European Union: Recast Brussels Regulation – EU Regulation 1215/2012

New rules on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters apply in the EU from 10 January 2015. EU Regulation 1215/2012 (the recast Regulation) replaces EU Regulation 44/2001 (the Brussels I Regulation) for proceedings commenced on or after that date.

Changes to the lis pendens rules

One of the most heavily criticised aspects of the Brussels I Regulation related to the interpretation of Article 27, which provided that, where proceedings were brought first in one EU Member State, all other EU courts had to stay any proceedings involving the same parties and same cause of action (pending the decision of the first seised court on jurisdiction), even when proceedings were brought in breach of an exclusive jurisdiction clause. This encouraged "torpedo" actions whereby proceedings were commenced in one EU court to delay proceedings in the court expressly chosen by the parties in an exclusive jurisdiction clause.

Under the recast Regulation, where there are concurrent proceedings in the courts of two or more Member States, generally it is the court in which proceedings are commenced first which takes priority. However, the new rules give the court which is seised of the proceedings by virtue of an exclusive jurisdiction agreement the freedom to decide on its jurisdiction, and progress the litigation regardless of whether or not it is first seised; and any other EU court is required to stay its proceedings, effectively reversing the "first in time" rule in such cases.

Interface between the recast Regulation and non-EU matters

There are, broadly speaking, three aspects to such matters: 1) jurisdiction agreements involving non-EU courts or between non-EU parties; 2) the existence of non-EU proceedings; and 3) non-EU defendants.

Jurisdiction agreements

Article 25 of the recast Regulation provides that where the parties have agreed that a court of a Member State is to have jurisdiction, then that court shall have jurisdiction. Under Article 25, the parties' domicile is irrelevant, widening the scope of jurisdiction agreements caught by the recast Regulation.

If a non-EU court is specified in a jurisdiction clause, then such an agreement will still fall outside the Regulation.

The absence of an express provision in the recast Regulation allowing Member State courts to decline jurisdiction where parties have contractually agreed that the courts of a non-EU state have jurisdiction means that proceedings may continue in an EU court (for example, on the basis that the defendant is domiciled in that state) in breach of a jurisdiction clause.

Non-EU proceedings

Articles 33 and 34 provide EU courts with discretion to stay proceedings where the same or related matters are already before the courts of a non-EU state.

However, this discretion can only be exercised where the non-EU proceedings are first in time, and where jurisdiction in the EU proceedings is based on Articles 4 (domicile), 7, 8 and 9 (special jurisdiction). In addition, the judgment of the non-EU court must also be capable of recognition and enforcement in the EU Member State seised.

Non-EU domiciled defendants

Generally, the local law of the EU court seised will continue to apply to determine whether that court has jurisdiction over a defendant domiciled outside of the EU. Article 25 is one of the important exceptions, and an EU court will have jurisdiction over a defendant domiciled in a non-EU State, in cases of jurisdiction clauses in favour of EU courts.

However, key alternative grounds for jurisdiction remain restricted in scope to defendants domiciled in Member States. For example, Article 7(1), which provides that, in respect of contractual claims, the courts of the place of performance may have jurisdiction, and Article 7(2), which provides that claims in respect of torts may be brought in the courts of the place where the harmful event occurred or may occur.

The arbitration exception

Following the ECJ decision in Allianz SpA v West Tankers Inc. [2009] , the interface between the Brussels I Regulation and arbitration became problematic as the ECJ held that the English court could not issue an anti-suit injunction to protect a London arbitration agreement where proceedings had been commenced in Italy, and also held that the Italian court could determine issues relating to the applicability of the arbitration agreement.

The recast Regulation restates the arbitration exception and confirms that proceedings relating to arbitration fall outside of its scope. In addition, a new article provides that the Regulation shall not affect the application of the New York Convention and a new Recital 12 emphasises the free-standing nature of arbitration.

Recital 12 expressly excludes certain judgments on arbitration agreements from the scope of the Regulation, particularly those determining whether or not an arbitration agreement is null and void

On the other hand, Recital 12 also provides that "where a court of a Member State...has determined that an arbitration agreement is null and void...this should not preclude that court's judgment from being recognised or...enforced in accordance with this Regulation."

It follows that any court proceedings brought to support an arbitration (including enforcing or challenging an award and deciding the validity of an arbitration agreement) fall outside the scope of the Regulation, and the court which is not first seised can decide the matters in relation to this arbitration. On the other hand, other EU courts will remain permitted to reach their own decisions as to the validity of an arbitration agreement and, in case they decide that the agreement is not valid, proceed to issue a judgment on the merits. Whilst their decision on the validity of the arbitration agreement will not be enforceable under the recast Regulation, the judgment on the merits will. Importantly, the recast Regulation does not appear to authorise an EU court to grant an anti-suit injunction in relation to proceedings in another EU court brought in breach of an arbitration agreement.

As a result, there is still a risk of irreconcilable judgments on the same cause of action if a EU court reaches one conclusion on the merits (after ruling the arbitration agreement invalid) and an arbitral tribunal reaches a different conclusion elsewhere. Potentially, both the court judgment could be enforced (under the Regulation) and the arbitral tribunal decision (under the New York Convention). It would appear from the wording of the recast Regulation that the arbitral award would prevail as it provides that the New York Convention takes precedence, but, ultimately, it may be up to the ECJ to rule on this in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.