19.EU Regulation 2201/2003, commonly known as ‘Brussels IIa’ (or simply ‘Brussels II’), forms the heart of cross-border family law in the EU. The issues within its scope include:
It is complemented by EU Regulation 4/2009 (‘the Maintenance Regulation’), which sets similar rules of jurisdiction for inter-country disputes over family maintenance payments. Both are procedural rather than substantive: that is, they do not set grounds for divorce, for example, across the EU; instead, they help to resolve cases by determining where cross-border cases should be heard and adjudicated upon (known as jurisdiction), and ensuring that the decisions of the court with jurisdiction are recognised and enforced throughout the EU.
20.Child abduction is among the issues to which Brussels IIa applies. Here, it has a complex relationship with the Hague Conventions of 1980 and 1996, but takes precedence over these in cases wholly within the EU. All EU Member States have signed the 1996 Convention, though Daniel Eames, Chair of Resolution’s International Committee, observed that “Brussels II provides greater speed” than the alternatives. Philip Marshall QC, Chair of the Family Law Bar Association (FLBA), suggested that the convenience of Brussels IIa has discouraged updates to the 1980 Convention. Chapter IV of Brussels IIa requires each Member State to designate one or more ‘Central Authorities’ to coordinate communications between countries in relation to the Regulation. Resolution told us that the information so exchanged “can be vital evidence in proceedings, including in child abduction proceedings or cases involving a child at risk of harm requiring protective measures”. These are included in the European Judicial Network in civil and commercial matters: Mr Eames argued “the fact that the judiciary is able to liaise easily when it has tricky issues would be a major loss if we were to come out”.
21.Brussels IIa also covers divorce, with a significance articulated by Resolution:
As more relationships are formed where one or both parties are from other EU states, the potential for lawyers to be required to advise, and the family courts across the UK to rule, on family law cases with an EU dimension has inevitably increased. Because of the extent to which EU law has permeated family law and practice across the EU, every divorce petition is founded on the jurisdictional requirements of the Brussels IIa Regulation.
22.Brussels IIa attracts more controversy in relation to divorce than in child-related matters. Under the Regulation, both parties can begin proceedings in the jurisdiction of their choosing. If two different jurisdictions are chosen, proceedings in the later court to begin proceedings are paused until the first court determines whether it has jurisdiction. Multiple witnesses criticised what they saw as a frequent ‘race to issue’, with FLBA observing “the more legally astute spouse (who is often also the financially stronger spouse) can often arrange to win the race to court in his favoured jurisdiction”. Mr Eames posited that “Brussels II prevents the opportunities for families to mediate and to reconcile, because you have to issue first”; Mr Marshall agreed “in absolute terms” with the International Family Law Group’s claim that the Regulation discourages mediation and can accelerate the breakdown of saveable marriages.
23.The Maintenance Regulation is similarly contentious. Kingsley Napley LLP stated that it “provides clear and consistent rules on where parties can start proceedings” and “contains detailed rules to assist enforcement and recovery of maintenance across borders”. They considered that “the driving purpose of the regulation is to be creditor/recipient friendly”, giving greater choice over jurisdiction to the maintenance receiver than its payer. The Family Law Bar Association (FLBA) noted that a “significant” number of prenuptial agreements made in the UK since 2011 (when the regulation came into force) contain choice-of-court provisions under Article 4 of the Maintenance Regulation, and that if it no longer applied in the UK, “the status of such agreements would be thrown into doubt”. However, some discontent was expressed. FLBA observed a conflict between Article 7 of Brussels IIa and Article 3(c) of the Maintenance Regulation, which could, for example, deny an English court jurisdiction over maintenance claims relating to a divorce case it was hearing. The International Family Law Group LLP argued that it enforces inappropriate prenuptial agreements. However, the Regulation lacks a natural replacement. The 2007 Hague Convention is a powered-down version, with orders only enforceable in certain circumstances. Mr Marshall claimed “most people did not know that the 2007 Hague Convention existed” and it was “little used”; he also recognised greater complementarity between Brussels IIa and the Maintenance Regulation. This would support remaining party to the Maintenance Regulation, if possible, at least in the short-to-medium term.
24.Brussels IIa and the Maintenance Regulation are improvements over their default alternatives. They are not without fault: races to issue resulting from Brussels IIa’s divorce provisions are particularly undesirable. Nonetheless, mutual recognition and enforcement of judgments in family cases is of demonstrable value in resolving cross-border instances of child abduction and non-payment of maintenance.
25.We recommend that the Government should seek to maintain the closest possible cooperation with the EU on family justice matters, and in particular to retain a system for mutual recognition and enforcement of judgments.
26.The UK’s commercial law sector has very significant economic influence, nationally and internationally. Gary Campkin, Policy and Strategy Director at TheCityUK, characterised the role of the legal sector in the business ecosystem:
It is one of the jewels in the crown. Indeed it is part of the reason why London, and the UK, is the leading global financial centre. It is also a reason why people come to London and the UK. They come here to access the law. They come here to deal with a situation where the courts provide certainty and fairness, and where the judiciary have a very strong reputation for impartiality. We believe very strongly that this is not just about the legal services industry itself but about the underpinning that English law gives the wider economy and business relations. It is a very important part of the UK offering.
Internationally, many firms with little or no other connection to the UK choose the law and courts of England and Wales to govern their contracts. Allen & Overy LLP estimated that English courts are the world’s most popular jurisdiction in this regard.
27.Witnesses representing the commercial law sector in this inquiry expressed similar priorities to those in family law, stressing the value of arrangements for mutual recognition and enforcement of judgments, and for choice of jurisdiction; both are provided by EU Regulation 1215/2012, called ‘Brussels I recast’ (or just ‘Brussels I’). First established as an international treaty (the 1968 Brussels Convention), it was superseded by EU law as the Brussels I Regulation in 2001, itself then updated or ‘recast’ in 2012. It ensures that clauses in contracts specifying jurisdiction, including that in England and Wales, are respected and that judgments in the UK apply across the EU (and Lugano States); it also protects UK residents from being sued in unconnected EU courts (so-called ‘exorbitant jurisdiction’). Patrick Robinson of Linklaters LLP observed:
The portability of English judgments and having them automatically recognised within the European Union is a considerable advantage. There is a risk—it is not clear how high the risk is—that they are no longer going to be recognised and enforced in the same way, at least in some places. It may be a theoretical risk, but commercial parties do not like risks.
28.The Government cannot incorporate Brussels I into domestic law unilaterally: the Regulation requires reciprocity, and a freestanding UK commitment to respect other countries’ jurisdictions and judgments would neither required them to return the favour nor provide a mechanism for the resolution of any disputes arising on these matters. The UK will cease to be a party to Brussels I when it leave the EU. The original 1968 convention might still apply, but is “outdated and contains a cumbersome enforcement regime”, according to the British Institute of International and Comparative Law (BIICL). It does not include all Member States (as recent entrants had no reason to join with Brussels I in place). The Lugano Convention 2007 (‘Lugano II’) brings EFTA nations into the Brussels Regime. Modelled on Brussels I before it was recast, it lacks features of the revised Regulation, such as streamlined enforcement and greater protection for exclusive choice of court agreements. Resolution claimed it could not be entered from outside the Single Market. There is also a 2005 Hague Convention on Choice of Court Agreements, though this is considerably weaker than Brussels I: it merely enforces jurisdiction choices already extant in contracts and cannot resolve cases where they are absent; it also excludes consumer and tort matters, intellectual property infringement and antitrust cases. Both Lugano II and the 2005 Convention are preferable to a void; however, maintaining the advanced links of Brussels I recast must be the priority. Denmark agreed a bespoke version of Brussels I with the EU in 2005: this may be instructive for the UK, but the agreement—which gives the CJEU jurisdiction on interpretation—could be seen as in tension with the Government’s aim to end the jurisdiction of the CJEU in the UK.
29.There are other matters to explore in commercial law. The Rome Regime deals with ‘applicable law’ issues, that is to say, which law governs disputes (as opposed to questions of jurisdiction, about which court hears them). EU Regulation 593/2003 (‘Rome I’) addresses contractual civil and commercial disputes and Regulation 864/2007 (‘Rome II’) covers non-contractual cases (e.g. anti-competitive practices, intellectual property and product liability). Unlike the Brussels Regulations, these do not require reciprocity and so can simply be incorporated into UK law. For Linklaters, this is “a straightforward option to promote continuity and certainty”. Regulation 1206/2001 (‘the Evidence Regulation’) and the Regulation 1393/2007 (‘the Service Regulation’) are useful background devices that facilitate cross-border evidence taking and provision of legal documents, respectively. Dr Eva Lein of BIICL thought agreeing similar post-Brexit provisions would be uncontroversial.
30.There are special concerns in the law of banking and finance, which is a significant field given the importance of that sector to the UK economy. TheCityUK explained:
Disputes inevitably arise in the financial services sector because of the sheer volume, complexity and value of the transactions. This was underscored by the Judge in Charge of the Commercial Court, Lord Justice Blair, in January 2016 when he noted that “ … as far as the London Commercial Court is concerned, of the cases commenced during 2015 … 69.26% were claims particularly in the fields of banking, finance, commodities, shipping, maritime disputes and insurance and reinsurance.
[ … ]
Data from the Law Society of England and Wales shows that between 2009 and the first half of 2015, the financial services industry accounted for 43% of the total value of deals on which the top 50 UK ’City’ law firms advised.
Saliently, any damage to the UK’s financial services will similarly affect the legal professions. Clifford Chance LLP observed that UK banks, insurers and other such organisations have contractual duties to perform functions based on EU membership and requiring authorisation from EU institution. If this lapses at the moment of the UK’s departure, those duties are rendered impossible to perform—but this is unlikely to be a defence to a claim for breach of contract, making those firms liable in damages. Areas of such uncertainty include derivatives, insurance and revolving credit agreements. Clifford Chance noted this uncertainty “could operate as a disincentive for EU customers to enter into contracts of this kind with UK firms”, and called for clarity—particularly on transitional arrangements.
31.The Government has said “we recognise that an effective system of civil judicial cooperation will provide certainty and protection for citizens and businesses of a stronger global UK”.
32.We recommend that protecting the UK as a top-class commercial law centre should be a major priority for the Government in Brexit negotiations given the clear impacts on the UK economy of failure to do so. Protecting court choices and maintaining mutual recognition and enforcement of judgments are central to this objective: the Government should aim to replicate the provisions of Brussels I Recast as closely as possible, perhaps using the EU-Denmark agreement as a blueprint. As a minimum, it must endeavour to secure membership of Lugano II and the 2005 Hague Convention in its own right. Rome I and II should be brought into domestic law. The Government must also address the potential liabilities for non-performance of contractual duties that financial institutions may face as a consequence of Brexit.
33.Witnesses throughout this inquiry drew attention the current and future roles of the CJEU, but these discussions were deepest in connection with commercial law. The CJEU is the ultimate interpreter of EU law, and Member States are required to give its judgments primacy. The Government has, in recent months, repeatedly stated an intention to end the jurisdiction of the CJEU in the UK, most recently in its Brexit White Paper. However, there are procedural matters—such as jurisdiction, determining the applicable law, and recognition and enforcement of judgments—for which conceding a small role for the CJEU could be necessary for continued and mutually beneficial cooperation. The Brussels I and II Regulations are, in essence, means to clarify the balance of powers between competing courts, none of which is independently well-situated to resolve disputes arising on the mechanism itself. A strong arbitral authority is required to ensure a consistent and fair application of transnational rules, and those regulations or similar arrangements would be unappealing without it. Our evidence strongly suggests close continuing cooperation in these areas of commercial and family law would, at the least, necessitate UK courts giving due regard to CJEU decisions: Simon Gleeson of Clifford Chance observed that “the ECJ will have strong persuasive authority in this country, even when it ceases to have actual authority”. This would not bind the courts: the risk here is that UK and EU case law on the same provisions begins to diverge in a way that undermines consistency and, potentially, reciprocity. The precise meaning of ‘due regard’ in this context also requires clarification. The London Solicitors Litigation Association notes that “it remains unclear … whether the EU will accept a system in which there is no final arbiter on the meaning of [a replacement for Brussels I]”.
34.We make no argument against the end of the CJEU’s jurisdiction in the UK on substantive matters of law: in the context of this report that question is not one for us to address. Nor do we address the question of whether the CJEU should play any part in state-state or investor-state dispute resolution in the new UK-EU relationship, which could be modelled on the arbitration mechanisms for previous UK trade deals or the new agreement between the EU and Canada. Indeed, it may be possible to maintain the beneficial relationships in family and civil law wholly without it. Our focus is on the purely arbitral and limited role which the CJEU or another court will need to play in respect of Brussels I and II. Mr Robinson observed that “here we are looking at the CJEU in its capacity as the body that can tell you how to interpret a European regulation, or three European regulations, rather than any broader power that it has”. Dr Lein expanded:
If that system is uniform and applies here and in other countries, it makes sense to keep it as a uniform system so that everyone more or less knows how to apply the rules and applies them in the same way. What the Court is doing is ensuring that. It is not that the Court is ultimately interfering in the decision-making process, but it interferes to explain to the courts what the concepts in those regulations mean.
Mr Eames added, in similar vein:
I suppose a distinction that can be made is that this is procedural and not substantive law. We are not having foreign laws applied in England; we are just deciding which is the most appropriate court, and having reciprocity. That is where the CJEU comes in. It assists with those issues and avoids UK families having competing jurisdictions in two different countries.
35.The end of the substantive part of the CJEU’s jurisdiction in the UK is an inevitable consequence of Brexit. If the UK and the EU could continue their mutually-beneficial cooperation in the ways we outline earlier without placing any binding authority at all on that Court’s rulings, that could be ideal. However, a role for the CJEU in respect of essentially procedural legislation concerning jurisdiction, applicable law, and the recognition and enforcement of judgments, is a price worth paying to maintain the effective cross-border tools of justice discussed throughout our earlier recommendations.
48 Family Law Bar Association (FLBA) () paras 32–4
49 [Dr Ruth Lamont]
52 Resolution () para 17
54 Resolution () para 11
55 Family Law Bar Association (FLBA) () para 29
57 , The International Family Law Group LLP ()
58 Kingsley Napley LLP () para 25
59 Kingsley Napley LLP () para 26
60 Family Law Bar Association (FLBA) () paras 20–23
61 Family Law Bar Association (FLBA) () para 18
62 The International Family Law Group LLP ()
66 [Patrick Robinson]
67 Allen & Overy LLP () para 6
68 Iceland, Norway and Switzerland
70 BIICL () para 11
71 The European Free Trade Association (EFTA) comprises Iceland, Liechtenstein, Norway and Switzerland. All but Switzerland are part of the European Economic Area (EEA) with the EU, but none is a Member State of the EU. Liechtenstein is not a party to Lugano II.
72 Resolution () para 31
73 , art 6
74 HM Government, The United Kingdom’s exit from and new relationship with the European Union, , February 2017, para 2.3
75 Linklaters LLP () para 2.5
77 TheCityUK () paras 19, 28
78 Clifford Chance LLP () paras 32–40
79 Clifford Chance LLP () paras 26–27
80 HM Government, The United Kingdom’s exit from and new partnership with the European Union, , February 2017, para 8.19
81 HM Government, The United Kingdom’s exit from and new partnership with the European Union, , February 2017, para 2.3
82 European Court of Justice, a court of the CJEU
84 London Solicitors Litigation Association ()
17 March 2017