Session 2010-11
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General Committee Debates
European Committee Debates

Recognition and Enforcement of Judgments

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

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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. 

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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

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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

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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

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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

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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

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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

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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

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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

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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. 

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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. 

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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

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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? 

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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.