Dispute Resolution for Businesses and Individuals post-Brexit14th January 2021
The following note briefly deals with the position of private actors (businesses and individuals) following the EU-UK Trade and Cooperation Agreement (the ‘Agreement’) agreed on Christmas Eve 2020 and provisionally in effect until 28 February 2021 pending review review and parliamentary ratification.
The Agreement, in addition to the provisions of the Withdrawal Agreement signed earlier in 2020, clarifies the trade relationship between the EU and the UK following Britain’s leaving the Union. This means that business relations will be significantly affected by the newly applicable regime and in particular cross-border private businesses will need to take into account the new rules in their day-to-day dealings.
The Agreement lays out detailed rules concerning resolution of disputes between the UK and the EU. The Agreement tackles the problem of dispute resolution from an international perspective, but below we deal with dispute resolution from the private angle between Bulgarian and British parties.
Jurisdiction and enforcement of judgments in civil cases
The Agreement does not provide for rules on the jurisdiction and enforcement of judgments in civil cases. Pre-Brexit, Regulation (EU) No 1215/2012 (‘Brussels I’) had applied. It provided a clear set of rules to determine jurisdiction, but it will no longer be applicable instrument in disputes between UK and EU parties; such disputes will no longer be within its principal scope. Instead, general instruments of international and domestic law will apply.
2007 Lugano Convention
In relations with Norway, Iceland, Switzerland, and Liechtenstein, the EU applies the 2007 Lugano Convention which is materially similar to Brussels I. The UK has applied to accede to the Convention, but a decision on this is in the hands of the EU and is expected potentially in the near future. If the UK accedes to Lugano, a very similar regime as prior to Brexit will again begin applying to jurisdiction and enforcement of judgments.
2005 Hague Convention
Unlike the Lugano Convention, the Hague Convention 2005 may be relied upon between the UK and EU Member States, including Bulgaria. The Hague Convention requires the courts of the signatory states to uphold exclusive jurisdiction clauses, and to recognise and enforce judgments given by courts in other contracting states designated by such clauses.
Bulgarian Code of International Private Law 2005
Until the UK’s potential accession to the Lugano Convention, procedures for recognition (aka exequatur) apply. If a party seeks enforcement of a British civil or commercial court’s judgment in Bulgaria, it will need to rely on Chapter 12 of the Code of International Private Law 2005.
To allow the recognition of the judgment, the following requirements must be met:
- The judgment must have been handed down by a court which has jurisdiction in the dispute;
- The defendant has been served with the claim and both parties have been duly summoned and that fundamental due process principles of Bulgarian law do not appear to have been violated in the course of the proceedings;
- That there should be no Bulgarian court’s judgment in force between the same parties for the same dispute;
- That there should not be a pending case in a Bulgarian court between the same parties for the same dispute, commenced before the foreign case;
- That the judgment given does not contravene Bulgarian public order.
Out of the above, items 2 and 5 may sound less straightforward. In practice, it would be rare for a British court’s judgment to fail to meet these requirements.
The enforcement of the judgment needs to be allowed by the Sofia City Court (SCC).
The above rules also apply to settlements approved by the foreign court.
Another crucial aspect of dispute resolution is service, which is a necessary prerequisite for due legal process. Pre-Brexit and intra-EU, this is harmonised via Regulation (EC) No 1393/2007 (‘Service Regulation’), which no longer applies in the UK.
Since 1 January 2021, a party seeking to serve documents regarding Bulgarian proceedings to a party in the UK needs to follow the British procedural rules and vice versa. The Bulgarian Ministry of Justice assists in the liaison with the English bodies responsible for the service, and in cases concerning Bulgarian nationals, Bulgarian diplomatic missions may also assist. In a nutshell, the procedure provides for a Bulgarian court, by a party’s application in a pending case before it, to request the British courts to serve a party to the case in the UK.
Direct effect of the Agreement
It needs to be noted that certain provisions of the Agreement may prove in the future to have a direct effect. Under EU law, the direct effect of a provision means a private person may rely directly on it before a national court. For the finding of a direct effect, the provision in question needs to be:
- Unconditional, i.e. no additional EU or national measure is needed for its effect;
- Able to confer rights to private parties.
It is reasonable to predict that a direct effect contained in an Agreement provision, if any, will be of vertical nature, i.e. one that can be invoked only against the Member State and not against private parties.
Only parties in the EU, including Bulgaria, will be able to rely on the potential direct effect. Such direct effect will typically be recognised by the CJEU in a preliminary ruling proceedings under Article 267 TFEU, where a national court, in a pending case before it, raises a question of interpretation of EU law with the CJEU.
NBLO is a law office operating in both the UK and Bulgaria and is thus perfectly positioned to provide Brexit-related advice. If you have any further questions, please do not hesitate to contact us by email at [email protected].