I cannot begin to give you an answer on the scale of the problem—I am not a practitioner, so that would be a little presumptuous of me—but I can outline the legal issues from a private international law perspective. Other witnesses, such as the witness from the Competition and Markets Authority, can describe some of the issues that do not relate directly to that area.
In private international law, the issues—as Professor Carruthers said in the previous session—always involve three points. First, there is jurisdiction, or which court will hear a case; secondly, there is applicable law, or which law will govern the dispute; and thirdly, there is the basis on which foreign judgments are recognised and enforced. In that sense, private international law is really quite simple.
In the civil and commercial field, the rules in those areas are harmonised across Europe. There is one instrument—the Brussels 1a regulation, as it is now—that deals with jurisdiction and recognition and enforcement of judgments, and two instruments that deal with applicable law: the Rome 1 regulation on contracts and the Rome 2 regulation on non-contractual obligations. The EU regime began with the Brussels convention in 1968 and has developed over many years, so there is a long history in this field.
On applicable law, the regime began with the Rome convention in 1980. When the treaty of Amsterdam was signed in 1997, there was a move away from conventions and treaties between EU states towards EU regulations, which is why this area is now governed by EU regulations in the form of Brussels 1a, Rome 1 and Rome 2. The system for jurisdiction and recognition and enforcement of judgments is very simple because of the progress that has been made over the years in the context of Brussels 1a, and we have clear rules for applicable law in Rome 1 and Rome 2.
The effect of Brexit will depend, of course, on the nature of the deal that might be done. If we assume that, after any transitional period, there is no special deal between the EU and the UK in this area, what would happen? We would potentially fall back on a broader European regime—the Lugano convention—that applies to some European Free Trade Association countries. The UK, as an EU member state, is currently a party to the Lugano convention, which applies to Norway, Switzerland and Iceland as well as to all EU states. If we want to remain a party to the convention, which is current UK Government policy—that is in the public domain—we will need the consent of all the other contracted states. The easiest route in that regard would be for the UK to become a member of EFTA.
If we were in the Lugano convention, the changes in comparison with our current adherence to the Brussels 1a regime would not be enormous. Lugano is based on the Brussels 1 regulation from 2001, whereas we now have in Europe a modified version of that regulation in the form of the Brussels 1a regulation of 2012. We would, therefore, basically be going back to the law as it was in 2001. On most matters, that is not a big deal, but there is one important area to consider.
I negotiated the Brussels 1 and Brussels 1a regulations for the Scottish and UK Governments in the Council of Europe. The big change that we won, and were pleased to win, in Brussels 1a was to do with choice-of-court agreements. Let us imagine that two parties have agreed to resolve their dispute in Edinburgh, but one of the parties reneges on the deal and goes to Italy to try to litigate there in the hope of drawing out the whole process and getting a settlement, because Italian courts are slow. Under the new Brussels 1a system, the Scottish court can go ahead and hear the case, and the Italian court has to stop hearing the case until the Scottish court has made its decision, because the Scottish court was originally chosen. Under the Lugano convention, the system operates under the traditional first come, first served approach in Europe, whereby if the Italian court receives the case first, it decides whether the choice-of-court agreement is valid. The process is slow, and can take years. That is an important difference between the Lugano convention and the Brussels 1a regime, and it would certainly be a disadvantage in that respect if we were to operate under the former regime rather than the latter.
The area of applicable law is not a problem, because Rome 1 and Rome 2 are applied by EU states unilaterally and universally. The rules in Rome 1 and Rome 2 that identify which law applies to a dispute will be applied in the future by EU states in the same way as they are now, whether or not we are a member of the European Union. We can unilaterally continue to apply Rome 1 and 2, which is the current plan, so there would be no change. There is no conceivable problem on applicable law; the problems relate to jurisdiction and recognition and enforcement of judgments.
To complete the picture, I should point out that we may not be able to stay in the Lugano system. That is a possibility, given that there are voices—Professor Hess from Germany has been raising his voice, for example—that are saying, “We do not want the UK in Lugano, because if it is not a full member of the EU, it will not comply with ECJ decisions”. However, as a professor, I was recently invited by the Swiss Government to attend an official Lugano experts meeting, and I did not hear such voices being raised there. In all honesty, I would say that there is, among the states that were represented at that meeting, more of an openness to the idea of the UK staying in the Lugano convention, and I hope that that would remain the case if the UK decided to try—as it currently wants to—to stay in Lugano and to work out how to make that happen.
If, for some reason, we are not in Lugano, what do we have? We currently have only one bit of an international regime in that regard, which is the Hague convention on choice-of-court agreements. That means that, where there is an agreement between the parties as to jurisdiction, it will be respected vis-à-vis the EU, because the EU is a party to that convention. If we leave, we will become a party to the convention—that is current Government policy—and therefore it would apply to arrangements between the UK and the EU. However, that leaves all the cases in which the parties have not made a choice-of-court agreement, and there are currently no international rules for recognition and enforcement of our judgments in the rest of Europe that would cover that scenario.
I am currently, as an independent expert for the EU, negotiating in The Hague a new convention on recognition and enforcement of judgments. The process is at a fairly advanced stage—there is one more special commission and then a diplomatic session to come, so it should finish next year. The EU’s current policy is to support the new convention, and I therefore have every reason to believe that, in due course, it will be ratified by the EU, and—I hope—by the UK in its new out-of-EU form. We would then have between the UK and the EU a perfectly workable recognition and enforcement regime to ensure that judgments that are given in Scotland are recognised in Germany, and vice versa. However, the new convention will not be in place immediately following Brexit, as that will take a few years, so if we have a hard Brexit there will be a gap in relation to the recognition and enforcement of commercial judgments that are not based on choice-of-court agreements.