Subject: Litigation
Paper: PD Newsletter
Reading time: 3 Min

Brexit - enforcement of judgments and jurisdiction clauses from a Swiss perspective

If the United Kingdom (UK) and the European Union (EU) do not reach an agreement on the consequences of the UK's exit from the EU by the end of 2020, a no-deal Brexit becomes a reality. With Switzerland also not being a member of the EU, the present newsletter gives some preliminary guidance on how a no-deal Brexit will affect the enforcement of judgments and treatment of jurisdiction clauses in Switzerland from January 1, 2021, if a no-deal Brexit actually comes to pass in the new year.

1. The role of the Lugano Convention

The Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of October 30, 2007 applies to issues of jurisdiction, recognition and enforcement of judgments in most private law disputes where involving member states of the EU and, inter alia, Switzerland. Pursuant to its purpose to facilitate the recognition of "European" judgments, authentic instruments and court settlements and introducing an expeditious procedure for securing the enforcement of such judgments, it has become the primary multi-state treaty in the European civil procedure realm since its inception.

Despite the UK's departure from the EU on January 31, 2020, the Lugano Convention is still applicable with respect to the UK during the Brexit transition period. Unless the UK and the EU can put a new agreement in place by the end of the year, there may be some noteworthy repercussions for dispute parties residing in the UK going forward. Though not at the forefront of the minds of affected businesses and individuals concerned about future trade conditions between the EU and the UK, dispute settlement is intrinsically linked to international trade.

There are efforts underfoot on the UK side to join the Lugano Convention as a separate contracting party in its own right. However, even if the UK does become a party to the Lugano Convention, it is very unlikely that such a transition will occur with some temporary interruptions begging the question, what will happen in the interim.

2. Applicable rules in Switzerland after December 31, 2020 in a no-deal scenario

If the Lugano Convention were to become inapplicable (for any amount of time) between the UK and Switzerland, Swiss courts will in all likelihood apply the Swiss Private International Law Act when determining issues of enforcement and jurisdiction. As a result, the enforcement in Switzerland of UK judgements rendered from January 1, 2021 will become more difficult, opening judgements to significant greater degrees of review, than under the present situation under the Lugano regime. Contrary to current practice, for example, foreign ex parte judgments and UK declaratory judgments would not be enforceable under the Swiss Private International Law Act and proof of proper service and foreign jurisdiction must be observed in more detail.

Based on the principles of legal certainty, droits acquis and the common rule that new provision should not have retroactive effect, the Swiss legal and government stance is that the enforcement of UK judgements rendered prior to the exit day or the end of the Brexit transition period, respectively, would still be governed by the Lugano Convention. This was confirmed by a current decision of the Zurich High Court (an appeal to the Swiss Federal Court against this decision is pending).

The situation is however unclear for judgments rendered after exit day or the end of the Brexit transition period, respectively, but based on proceedings instituted prior to exit day or the end of the Brexit transition period, respectively. The Swiss Federal Office of Justice is, based on the principles mentioned above, of the opinion that in such a case the Lugano Convention will continue to apply despite the fact that the UK is no longer bound by or not yet a party to the treaty.

With respect to jurisdiction clauses, the Lugano Convention remains applicable even after a no-deal Brexit as long as one of the parties is domiciled in a state bound by the Lugano Convention and the jurisdiction of a court in a state bound by the Lugano Convention is agreed to. This means that in case of parties domiciled in UK and Switzerland agreeing that a Swiss court is competent, the Lugano Convention still governs the jurisdiction clause. Based on the Swiss understanding, irrespective of the Lugano Convention or the Swiss Private International Law Act being applicable, the territorial jurisdiction of a court remains fixed after a court action is pending. This should leave suits commenced prior to the exit date or the end of the Brexit transition period, respectively, unaffected. Note in this regard, that the Hague Convention on Choice of Court Agreements is not applicable between Switzerland and the UK as Switzerland is not a contracting party to this treaty.

3. Outlook

Entering into new international contracts with Swiss links or battling with enforcing existing foreign verdicts in Switzerland in the present uncertain times may prove challenging. Some degree of mitigation may be secured by considering jurisdiction clauses or, depending on the case, seeking certainty in arbitration. We are happy to assist UK clients (or from elsewhere) in both regards.