Short sighted plotting of the EU against the UK: Lugano

In this post, Carl Baudenbacher of Monckton Chambers (former President of the EFTA Court) discusses the EU and Denmark’s current lack of consent for the UK re-joining the Lugano Convention at the end of the transition period.

The Lugano Convention of 2007 (“LugC”) guarantees the recognition and enforcement of judgments in civil and commercial matters in the contracting parties EU, the EFTA states Iceland, Norway, Switzerland and Denmark; the latter is an individual member by virtue of a special regulation. Such judgments should be able to circulate freely in the EU Member States, Switzerland, Norway and Iceland. The Lugano system is thus based on the assumption that the judicial regimes in Europe are basically equivalent. The 2007 LugC is a follow-up treaty to the first LugC of 1988. The fact that both treaties were signed in Switzerland and bear the name of the most important city of Ticino is a considerable gain in prestige for the country.

Legal industries

The LugC is part of EU law. The UK has so far participated in the Lugano system as an EU member state. The UK’s Lugano status would end with its withdrawal from the EU at the end of 2020. London therefore submitted an application for re-accession as an individual member on 8 April 2020. According to Art. 72 LugC, the consent of all contracting parties is required for this. The EFTA states Switzerland, Norway and Iceland support the British re-joining. However, the EU and Denmark have not yet given their consent.

All over the world, the conduct of legal proceedings is in the hands of attorneys and other legal professionals; one speaks of legal industries. The most important legal industry in Europe is the British. In 2019, its members generated revenues of 37.1 billion pounds. This is also related to the quality of British judges. A loss of Lugano membership would make the recognition and enforcement of judgments of British courts in the EU27 and in Iceland, Norway and Switzerland much more difficult.

The FT reported on 27 April 2020 that the European Commission had indicated to Member States that a quick decision on the British application was not in the interest of the EU. It argued that the current Lugano contracting parties are all part of the EU internal market and that the UK is determined to leave that market. This line of argument is, however, not tenable. Membership in the internal market is not a prerequisite for Lugano membership. And the assertion that all current Lugano states are members of the internal market is wrong. Switzerland is at best a partial participant in the internal market. Of the four fundamental freedoms, it has only adopted the free movement of persons and (largely) the free movement of goods, but not the freedoms of services, establishment and capital.

In fact, the EU is concerned about something quite different: it wants to build up additional pressure in the negotiations on a future free trade agreement with the UK. This is ill-considered, but not surprising. As the refusal to recognise the equivalence of Swiss stock exchanges as of 1 July 2019 shows, Brussels has recently not shied away from harassing friendly European states by dubious means. However, the issue of stock exchange equivalence was a shot in the arm for the EU, not only economically but also in terms of reputation. Such a thing is bad for a group of states that sees itself not only as an economic community but also as a community of law and values.

No harm principle in international law

To damage the British legal industry by blocking the UK’s reintegration into the Lugano system would be an even greater blunder. Theoretically, the EU could argue that it was free in this decision. However, this freedom is in such a long and close relationship limited by the general prohibition to harm others under international law. Such a step would not even benefit the EU27 — on the contrary. The EU states have a great interest in ensuring that judgments of their courts in civil and commercial matters can be recognised and enforced in the UK without any problems. One might think of consumer cases in connection with online purchases or services of all kinds.

Finally, the Commission’s behaviour is an affront to Iceland, Norway and Switzerland, which are being held hostage, as it were. Particularly in the light of recent global developments (keywords: COVID crisis, Hong Kong “security law”, Belarus), the EU would be well advised not to put obstacles in the way of the NATO nuclear power Great Britain, which holds one of two permanent seats on the UN Security Council, joining the LugC as an individual member.

For the UK to be able to accede to that treaty by the end of 2020, the contracting parties must declare their agreement by 1 October 2020 at the latest. If this is not understood in Brussels, the EU capitals will have to take action.

This blog post is a translation of an essay published in Neue Zürcher Zeitung, Switzerland, on 21 August 2020: https://www.nzz.ch/meinung/kurzsichtiges-raenkeschmieden-der-eu-gegenueber-grossbritannien-ld.1570987?mktcid=smsh&mktcval=OS%20Share%20Hub

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