CIArb News

The European Commission rejects the UK application to join Lugano

07 May 2021

The European Commission earlier this week issued a recommendation arguing that the Parliament and Council should vote to block the UK’s accession to the 2007 Lugano Convention as a third country party. This convention is the international treaty – open to any other state outside the EU Single Market and EEA – that regulates whether a court is competent to hear a cross-border case and helps domestic courts rule on the recognition and enforcement of foreign judgments in civil and commercial matters.

Although non-binding in nature, this decision by the Commission to not recommend accession emphasises the need to plan for a future where the UK no longer will have access to the support systems providing guidance in matters of choice of law, jurisdiction and enforcement of judgments previously granted Britain through her membership in the European Union.

In the absence of the joint understanding between disputing parties on regulatory, procedural, and forum matters provided by the Brussel Regime – focus might now fall onto arbitration and Alternative Dispute Resolution (ADR) mechanisms, and specifically arbitration practitioners, whose competencies in securing access to justice in transnational disputes are renowned.

Catherine Dixon, CIArb Director General, commenting on the news, adds that “whilst we are disappointed with the EU Commission’s recommendation, it is important to recognise that there are other options which ensure effective enforcement across the EU. Arbitration and other forms of ADR increasingly offer parties flexibility and ensure SME’s, which did benefit from the Lugano Convention, can continue to have effective access to justice within the UK and across the EU."

Indeed, the natural strength and reliability of English law – already the vehicle of choice in many ADR processes – may in this area perform well as a replacement to convention and treaty rules. Utilised correctly, increased reliance on ADR provisions stipulating the use of English law by itself or together with still-in-force treaties like the Hague Convention would help streamline dispute resolution proceedings and decrease costs incurred for parties.

Additionally, the New York Convention safeguards the enforceability and recognition of transnational arbitral awards – making the resolving of disputes through such means impervious to changes in Britain’s standing vis-à-vis European legal schemes and her relationship with mechanisms pertinent to EU treaty law.

Whilst The Chartered Institute of Arbitrators does not agree with the Commission’s rationale given in its recommendation – namely that it did view the United Kingdom, a founding member of the Union, as a third country without a special link to the internal market – we stand firm in our commitment to provide world-class access to redress, both through arbitration and other forms of ADR.

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