The last changes in European Procedural Law after entering in force of REGULATION (EU) 1215/2012 (BRUSSELS I BIS)

New rules on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters apply in the European Union from 10 January 2015. Regulation (EU) № 1215/2012 of the European Parliament and of the Council about jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("The Regulation" or"Regulation Brussels I bis") " processed " Regulation (EU ) № 44/2001 (so-called Brussels I Regulation ) and reverse it. The regulation will apply to proceedings commenced on or after 01.10.2015.The Regulation Brussels I bis is the centerpiece of European international civil procedural law. It sets forth the rules governing the jurisdiction of courts and the enforcement of court decisions for the Member States of the European Union. The principal objective of this Regulation is to facilitate the free circulation of judgments and to further enhance access to justice.

The following is a summary of the changes of the Regulation which are significant for business decisions.

Jurisdiction over consumer contracts and individual contracts of employment

National rules of jurisdiction may no longer be applied by Member States in relation to consumers and employees domiciled outside the EU (Article 18 and Article 21). Such uniform rules of jurisdiction will also apply in relation to parties domiciled outside the EU in situations where the courts of a Member State have exclusive jurisdiction under the Regulation or where such courts have had jurisdiction conferred on them by an agreement between the parties.

Expanded Jurisdiction of EU Courts in Case of Proceedings Relating to Consumer Contracts and Proceedings against Employers from Non-EU Countries Brussels I bis lays down the rules for the international jurisdiction of national courts in cross-border civil and commercial matters within the EU. The general principle that the European rules on jurisdiction shall only apply if the defendant is domiciled in a Member State still applies (article 6(1) Brussels I bis). There are, however, exceptions to this general principle. Already under Brussels I, the European courts had jurisdiction for actions filed against persons domiciled outside the EU if there was an exclusive (European) venue for such actions (now: article 24 Brussels I bis) or if the parties had agreed on a jurisdiction clause (now: article 25 Brussels I bis). In addition, Brussels I bis also establishes the jurisdiction of the EU courts for actions filed by consumers and employees against enterprises and employers from non-EU countries. According to article 16(1) Brussels I, EU consumers could not bring proceedings in the courts at the places where they were domiciled against enterprises from non EU countries which did not have a branch in a EU Member State. Instead they had to pursue their claims in the courts of the home state of the enterprise. Due to the efforts involved and the uncertainties associated with such an endeavor, consumers often refrained from doing so. Article 18(1) Brussels I bis has now significantly expanded the consumer protection regime. Consumers can now also take action at their domicile in the EU "regardless of the domicile of the other party to the contract". This possibility of conducting litigation "close-by" has a significant economic effect for enterprises whose sole activity in the EU, for instance, consists in selling products online from a third State into the EU, for example from the U.S. Such enterprises can now be sued by consumers directly in the courts at the places where these consumers are domiciled. Other agreements conferring jurisdiction for the benefit of the enterprise's local court cannot change this because the provisions on jurisdiction for consumer contracts are mandatory (article 19 Brussels I bis). Pursuant to article 21(2) Brussels I bis, similar rules apply to proceedings instituted by employees against employers that neither have their domicile or seat nor an establishment in a EU Member State. Pursuant to article 21(1)(b)(i) Brussels I bis, such employers can also be sued in the courts of the place within the EU where the employee performs or has performed the work habitually. This is often the place where the employee is also domiciled.

Revisions to the related actions (or lis pendens rules)

Perhaps the most significant criticism of the Brussels Regulation among commercial parties, or at least the one most frequently articulated, is that the lis pendens rules aimed at preventing parallel proceedings before member state courts and inconsistent judgments are open to abuse.

Under the Brussels Regulation, if proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, Article 27 provides that the court second seised must stay its proceedings until the court first seised has determined whether it has jurisdiction to hear the claim. That is the case even if the proceedings were brought in the first seised courts in breach of a jurisdiction clause (Gasser v MISAT(C-116/02)). While the rationale behind the lis pendens rule is a sensible one in theory, in practice the rigidity of this first-in-time rule has allowed it to be abused by potential judgment debtors who agreed in their contracts to litigate disputes exclusively in the courts of one jurisdiction but who want to delay judgment being entered against them in those courts. They do this by commencing proceedings quickly in the courts of another, generally slow moving, jurisdiction as soon as a dispute arises (Italy and Greece often being the preferred choice), perhaps seeking a declaration of non-liability. When the potential judgment creditor then commences proceedings in the courts chosen in the jurisdiction clause, those courts are forced to stay their proceedings pending a decision on jurisdiction from the court first seised. This tactic, widely known as the “Italian torpedo”, is a concern for commercial parties because it can lead to significant delay in obtaining judgment and in some cases can render judgment ineffective. It has also resulted in a rush to the courts, as parties who want to ensure they can litigate in their agreed forum find themselves forced to commence proceedings pre-emptively in the chosen courts so as to protect themselves from this kind of abuse, in circumstances where they might otherwise have sought to settle the litigation without involving the courts.

It was clear from the early stages of the reform process that the Commission had listened to and intended to deal with the concerns expressed by commercial parties and practitioners about the “Italian torpedo”. There was recognition from the outset that the Brussels Regulation could do more to prevent litigants from bringing proceedings in bad faith in a non-chosen forum simply to delay resolution of the dispute in the courts chosen by the parties in their jurisdiction agreement.

The Commission's recognition of the need to deal with this problem has translated into a series of helpful new provisions in the Brussels Regulation (recast). Recital 22 now talks about the need to enhance the "effectiveness of exclusive choice of court agreements" and the need to avoid "abusive litigation tactics". A revised "first-in-time" rule has been included, which seeks to deal with the “Italian torpedo” by freeing a court chosen in an exclusive jurisdiction clause to determine whether it has jurisdiction regardless of whether it was first seised of the relevant proceedings. So, the "first-in-time" rule (now at Article 29) is expressed to be without prejudice to Article 31(2) which provides that:

"… where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement."

The clear implication of this rule is that the court designated in an exclusive jurisdiction clause can continue to hear a claim without waiting for the court first seised to stay its proceedings. Article 29(2) imposes some communication requirements upon member state courts if requested to notify another member state court when they were seised with proceedings (Article 32).

This revision is to be welcomed. Article 31(2) is a helpful amendment for commercial parties and the EU should be applauded for listening to feedback and seeking to deal with this problem.

Abolition of the exequatur procedure

The most important change is the abolition of the exequatur procedure.The exequatur is the procedure for the declaration of enforceability of a judgment given in another Member State. With this Regulation, a judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without a declaration of enforceability being required, upon production of a copy of the judgment which satisfies the conditions necessary to establish its authenticity and a certificate to be issued by the court of origin (Article 37). However, this Regulation provides several grounds (Article 45 and Article 46) for refusal to recognise and/or enforcement of judgments on the application of any interest party. Such is the case for example when the decision was given in default of appearance and the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him to arrange for his defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible for him to do so.

Confirmation of the arbitration exception

This Regulation does not apply to arbitration. As indicated in the Preamble, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement, the courts of a Member State should refer the parties to arbitration, stay or dismiss the proceedings, or examine whether the arbitration agreement is null and void, inoperative or incapable of being performed in accordance with their national law.

In accordance with Article 3(2) of the Agreement of 19 October 2005 between the European Community and the Kingdom of Denmark on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, Denmark has by letter of 20 December 2012 notified the Commission of its decision to implement the contents of Regulation (EU) 1215/2012. This means that the provisions of Regulation will be applied to relations between the Union and Denmark.