Brexit update: 2007 Lugano Convention, trading in services with Ireland and CMA guidance

By December 7, 2020News

Brexit and the 2007 Lugano Convention

On 26th November 2020, the Law Society of England and Wales published a letter from the Law Societies’ Joint Brussels Office to Charles Michel, President of the European Council, urging the EU to approve the UK’s application to accede to the 2007 Lugano Convention on the Jurisdiction and Recognition of Civil and Commercial Judgments.

The letter was sent on behalf of a wide range of business and professional organisations and interest groups (namely, the Law Societies of England and Wales, Scotland and Northern Ireland, the City of London Corporation, the British Retail Consortium, the British Chamber of Commerce EU and Belgium, the consumer interests-focused publication “Which?“ and the Chambers of Ireland) and stresses the importance of access to justice in the resolution of the trade disputes which will inevitably arise in the course of future trading activity between UK and EU-based trading parties.

The letter argues that “failure to put in place a sound legal framework by which the intervention of the courts is recognised and enforced puts such access to justice at risk” and, in an accompanying position paper, puts forward a range of scenarios where ”failure to agree an international framework would result in national rules applying”. The letter goes on that “this presents the possibility of two or more courts having jurisdiction, or none, and in any event [that] the parties will need recourse to courts in different countries to enforce the judgments. While the complexities of carrying out two legal procedures will be most off-putting to those with the least means, if there is no recourse to courts, this amounts to a denial of justice.”

The UK deposited its application to accede to the Convention on 8th April 2020 and has received statements of support from Norway, Iceland and Switzerland but so far has not received the backing of the EU, which is a party to the Convention in its own right. It may be that the EU would agree to the UK’s accession to the Convention as part of an overall agreement between the UK and the EU for their new post-Brexit transition period relationship. However, it is clear that the signatories to the letter believe that approval by the EU to the UK’s accession application is in the interests of the EU as well as the UK in any event.

On the question of timing, the letter adds the practical point that “even if time is now running short for getting the Lugano Convention into place for the start of January [2021], there should be time to think about phasing in arrangements. These kinds of transitional mechanisms are often used in trade to assist in any shift to a new legal framework. Here the matter is made easier as Lugano is already in existence between the parties.” What the precise shape of these transitional arrangements would be is not spelt out in the letter but it is an issue which needs to be thought about.

Accession by the UK to the 2007 Lugano Convention should not be controversial, particularly as prior to the end of the post-Brexit transition period the UK is indirectly a party to the Lugano Convention anyway through its former membership of the EU. Many would hope that such accession can be achieved sooner rather than later.

Brexit, Ireland and the Provision of Services

On 30th November 2020, the UK Government issued updated guidance on trading in services with Ireland from 1st January 2021. The guidance has added a section on “the recognition of professional qualifications” to the original version issued on 19th March 2019.

One of the main points in the guidance is perhaps the confirmation that the UK and Irish Governments have committed their countries to maintaining the Common Travel Area, meaning “full protection and maintenance of the status quo for all journeys for individuals between the UK and Ireland”.

The updated guidance note also confirms that “rights to work, study and access social security and public services will be preserved on a reciprocal basis for UK and Irish nationals in the other’s state”.

Cross–border trade in services between the UK and Ireland will be affected by the coming to an end of the post-Brexit transition period on 31st December 2020 and UK businesses in particular engaged in cross-border trade in services with Ireland will need to comply with both UK and Irish rules. This applies as much to the mutual recognition of professional qualifications as it does in other areas. In this context, the guidance note makes specific reference to the regulation of UK statutory auditors and UK lawyers working in Ireland, which has been in the spotlight.

The rules affecting the transfer of personal data between the UK and Ireland will be affected by the ending of the post-Brexit transition period as the UK will then become a “third country” for the purposes of the EU’s General Data Protection Regulation 2016/ 679 (also known as GDPR).

There is clearly a determination on the part of both the UK and Irish Governments not to throw away the hard won gains of rapprochement that the two countries have worked hard to achieve over many years.

Interestingly, the UK Government published a number of other updated guidance notes on 30th November 2020 relating to trade in services with other individual EU and EFTA member states adding sections for “recognition of professional qualifications” and “social security payments for employees”, where there will be more change and less business as usual after the post-Brexit transition period than in the case of the UK and Ireland.

The role of Ireland in the provision of cross-border services between the UK and the EU may well become more important in the future as a result of its privileged relationship with the UK and its status as an EU member state.

Brexit and the UK Competition and Markets Authority

On 1st December 2020, the UK Competition and Markets Authority (CMA) published detailed 49-page guidance (“Guidance”) on its website under a banner which speaks for itself: “Guidance on the functions of the CMA after the end of the Transition Period”.

Subject to transitional arrangements which would keep the EU competition authorities involved in cases commenced prior to the end of the post-Brexit transition period on 31st December 2020, the thrust of the CMA Guidance is that as of 1st January 2021, the CMA would take on responsibility for merger, cartel and competition enforcement cases that were previously reserved to the European Commission, typically,” the larger and more complex cases”.  In its accompanying press release of 1st December 2021, the CMA states that it “is ready for this challenge; it has committed the necessary resources to ensure that it has the people, skills and infrastructure in place to deal with these investigations and has, for merger cases, already been engaged in the “pre-notification” discussions that precede a formal investigation for the past few months”.

The CMA confirms in its press release that it will continue with its work on the monitoring and enforcement of UK consumer protection law and also confirms that it “stands ready to take on new functions with professionalism, impartiality and analytical rigour, including the proposed Office for the Internal Market and establishing a new Digital Markets Unit in 2021/22”.

The supervision of UK competition law may well be be central to the maintenance of any new relationship between the UK and the EU based on “level playing field” criteria and in that regard (and unless UK government policy changes its policy) the role of the CMA is likely to be hugely important.

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