs all the help that it can
get.
The
Government also believe that our full and honest participation in the
negotiation of the proposal from the outset is essential to our
negotiating credibility and, ultimately, to its success. Our European
partners are well aware—as hon. Members who have spoken today
have been—that this legal framework is essential to the UK, and
if we were to step away and not opt in, they would quite clearly call
our bluff. All we would do is to lose credibility, influence and the
vote.
The
benefits that we have identified from the new proposal are real and
significant, and a lot of them have been discussed today. They include
an end to tactical litigation to undermine legitimate choice-of-court
agreements and an end to tactical litigation to frustrate and undermine
valid arbitration agreements. Those are both areas in which the UK is a
global leader, and in those aspects alone we stand to gain
significantly from the changes. We will also see an end to the
unnecessary and pointless bureaucracy of the exequatur
procedure—I will pronounce that correctly at some point, I am
sure—while retaining adequate safeguards to protect debtors. The
ending of this process will save costs, which are estimated at some
£3,500 a case, and it will end the significant delays in just
getting a claim through—it is indeed a costly rubber stamp. I
recognise that we need to make changes, and we will go for them. The
process will be made easier by opting in and by having a full seat and
vote at the table. Overall, we will see a solid regime to support
businesses and consumers and to support our growth agenda. This is an
important piece of law.
5.10
pm
Robert
Flello:
Earlier this afternoon, the Minister mentioned
that there is already well-established legislation, that there is a
framework in place and that it works well, but it is not perfect. I
certainly agree with that. Indeed, we have all seen the uncertainty
that has come through because of torpedo measures and because of
tactical and malicious litigation, which is a strong, but appropriate
term.
It
is slightly strange that we must opt in to be able to negotiate the
changes. It is always frustrating that one has to negotiate after
setting out one’s stall, but that is where we
are.
Mr
Djanogly:
The hon. Gentleman makes an important point, and
it is one that we considered carefully. Ultimately, however, because
there are so many benefits to the UK economy of opting in, if we had
said that we will stand back, see what happens and then decide, we
would have totally undermined our negotiating
position.
Robert
Flello:
I am grateful to the Minister, who has led me
nicely on to what I was about to say. Labour Members are keen to see UK
business thriving, but only in the proper legal framework that protects
all parties and defends the rights of all who operate businesses
throughout not only the European Union, but the wider
world.
I
thank the hon. Member for Portsmouth North, who gave a good
introduction to the matter before us this afternoon. In her
contribution, she set out the proposed regulation, which includes four
things, including abolishing the exequatur. I hope that somebody
watching or listening to the debate will correct both me and the
Minister if we have pronounced that term incorrectly—abolition
seems appropriate given that we have all struggled with the
pronunciation. The fact that the regulation also looks at the
choice-of-court agreement and moves it forward is positive. On the
improvements to the arbitration process, as the Minister has rightly
said, we lead the world in arbitration procedures and processes, and so
we must ensure that that is protected. On improving access to justice,
it is particularly important to me to improve access for employees, but
it is also important to do so for others more widely.
Despite good scrutiny this
afternoon—the Minister is still reeling from the list of
questions, so I send him my apologies—there are still many
questions to be answered before we can be completely comfortable. As
the Secretary of State has said, the regulation will have a
significant impact, so we need to be absolutely certain that this is
done correctly. The deadline of 4 April is extremely short
notice, but I am pleased that the Government acted speedily, once the
proposed regulation was published, in getting the consultations under
way, and I commend them and their officials for
that.
We
are discussing an extremely important measure. It might seem dry and
technical, but it is important. All the negotiations that take place
will be critical. I hope that those taking them forward into the
European framework will ensure that the British negotiating position is
upheld. All eyes will be on the Government’s performance. I had
hoped to see my friend and neighbour, the
hon. Member for Stone (Mr Cash) in Committee this afternoon.
I am sure that his eyes will also be on the Government’s
performance and on what happens. We have given the topic a good airing,
and I look forward over the weeks and possibly months ahead to a
positive outcome.
The
Chair:
Minister, do you want to respond further?
Mr
Djanogly:
I do not think so. I think that there is a great
amount of agreement between the Government and Opposition on this
important legislation. The Government look forward to negotiating on
behalf of the
UK.
Question
put and agreed to.
5.15
pm
Committee
rose.