Private International Law (Implementation of Agreements) Bill [HL] Debate
Full Debate: Read Full DebateLord Mance
Main Page: Lord Mance (Crossbench - Life Peer (judicial))Department Debates - View all Lord Mance's debates with the Scotland Office
(4 years, 5 months ago)
Lords ChamberMy Lords, this is an area in which I have long been engaged as a practitioner, and I believe that I still have the honour of chairing the Lord Chancellor’s advisory committee on private international law—although, so far as I recall, we were not consulted on this Bill, nor on the 2018 regulations on private international law that until now have operated as the default on Brexit.
At the heart of this Bill is jurisdiction. Former practitioners such as I know that jurisdiction is commonly the most important preliminary issue in international litigation. The noble Baroness, Lady Shackleton, referred to this in the context of divorce. I shall be referring to commercial litigation, but the same applies to other areas, including matrimonial disputes, children, insolvency and divorce. Any party wishing to avoid or delay liability or a judgment will seek the slowest or most amenable jurisdiction. To prevent this, it is common in commercial law to insist on an agreed forum for disputes—a choice of court or arbitration clause, often in favour of London.
London’s practitioners and courts have a reputation for the impeccable handling of complex disputes. It is part of the package of financial, business and trading facilities and activities that has made London a—if not the—world business centre. But what matters is that other courts and states recognise our jurisdiction. We can legislate domestically for all we are worth, but international recognition and enforcement of jurisdiction and judgments require in practice reciprocal international agreement.
The Bill’s Explanatory Memorandum notes that “key stakeholders” have consistently made clear the importance of the UK continuing to take a leading role internationally on private international law. The Minister has emphasised that it is essential for legal certainty to have a framework. The memorandum goes on to say that the UK
“will need to take steps to ensure continued participation in key PIL international law agreements”,
and that Brexit will allow the UK
“to agree ambitious new PIL frameworks with international partners all over the world”.
There is hyperbole in both statements. We are ceasing to participate in some key instruments with EU states, and the Bill is unspecific—to say the least—about the ambitious new frameworks with other world partners.
From the end of this year, the UK will cease to be party to what is probably—in fact, certainly—the most significant set of private international law measures in the world: the Brussels regime regulating jurisdiction and the enforcement of judgments across EU states, and parallel measures such as the insolvency Regulation 2015/848 and the regulation on jurisdiction, recognition and enforcement in matrimonial and parental matters. The UK was itself a proponent of the successful recasting in 2012 of the first of those—the central Brussels regulation—to meet UK needs. As the Minister noted, we helped build these instruments.
The Government’s ambitions do not extend to repeating this existing framework, which has, over 35 years, attracted very considerable support in London as elsewhere. However, some form of substitute is now necessary, to apply as between the UK and EU states. In relation to children, there are, happily, the Hague conference conventions of 1996 and 2007—non-EU measures, which are referred to in the Bill—on which to fall back. In relation to commercial law, insolvency and divorce, there are no such parallels, although there are other measures focusing on commercial law, which are referred to in the Bill, to which I come.
The Bill is by its own lights a sensible measure, but its lights are rather dimmer than the halogen welcome given to it by the Explanatory Memorandum. I take first the Hague choice of court convention of 2005, which Clause 1(2) of the Bill paves the way to joining. That is an excellent instrument, again promoted by this country. In that, the committee that I chair had the privilege of playing a role but, absent specific declaration, it does not cover the very important area of asymmetric jurisdiction clauses. Many of the derivatives and banking clauses on which the City relies are asymmetric; in other words, they give one party but not the other, or others, a choice of jurisdiction. The better view is that the existing Brussels regime covers all choice of court clauses, whether they are asymmetric or not.
As a consequence of that, if you go to the website of the International Swaps and Derivatives Association, the first document you will see is headed “ISDA Amendment Agreement”, to change
“English Law to Irish or French Law”.
It provides the means to change the usual London jurisdiction clause in favour of Paris or Ireland. That is a measure of the current doubts about the future value of English jurisdiction clauses, which have been allowed to continue for some four years now to the detriment of London as a world centre.
A second problem about the Hague choice of court convention is that, even on the most optimistic reading, it covers only exclusive jurisdiction clauses agreed since l October 2015, when the EU first signed the UK up as a member state. In contrast, the 2012 Brussels regulation, which we have at present, applies to all proceedings begun since 10 January 2015; that is, proceedings begun rather than jurisdiction clauses agreed. But this will cease to apply to all proceedings begun after the end of this year. So, the position is that presently enforceable asymmetric jurisdiction clauses in favour of London will cease to be recognised at an international level by other EU states overnight on 31 December 2020. Indeed, all enforceable jurisdiction clauses, asymmetric or not, will cease to be recognised at an international level; they may, of course, be recognised at an overseas domestic level—that is quite a different matter. Until 19 June 2018, the UK’s position was that such clauses should be preserved, or grandfathered; that is, retain their current validity. This has gone. No doubt, even an additional glimmer of Court of Justice jurisdiction after the end of the year, however benign, was not acceptable.
A third problem with the Hague choice of court convention is that it contains a list of excluded topics, which is considerably longer than that in the Brussels regime. The excluded topics include, for example, personal injury, simple tort claims, immovable property and intellectual property claims.
I turn to the second instrument, which the Explanatory Memorandum and the Government’s paper on the future relationship evince enthusiasm for acceding to. As already mentioned, that is the Lugano Convention 2007; Clause 2 of the Bill would be used for that. The Lugano Convention corresponds to the main Brussels regulation before it was recast in 2012. As a result, it has severe defects. On the other hand, no doubt the great attraction, in the Government’s eyes, would be that the European Court of Justice would have no jurisdiction over it; there would be an obligation merely to take account of Court of Justice jurisprudence, not necessarily to agree with it.
On the other hand, the UK needs the consent of the other parties to join. There are four, three of which have welcomed the UK aboard. Switzerland, Iceland and Denmark all welcomed the UK aboard, but the last party—the EU, for its member states—is apparently silent, and there are rumours that it may not consent. Any clarity the Minister can give would be most welcome.
Even if we were to sign up, the un-recast, unreformed Lugano has significant weaknesses. First, its arbitration exclusion is less clear than the Brussels regime; again, that is important for London. Secondly, it is vulnerable to the famous “Italian torpedo”, whereby a London choice of court clause can be undermined by an entirely wrong or even abusive commencement of jurisdiction in some other court—the typical example being Italy. The aphorism comes from an Italian law professor, so I am not, I hope, in any way using unduly what is a well-quoted phrase. Lugano’s third defect is that it makes no provision for stay of proceedings in the face of prior litigation in a non-contracting state: in other words, you can agree on a New York choice of court clause, but Lugano will override it. That is an extraordinarily Eurocentric provision, which the recast Brussels regime avoids, largely. Can the Government say whether, having joined Lugano, they hope to follow the Brussels example, whereby the UK did have a big role, and recast the Lugano convention to cure these defects?
There is one other problem with signing up which the Government may have overlooked—again, I would welcome the Minister’s comments. If we sign up to Lugano, we are locked into its limitations, potentially precluding us from getting the advantages of the next instrument which the Government express an interest in joining: the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. This is fairly hot off the press: it is mentioned in the Explanatory Memorandum and, again, the UK played a significant role in its preparation in the Hague conference. Perhaps it is one of the “ambitious new” private international law frameworks which the Government hope to agree
“with international partners all over the world”.
The less hyperbolic reality is that it has at present only two member states, with which our most obvious affinity is purely alphabetical: Uruguay and Ukraine. Even according to the Hague conference website, they have only signed, not ratified.
Secondly, this instrument deals only with recognition and enforcement; it does not limit or define jurisdiction, as the Brussels regime and Lugano do. Nevertheless, it appears to have one particular advantage in relation to our former EU partners which Lugano does not. It should be noted that the EU has expressed interest in signing up to the 2019 convention. If it does and we do, the convention will go some way to avoiding the Italian torpedo, because it will enable the refusal of such recognition or enforcement of any judgment given in breach of a choice of court clause, whether exclusive or asymmetric. For example, if proceedings were commenced in Italy in breach of a choice of court clause pointing to London, the UK or any EU contracting state could refuse to recognise the judgment. That beneficial provision would go some way to evading the Italian torpedo and correcting the main defect of the Lugano convention. Under Lugano, EU and Lugano courts—including the UK if it joined Lugano—would have to recognise and enforce the Italian judgment, even though it was patently given in proceedings started in Italy in breach of a London choice of court clause.
The UK would lose the advantages of this beneficial provision if we signed up to Lugano before signing up to the 2019 Hague convention, because Article 23 of the latter states expressly that it does
“not affect the application by a Contracting State of a treaty that was concluded”
by that state prior to conclusion of the convention. I would be very glad to hear the Government’s thinking on this. On the face of it, the message is: festina lente—in other words, be very careful and do not sign up immediately to Lugano without thinking very hard about it. By all means, sign up to the Hague choice of court convention as soon as possible, but consider whether it may not be better to wait for the EU to sign up to the 2019 convention and sign up ourselves at least before any attempt to join Lugano.
There are one or two minor points, or at least more minor points, although I do not want to underestimate their importance, particularly relating to the width of the powers relating to delegated legislation, on which noble Lords have already spoken. Even taking into account the Constitutional Reform and Governance Act, providing for scrutiny of any international agreement, the powers of delegated legislation are of a width that is questionably wide. That refers among other things, but perhaps particularly, to the Henry VIII clause, which my noble and learned friend Lord Judge has referred to.
Of particular interest to me, I declare as a practising arbitrator, is the definition of “private international law” to include recognition or enforcement of foreign arbitral award. Private international law normally keeps court jurisdiction and arbitration separate. International arbitration awards are enforceable under the New York convention of 1958. Brexit should not affect the enforceability or recognition and enforcement of arbitration awards. The Bill seems quite an inappropriate place to give Ministers the power to make regulations about arbitration, even subject to affirmative approval.
I conclude by welcoming this opportunity to discuss openly in this House a subject of huge importance to the City and this country’s financial position. There has been a fear that it may have been too low down the Government’s agenda and the subject of too little attention. I hope this debate will have focused minds and that there will now be wide and open consultation on whatever future measures, ambitious or not, the Government may consider signing up to.
I thank all noble Lords for their contributions to the debate. I will take some of those points in turn. The noble and learned Lord, Lord Wallace of Tankerness, raised Hague Convention 35. Hague, unlike Lugano, for example, can be entered into by a state, but can be ratified and applied in respect of only one jurisdiction within the state. It so happens that Hague Convention 35 was implemented in respect of Scotland, but not of England and Wales, nor, I believe, Northern Ireland. I am not able to explain why it has been in abeyance for a number of years with respect to those other jurisdictions, but I can say that since the noble and learned Lord raised the point with me I have spoken to officials who are addressing that matter. Certainly, our recommendation would be that it should be applied in respect of England and Wales as well.
The noble and learned Lord asked when we last implemented an international treaty obligation without primary legislation. My stock response was going to be that we now have CRaG 2010, but he went on to criticise that. While I understand that some observations have been made about the sufficiency of CRaG, my response is that we now have primary legislation that requires parliamentary scrutiny in circumstances where we intend to enter into an international treaty. It is in that context that we use the affirmative procedure to draw down those obligations and apply them in domestic law. I venture that that is an acceptable mechanism, because it requires parliamentary scrutiny at the stage of international law. It allows parliamentary scrutiny at the stage of drawing it down into domestic law in accordance with the duality principle.
The noble and learned Lord, Lord Judge, adopted and advanced the submissions of the noble and learned Lord, Lord Mance—which shows courage and, indeed, prescience. He also asked why we refer to arbitration. We do not intend to intrude wholesale on the New York convention or other aspects of arbitration, but it might be that there will be bilateral or multilateral jurisdictional issues where a party wishes to refer to arbitration. If, at that stage in the negotiation, we consider that appropriate, albeit in a limited circumstance, we will want to have the power to proceed with such an agreement. However, we are conscious of the need to keep a dividing line between provisions with regard to arbitration that are generally addressed by wholly different conventions, such as the New York convention, as distinct from those that apply more generally in private international law. We are not endeavouring to cross any lines there.
Schedule 6 is where it is because that is where it should be. It is not hiding. I reassure the noble and learned Lord of that. With regard to Schedule 2, my understanding is that it reflects or replicates the text of the 1996 Hague Convention on child protection and is in that form for that reason.
A question was also raised by the noble Lord, Lord Collins, and others about why we have these Henry VIII powers to amend primary legislation. There may be circumstances in which we want to insert implementation provisions into existing primary legislation. I ask noble Lords to notice that that is exactly what we are doing with Clause 1, where we are putting the three Hague Conventions into the Civil Jurisdiction and Judgments Act 1982. It might be that we will want to use existing primary legislation and implement using existing primary legislation. That is why that power has been taken.
The noble and learned Lord, Lord Mance, gave a very detailed and reasoned distinction between the merits of the Brussels regime, in which we played a very prominent part, and the perhaps deficiencies, to use one term, or the less robust regime we find in Hague and even in Lugano, which essentially reflects Brussels rather than Brussels Ia and Brussels IIa. I have to notice that there are those differences. It is a consequence of us having left the EU on 31 January 2020 —it is as simple as that, is it not? I know the noble and learned Lord recognises that. We cannot be part of the Brussels regime now we have left the EU, and the Government have made it clear that they will not be subject to the jurisdiction of the ECJ.
Of course, if and when we become a party to Lugano, we will seek to move forward the Council of the Lugano Convention to address its equivalence because Lugano originally reflected Brussels I and Brussels II and it is yet to catch up, as it were, with Brussels Ia and Brussels IIa, but certainly if we were a party to it, we can see that we could drive the direction of travel.
That said, we have to be careful about when we engage in the Lugano process. We have made an application to the Council of the Lugano Convention. We have letters of support from the three existing Lugano states, but noble Lords are quite right to point out that we require the consent of the EU to become a party to the Lugano Convention. There are also questions about the way in which that will interrelate with the provisions of the 2019 Hague Convention, and we will have to look at that. Again, my understanding is that we were a material contributor to the development of the Council provision on the 2019 Hague Convention as well, so we are familiar with it, and we see its considerable benefit, all the more so if the EU were to become a contracting state to the 2019 convention.
However, the noble and learned Lord, Lord Mance, is ahead of me. I thought only Uruguay had ratified so far, but he was able to add Ukraine.
I apologise—it has signed but not ratified. As the noble and learned Lord will know, it takes a little time for signatures. There has to be a certain number of states signing to the convention and then ratification can take place. Clearly, we are conscious of that. The noble and learned Lord has highlighted a real issue, which is the care we must take in considering our position with regard to Lugano and with respect to the 2019 Hague Convention. If we were not conscious of that before, we are now, if I can put it that way. It may be that the Lord Chancellor’s consultative committee should have sat earlier.
I hope I have addressed the majority of the points that have been raised so far. There was one point the noble and learned Lord, Lord Wallace, raised about intra-UK powers. We will have powers to implement an agreement intra-UK but clearly we would do so only after engagement with the devolved Administrations because the implementation of private international law is a devolved competence, albeit that entry into the treaty at the level of international law is a reserved competence. I reassure the noble and learned Lord that we would not do that without full consultation with the relevant parties.
I see that the noble Baroness, Lady Shackleton, is about to rise, but before she does so I shall just say that in the absence of Brussels and in the absence of provision in international law convention under Hague for certain matters, such as jurisdiction on divorce, we will fall back on our previous common-law position, which some will regard as less than entirely satisfactory, but it is a consequence of us having left the EU. I hope that that anticipates the intervention I was going to get.
Given the hour, I will rest my further submissions there. I look forward to further detailed discussion of these matters in Committee.