21. AMENDMENTS TO THE 1968 BRUSSELS
JUDGMENTS CONVENTION AND THE 1988 LUGANO JUDGMENTS CONVENTION
Letter from Lord Tordoff, Chairman of
the Committee, to Keith Vaz Esq MP, Parliamentary Secretary, Lord
Chancellor's Department
The above document was considered by Sub-Committee
E (Law and Institutions) at its meeting on 14 July. The Committee
decided to retain the document under scrutiny pending clarification
of three matters.
The first arises from reports in the media that
the new text causes difficulty for those engaged in electronic
commerce and that the industry was not consulted. I attach an
extract from European Report for 3 July. I would be grateful
to have your reactions to the points it raises.
Secondly, your Explanatory Memorandum draws
attention to the fact that the Justice and Home Affairs Council
on 12 March decided to "freeze" the text on the assumption
that a Community instrument to replace the Brussels Convention
would be brought forward under the new Title IV of the EC Treaty.
The Committee notes that the House of Commons European Scrutiny
Committee has sought further information from you on the implications
of the shift from a Convention to a Community regulation and on
the position of the United Kingdom under the Protocol on the position
of the United Kingdom and Ireland and the intentions of the Government
as regards the present proposal. We reserve the right to pursue
the matter further when we have seen your response to the Commons
Committee. We hope your answer will include an explanation of
the consequences if the United Kingdom and/or Denmark does not
opt in. Would the Convention (unamended) continue to apply as
between the "opted-outs" and as between an "opted-out"
and a Member State which becomes subject to the Regulation? What
happens to the current system of mutual recognition?
Finally, the Committee is aware that negotiations
on an international convention on jurisdiction and recognition
of judgments are presently under way under the auspices of the
Hague Conference. The Committee is surprised that this development
was not mentioned in your Explanatory Memorandum. The Committee
would therefore be grateful if you could provide it with a description
of the proposal being discussed at the Hague and an explanation
as to how its provisions might overlap with or otherwise relate
to the new texts of the Brussels and Lugano Conventions. The Committee
would also welcome your views on the implications for those negotiations,
and in particular for the United Kingdom's role in them, if the
new text of the Brussels Convention is adopted as a Community
Regulation. It would be helpful if you could describe the legal
position (a) if the United Kingdom opts in to the Regulation,
(b) if the United Kingdom chooses not to opt in, and (c) if Denmark
does not opt in to Title IV.
I look forward to receiving the information
requested above.
16 July 1999
Letter from Keith Vaz MP, Parliamentary
Secretary, Lord Chancellor's Department, to Lord Tordoff, Chairman
of the Committee
Thank you for your letter of 16 July which raised
three matters on which Sub-Committee E (Law and Institutions)
has sought clarification.
The first matter concerns potential difficulties
for those engaged in electronic commerce arising out of a proposal
relating to consumer transactions.
In broad terms, Article 13 of the Conventions
allows a consumer to bring proceedings before a court in the country
and specific jurisdiction or where he lives, if the goods were
paid for on instalment credit terms, or if the transaction resulted
from an advertisement and the consumer took steps in that state
necessary for the conclusion of contract. It probably covers e-commerce
transactions but there is some uncertainty about whether the maintenance
of a website constitutes "advertising" for this purpose.
There are legal arguments both ways and only a decision from the
European Court of Justice would finally decide the matter.
In May the Justice and Home Affairs Ministers
agreed as part of the review of the Conventions that, apart from
goods bought on instalment credit terms (where the rules would
remain unchanged), contracts for goods and services should fall
within the protective scope of Article 13 if the contract was
concluded with a trader who "pursues commercial or professional
activities in the State of the consumer's domicile or, by any
means, directs such activities to that State or to several States
including that State, and the contract falls within the scope
of such activities".
The intention of Member States was to make it
clear that e-commerce transactions, including those involving
websites, come within Article 13. This would help improve comsumers'
access to justice in cross border cases and so should enhance
consumer confidence in e-commerce, especially for higher value
purchases.
However, the concerns reflected in the extract
from European Report have been noted and the Government
recognises that the prospect of having to defend cases in a foreign
court could deter some businesses from making the most of e-commerce.
The Commission's proposal for a Regulation offers Member states
another opportunity to review the matter and in particular the
Government welcomes the Commission's decision to hold a hearing
on the topic in the autumn. The Department of Trade and Industry
intends to supplement this with a seminar for interested parties
in the UK. This will take place on 15th October and should ensure
that the Government has a full understanding of the views of business,
consumer organisations and regulators before the negotiations
on this issue begin in the autumn.
On the issue of consultation the proposals to
make amendments to Article 13 emerged during the course of the
negotiations. The Government considered that the proposed changes
were a minor clarification of the existing law and did not consult
at that stage. The Lord Chancellor's Department liaised with other
Government departments, including the Department of Trade and
Industry. The DTI had had earlier discussions about this issue
and other related matters with business and consumer organisations
in the context of a Council Resolution on the Consumer Dimension
of the Information Society which was adopted in November 1998.
The second matter raised by the Committee concerns
the implications of the Commission's proposal to convert the 1968
Brussels Convention into a Community regulation. If the United
Kingdom or Ireland decide not to adopt such a Community regulation,
either at the same time as, or some time after, such an instrument
is adopted by the Council of Ministers, then these states will
remain parties to the Convention which will continue to operate
for those States as between themselves and the other States of
the European Union. This matter has been confirmed by an opinion
from the Council Legal Service. The Convention will, in any event,
remain operative as between Denmark (which has chosen to be excluded
by the EC Treaty from taking part in the adoption of measures
under Title IV of the Treaty) and those States which adopt a regulation
to replace the Brussels Convention. In this respect the current
system of mutual recognition and enforcement of judgments established
by the Convention will continue to operate as it does at present.
In this situation it will be for the Commission on behalf of the
States which are governed by the new regulation to negotiate with
Denmark and any other "opted-out" States an agreement
which would change the Convention in order to incorporate the
amendments which have recently been agreed by the Council of Ministers.
Once such an agreement has been concluded and ratified the same
rules will, in substance, operate throughout the European Union;
with most States being parties to the new regulation and a small
minority (possibly only Denmark) retaining the Brussels Convention.
The consequence of this "variable geometry" as regards
references to the Court of Justice is described in paragraph 3
of my letter to Jimmy Hood, chairman of the House of Commons European
Scrutiny Committee.
Finally, your Committee has correctly noted
that negotiations for a world-wide convention on jurisdiction
and recognition of judgments in civil and commercial matters are
currently under way under the auspices of the Hague Conference.
The present intention is that these will be concluded with a diplomatic
conference in the autumn of 2000 to adopt a convention text. Although
a significant amount of work remains to be done, it is likely
that the final agreement will contain the following main components:
— a list of mandatory grounds of jurisdiction:
that is grounds which will oblige a Contracting State to assume
jurisdiction;
— a list of prohibited grounds of jurisdiction:
that is grounds which will oblige a Contracting State to refuse
jurisdiction;
— a so-called "grey area"
of jurisdiction: that is an area covering grounds not specified
in the lists mentioned above on which a Contracting State may
assume jurisdiction if the ground in question is available under
the national law of that State;
— machinery for the recognition and
enforcement of judgments, including provisions to protect the
legitimate interests of defendants, which will only operate in
respect of judgments based on one of the mandatory grounds of
jurisdiction; judgments based on a ground in the "grey area"
will continue to fall to be recognised and enforced in accordance
with the national law of the State where that is sought.
This project was originally proposed by the
United States in 1992. The Europeans have been understandably
cautious about entering into such an agreement with the US. The
very high levels of damages and surprising findings of liability
in some well-publicised cases raise concerns about the prospect
of American civil judgments being automatically enforceable in
other countries. Despite these reservations negotiations have
been proceeding reasonably constructively for the last two years
and the Government remains committed to making every effort to
achieve a successful outcome.
From the United Kingdom's point of view, there
are two main advantages which could follow successful negotiations
in this area. The first, and more important, is that a Convention
which contained a sufficiently broad list of grounds on which
Member States would be prohibited from assuming jurisdiction could
protect British defendants from the exorbitant grounds presently
claimed by courts in the United States and other non-EU states.
The second advantage is that a Convention would, assuming it is
widely ratified, provide for the easier enforcement of UK judgments
in those countries with which we currently have no reciprocal
enforcement.
The issue of the relationship between the Brussels
and Lugano Conventions (and any regulation which replaces the
former), and any Hague Judgments agreement has not yet been discussed
in the negotiations at the Hague. In view of the overlapping scope
of the two existing agreements and any new Hague agreement, it
is clearly important that there should be a provision in the latter
agreement which, in broad terms, preserves unaltered the operation
of the former agreements. The United Kingdom will seek to secure
the inclusion of such a provision.
If and when the Brussels Convention is replaced,
at least for the majority of the Member States, by a Community
regulation, the issue arises as to the extent to which such a
development would give rise to community competence. This matter
is discussed in my letter to Jimmy Hood. The extent to which such
competence could affect the negotiating position of the United
Kingdom at the Hague Conference in relation to the world-wide
judgments agreement is also discussed in that letter on the basis
that the United Kingdom decides to adopt the Community regulation.
If the United Kingdom decides not to do so, then any such competence
does not affect the position of the United Kingdom in this regard.
This follows from Article 2 of the Protocol attached to the EC
Treaty which governs the special position of the United Kingdom
and Ireland in relation to Title IV measures.
The position of Denmark as regards Title IV
measures is governed by a separate Protocol to the EC Treaty.
Under Article 1 of this Protocol Denmark is excluded from taking
part in the adoption of such measures, although under Article
7 it "may, in accordance with its constitutional requirements,
inform the other Member States that it no longer wishes to avail
itself of all or part of this Protocol. In that event, Denmark
will apply in full all relevant measures then in force taken within
the framework of the European Union". Denmark has not so
far exercised this option.
28 September 1999
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