European Union: Post-Brexit Tension? EU Courts Can Refuse To Recognise "Quasi Anti-suit Injunctions"

The European Court of Justice (ECJ) has ruled that an English High Court judgment amounts to a "quasi anti-suit injunction", which EU courts can in principle refuse to enforce. The judgment awarded declaratory and monetary relief against a party which had brought Greek proceedings in breach of a settlement agreement with an exclusive English jurisdiction clause. This article will review the judgment and the ongoing challenges between English courts and EU regulation in a post-Brexit environment.

Legal context

Brussels instruments - the Brussels Regulation - and, from 2015, its successor, Brussels Recast - provide a scheme for determining, as between member states of the European Union, which country's courts have jurisdiction to hear a dispute; and for the mutual recognition and enforcement of judgments as between member states. There are limited bases on which the courts of one member state can refuse to recognise or enforce a judgment rendered in another member state. One such exception is where recognition would be "manifestly contrary to public policy" in the recognising state.

Effect of Brexit - since the UK's departure from the EU, the Brussels instruments no longer apply to the UK, except in proceedings instituted before the end of the Brexit transition period (31 December 2020). Judgments arising from proceedings instituted before that date remain subject to the Brussels regime on recognition and enforcement. For more information, see our insight Brexit: Governing law, jurisdiction and enforcing judgments.

Anti-suit injunctions - anti-suit injunctions are orders issued by a court which prohibit a party from bringing or continuing proceedings in another jurisdiction. They are typically sought and granted where one party brings, or seeks to bring, proceedings in the courts of Country A, in breach of an agreement between the parties that disputes will be subject to the exclusive jurisdiction of the courts of Country B; or that any dispute will be referred to arbitration. Anti-suit injunctions have been held to infringe European law as they are considered to interfere with the power of a court to rule on its own jurisdiction, and are contrary to the mutual trust between the legal systems of member states which underpins the Brussels instruments. As a result of Brexit, it is anticipated that there may be more anti-suit injunctions issued by the English courts as the domestic laws on asserting and protecting jurisdiction continue to develop.

Background facts

The dispute underlying this decision is long-running and convoluted. By way of short summary though:

• In 2006, a ship sank off the coast of South Africa. The ship's owner commenced proceedings in the English High Court, and in arbitration, against the ship's insurers, seeking an indemnity for its loss.
• The proceedings were settled in 2007. The relevant settlement agreements were subject to English law, and to the exclusive jurisdiction of the High Court in London.
• In 2011, the ship's owner commenced proceedings in Greece against various defendants, alleging that they had obtained false evidence to avoid paying the indemnity, and had spread defamatory rumours about the owners in the insurance market.
• In 2014, the defendants sought, and obtained, a declaration from the English High Court that the subject matter of the Greek proceedings had been settled, and that the proceedings in Greece had been brought in breach of the settlement agreements, and in breach of the exclusive jurisdiction clauses within them. The court also found the owner liable for damages for breach of the settlement agreements. In giving its judgment, the English court said:

"There is no question of the relief sought here... interfering with the jurisdiction of the Greek court. It is no more than a determination by the English court of the rights and obligations under the settlement agreements, contracts governed by English law... and a determination by the English court of the appropriate remedy in respect of a breach... of their obligations under English law contracts... Such orders are not intended to usurp the jurisdiction of the Greek court, but rather to assist the Greek court... it is for the Greek court to decide whether to recognise a judgment of the English court that the Greek claims fall within the terms of the settlement agreements.

• While the High Court decision was initially recognised in Greece in 2015 under the original Brussels Regulation, a series of appeals followed, which eventually led to the instant reference from the Greek courts to the ECJ. In essence, the key question for the ECJ was whether a member state was able to use the "public policy" exception to refuse recognition or enforcement of an order of the nature granted by the English court in this case.

The ECJ decision

• "Quasi anti-suit injunctions" - The ECJ decision rehearses that anti-suit injunctions are incompatible with the Brussels regime, as they constitute an interference with a national court's jurisdiction. Although the English court's 2014 orders did not amount to a full anti-suit injunction (as they did not directly prohibit the continuation of the Greek proceedings), the ECJ found they could be classified as "quasi anti-suit injunctions" - their purpose may not have been to prohibit a party from bringing or continuing legal action before a foreign court, but they could be regarded as having, at the very least, the effect of deterring such proceedings.
• Such '"quasi" anti-suit injunctions', the ECJ said, run counter to the trust which the Member States accord to one another's legal systems and judicial institutions and on which the system of jurisdiction under the Brussels instruments is based.
• Public policy exception - The ECJ then considered whether a court asked to recognise and enforce such a "quasi anti-suit injunction" could refuse on the 'public policy' ground - i.e. where recognition would be manifestly contrary to public policy in the recognising state.
• The ECJ held that, while issues of public policy are a matter to be determined by national courts in individual member states according to their own conceptions, the public policy ground as a concept is an exceptional one which applies only where recognition of the judgment from another state would be "at variance to an unacceptable degree with the legal order of the state in which enforcement is sought"; or is "a manifest breach of a rule of law regarded as essential in the legal order of the state where recognition or enforcement is sought". While it is for national courts to determine what offends against public policy in their state, in principle a "quasi anti-suit injunction" is liable to be incompatible with public policy in the EU, as it infringes the general principle in the Brussels regime that every court is to rule on its own jurisdiction.

Impact of the decision

While it has long been understood that anti-suit injunctions offend against the principles of the Brussels regime, this decision significantly widens that principle, such that any order which indirectly influences the continuation of proceedings in another member state is now liable to be refused for enforcement in the EU. That impact is arguably somewhat mitigated as regards UK judgments, in that the Brussels regime only has continuing application to proceedings which were issued approaching four years ago, before the end of the transition period. However, it does mean that in any such proceedings, any apparent breach of an exclusive jurisdiction (or arbitration) agreement should be challenged in the court seized, rather than run the risk of an unenforceable quasi anti-suit injunction. There may also be wider ramifications if this line of reasoning is adopted within the EU more generally in relation to the enforcement of judgments from non-Member States, particularly regarding the UK in the post-Brexit era.

The English courts and practitioners are still grappling with the jurisdictional fallout from Brexit in the absence of the Brussels regime, and there remains a concern in practice that enforcing English judgments in the EU (or vice versa), or at least being able to give clear advice on the ability to enforce, is more difficult than it used to be. On a connected, but distinct point, it is anticipated that one outcome from the "new era" will be an increase in anti-suit injunctions being issued by the English courts. While that may in itself prove controversial in Europe, the controversy may increase if the very concept of what constitutes an anti-suit injunction is now given a much broader definition under EU law.

In practical terms, this means that parties engaging in cross-border litigation (or litigation where cross-border enforcement is likely to be required) will have to pay even closer attention to their ability to export English judgments into foreign jurisdictions and the ability to bring overseas judgments into effect in the UK.

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