The European Commission has thwarted the UK’s bid to rejoin the Lugano Convention – an agreement which governs mutual recognition of civil and commercial legal judgements between its signatories. For now at least.
According to the Swiss Federal Council, which acts as depository for the Convention, the Commission has said it is “not in a position to give consent to invite the United Kingdom to accede to the Lugano Convention”.
While the European Commission’s decision comes as no surprise, the way the organisation has conducted itself and the reasoning it used was not expected.
Unlike the EFTA countries of Norway, Iceland and Switzerland, which notified the depository of their approval to invite the UK to join Lugano within the response period for new applications laid out in the Convention, the European Commission missed the deadline.
Then it issued a non-binding recommendation that member states should reject the UK’s application without letting the member states vote on it.
This “recommendation” was based on the bizarre argument that interprets the Lugano Convention as being an instrument of the EU Single Market – for EU and EFTA countries – and thus not open to third countries, like the UK.
This reasoning raised a lot of eyebrows, not least because the Lugano Convention was first signed in 1988, well before the Single Market was even created. Indeed, the picturesque town of Lugano is itself in Switzerland, which is at best only a partial participant in the Single Market for people and goods, but not services or capital.
Moreover, the Lugano Convention of 2007 which replaced the 1988 original, explicitly states that it is not just for EU and EFTA states, but open to “any other state” (Article 70c) as long as it meets “the conditions laid down in Article 72”, one which also does not mention any requirement of affiliation to the Single Market.
The fact that all the non-EU signatories and some EU member states, such as the Netherlands, had already given their approval to inviting the UK, suggests that the European Commission’s interpretation of the Convention is not shared by all parties to it.
According to Carl Baudenbacher, the former president of the EFTA court, “There is simply no EU and EFTA requirement. It’s made up by the Commission”
The real reason behind the EC’s decision is no secret. Legal services is a very lucrative sector and the Commission has long had its eye on London’s preeminent role as a centre of commercial litigation, intending to prize away as much business as it can from it.
As former Spanish judge, Josep Gálvez told The Financial Times: “It’s a way to punish the UK for leaving the EU, but also a very good opportunity for some EU jurisdictions to attract international litigation to their courts”
While some reports around this issue are framed as a victory of Brussels over Westminster, this is far from the truth. In reality, there are no winners because those directly affected are not governments, but ordinary citizens and small businesses on both sides who will now find it harder to seek justice across borders. Outside the Lugano agreement, resolving disputes relies on the 2005 Hague Convention, which is more expensive and harder to enforce.
Ironically, those most affected include many of what have hitherto been the most pro-EU people in the UK and EU member states, not least the six million EU citizens who made the UK their home, but still have family and commercial ties across the Channel.
The cross-bench peer Lord Anderson QC put it well: “Petty politicking on this will make the EU look small and erode the goodwill that many of us feel towards it”
Indeed, the interests of the European Commission are not aligned with those of the member states, their citizens or business. EU consumers will find it harder to get redress from UK companies.
The administrative burden will be borne by the member states, not the Commission. It does not have to worry about increasing costs or adding to a backlog of cases going to court. Whether a divorced mother is able to get child support from a father is not of its concern.
Yet while the EU has said No for Now, all is not lost. The Dutch government, which backed the UK bid and disagreed with the Commission’s position, has emphasised that this decision is not final.
Looking at the future, there are two options for the UK. The first of these is to force a vote at the European Council. As the EU states have not formally voted on the UK’s bid, they could theoretically force the EC to put forward a proposal for it to vote on, the outcome of which would be decided by qualified majority voting.
However, as Geert van Calster, Professor at the University of Leiden pointed out in his blog, that proposal would need to voice affirmative support for the UK’s bid, which in turn would mean changing the EC’s current position as a prerequisite – and that could only be done with unanimous support from all member states.
As the issue has not attracted much attention in the EU27 states and barely been reported on, this seems very unlikely, at least until fall out from the decision becomes apparent and turns into a problem that needs fixing.
There is of course an alternative: the UK could simply join EFTA – in which case the EU would have no legs to stand on.
The author is a strategy consultant, a former co-founder of Conservatives for a People’s Vote and now campaigns for EFTA4UK.