The Problem

On 31 December 2020, the UK will leave the EU. When that happens, the reciprocal agreements in place that presently allow a UK court decision to be easily and quickly enforced in EU and EFTA Member States (Iceland, Norway and Switzerland) will come to an end. This could have significant implications for landlords who hold guarantees from entities based in the EU, Iceland, Norway or Switzerland.

The Present Position

If a tenant defaults and a landlord has to pursue a non UK guarantor, the landlord will normally raise court proceedings in the UK, obtain a court judgment, and then have it enforced against the guarantor in the state in which the guarantor is based.

While the UK was a Member of the EU, enforcement of the court order was straightforward. The landlord was able to rely either (1) on an EU regulation - Brussels I (recast)- to enforce the UK judgment in another EU Member State, or (2) on the 2007 Lugano Convention to enforce it in most EFTA Member States (Switzerland, Norway, and Iceland, but not Liechtenstein).

Although the Brussels I (recast) and the 2007 Lugano Convention schemes are not identical they are largely similar. The procedures allow for expedited recognition and enforcement of UK judgments across the EU and EFTA.

Court proceedings after 31 December 2020

As matters stand, neither Brussels I (recast) nor the 2007 Lugano Convention will be available to enforce a UK judgment in EU or EFTA Member States if court proceedings are commenced after 31 December 2020.

Instead, a party will have to rely on the local domestic rules and procedures in force in the state in which the guarantor is based.

Most EU states should enforce a UK judgement even if there is no formal reciprocal regime with the UK, but the procedures will almost certainly take longer and cost more than the existing streamlined EU/EFTA procedures.

There are, however, some EU/EFTA Member States that do not allow for the recognition of judgments from non-EU/EFTA states, for example Liechtenstein. The Law Society of England & Wales has warned that this may require a party seeking to enforce a judgment to start new court proceedings on the merits in those EU/EFTA states with the potential for there to be conflicting judgments.

Is the Hague Convention the solution?

States which are parties to the Hague Convention 2005 undertake (1) to recognise contractual exclusive jurisdiction clauses and (2) are then required to enforce judgments issued by the selected courts.

The UK is already a party to the Convention but only via EU Membership and so it will need to re-join in its own right. It has taken the necessary steps to do that

It is likely, therefore, that from 1 January 2021 the Hague Convention will be the onlyinternational agreement which can be relied upon for enforcement of UK judgments within the EU. It does not apply to EFTA states.

The major limitation of the Hague convention is that it applies only where the contract has an exclusive jurisdiction clause (a clause that gives a country exclusive jurisdiction to hear a dispute) entered into after 1 October 2015.

What should you do?

Review your guarantees to determine your exposure. If you have guarantees by EU/EFTA companies, determine which guarantors are in Hague convention countries. For those that are, check the guarantees to see when they were entered into and if they have exclusive jurisdiction clauses.

For future guarantees with EU/EFTA guarantors, you should include arbitration clauses. 

It's possible that all of this will be resolved by a last-minute agreement between the EU and the UK, but as we've seen before, it's best not to presume that will happen.


Matt Farrell