Brexit’s impact on litigation

Wednesday 4 August 2021

Przemysław Wierzbicki

KKLW Legal, Warsaw

pwierzbicki@kklw.pl

Anna Domagała

KKLW Legal, Warsaw

adomagala@kklw.pl

The United Kingdom is one of Poland’s most important trading partners. When the UK left the European Union, not only did trade become more difficult, but litigation also became more problematic for business owners.

Jurisdiction after 31 December 2020

According to Article 126 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (WA) the transition period after the withdrawal of the UK from the EU, during which time EU law applied to the United Kingdom, ended on 31 December 2020. It implies that, effective from 1 January 2021, a Polish business which intends to sue its contractor from the UK has to examine national and international legislation and assess whether the suit should be filed in Poland or in the UK, while a British business has to decide whether to sue its Polish contractor in the UK or in Poland.

According to the general rule contained in Article 1103 of the Polish Code of Civil Procedure, cases fall under the jurisdiction of Polish courts if the defendant is domiciled or habitually resident or has its registered office in Poland. Therefore, if a party to an agreement (and proposed defendant) has a registered office in the UK, it is not possible to bring a suit in Poland on the basis of the above general rule. However, the Polish Code of Civil Procedure provides for a number of special rules that may allow a case to be brought against a British contractor in a Polish court. The jurisdiction of Polish courts includes, for instance, cases relating to:

  • an obligation arising out of a legal transaction that has been performed, or is to be performed, in the Republic of Poland;
  • an obligation not arising out of a legal transaction which arose in the Republic of Poland;
  • the activity of an establishment or a branch of the defendant located in the Republic of Poland;
  • a claim for property rights, and the defendant has property in the Republic of Poland or is entitled to the property rights in the Republic of Poland of significant value vis-à-vis the value of the matter in the dispute; and
  • the matter in dispute is located in the Republic of Poland.

A choice of court agreement

The provisions of the Polish Code of Civil Procedure therefore give Polish businesses an opportunity to bring cases against British contractors in Poland. However, in order to do so, it requires legal analysis and may involve arguments proving the jurisdiction of the Polish court in each case. British business owners must bear in mind that, in some cases, Polish courts have exclusive jurisdiction. This is important because where a judgment is made in a foreign country on a matter falling under the exclusive jurisdiction of Polish courts, it is not subject to recognition by the Polish court.

The exclusive jurisdiction of the Polish courts is applicable, for instance, in cases concerning the rights in rem and ownership titles to real estate located in the Republic of Poland, as well as in cases concerning tenancies, leases and other relationships relating to the use of such real estate (except for cases concerning lease fees and other amounts due in connection with the use or collection of benefits from such real estate). Exclusive national jurisdiction also applies to cases concerning the dissolution of a legal person or an organisational unit which is not a legal person, as well as cases concerning the revocation or invalidation of resolutions of those bodies, if the legal person or the organisational unit (which is not a legal person) has its registered office in the Republic of Poland.

For businesses, the above means additional costs and time. It is beneficial to include a clause containing a choice of court agreement in agreements concerning parties in Britain and EU Member States. To ensure that the clause is effective, it should be written by reference to the Hague Convention of 30 June 2005 on Choice of Court Agreements, to which Poland and the UK are also parties (after Brexit, the UK indicated its willingness to join it as an independent party, whereas previously it was a party as an EU Member State). The Hague Convention applies in international matters to contracts in civil or commercial matters which concern exclusive jurisdiction. It is very important that such clause therefore confirms the exclusive jurisdiction of the court of a given state. Non-exclusive and asymmetric clauses do not fall under the Hague Convention and would therefore require the application of national regulations to determine the appropriate jurisdiction.

Proceedings instigated by 31 December 2020

Article 67 of the WA provides that in respect of legal proceedings instituted before the end of the transition period, EU Regulation No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters will apply. As a result, Brexit has no impact on proceedings instigated by 31 December 2020 regarding jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Importantly, according to Article 67 of the WA, EU Regulation No. 1215/2012 will still apply to enforcement proceedings or actions instigated after 31 December 2020 which are related to substantive proceedings or actions instituted before the end of the transition period.

Recognition and enforcement of judgments after 31 December 2020

For cases initiated after 31 December 2020, a separate case has to be brought in order to recognise, in Poland, a judgment given in a British court and vice versa, because EU Regulation No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters will not apply. It means that judgments given in the British courts are no longer automatically recognised in the EU Member States without any special procedure being required.

Pursuant to Article 1150 of the Code of Civil Procedure, judgments of foreign courts in civil cases that may be enforced through execution become 'enforceable titles' upon a declaration of enforceability by a Polish court. The declaration of enforceability takes place if the judgment is enforceable in the state where it originated and there are no obstacles specified in Article 1146, paragraphs 1 and 2. The declaration of enforceability takes place upon the request of the creditor by way of appending an enforcement clause to the foreign court judgment. The obstacles which may result in the refusal of a declaration of enforceability, in addition to the lack of enforceability in the state from which the judgment originates, include the following:

  • the judgment does not have the force of res judicata in the state in which it was issued;
  • the judgment was issued in a case falling under the exclusive jurisdiction of the Polish courts;
  • the defendant did not enter a substantive defence and was not duly served with the document instigating the proceedings early enough to enable them to defend the case;
  • a party was prevented from defending itself during the proceedings;
  • a case involving the same claim and between the same parties was filed in the Republic of Poland earlier than with a court of a foreign state;
  • the foreign judgment is contradictory to an earlier final judgment of a Polish court or an earlier final judgment of a court of a foreign state, which complies with the requirements for its recognition in the Republic of Poland, issued in a case involving the same claim between the same parties; or
  • a declaration of enforceability would be contrary to the fundamental principles of the laws of the Republic of Poland (public policy considerations).

After Brexit, there may be a need to consider whether British judgments that apply concepts unknown to Polish law can be declared enforceable. A good example is the anti-suit injunction – an order to terminate or prohibit the initiation of proceedings, issued by a court, used in common law jurisdictions. Anti-suit injunctions may also order a party to withdraw a previously filed claim.

This concept was analysed by the Court of Justice of the European Union (CJEU), which drew attention to the contradiction of the anti-suit injunction with the principle of mutual trust between the EU Member States in the field of justice (case C-159/02, Gregory Paul Turner vs. Felix Fareed Ismail Grovit). Each court has the right to examine its own jurisdiction. EU law does not allow the jurisdiction of one court of a Member State to be controlled by another court of a Member State. However, the UK is no longer a member of the EU, so anti-suit injunctions may now be used more willingly by British courts, not limited by EU law and the interpretation of the CJEU.

On the other hand, the Polish court may need to determine whether the anti-suit injunction is contrary to the fundamental principles of the legal order of the Republic of Poland. These principles also include the principles of individual branches of law. If the judgment is inconsistent with these principles, it is necessary to refuse its enforcement. The general rule in Polish civil proceedings is to examine the jurisdiction ex officio in each aspect of the case.

Similar problems may arise regarding the enforceability of English protective judgments in Poland, which provide for security measures unknown to Polish law, such as freezing injunctions (effectively a court ban on disposing of property assets addressed to the debtor). Without applying the principle in Article 54 of Regulation 1215/2012 – according to which, if a judgment contains a measure or an order which is not known in the law of the Member State addressed, that measure or order shall, to the extent possible, be adapted to a measure or an order known in the law of that Member State which has equivalent effects attached to it and which pursues similar aims and interests – will it still be possible to enforce of such judgments after 31 December 2020? It is likely that due to the scale of trade between Poland and the UK, Polish courts will soon have an opportunity to answer this question.

Applicable law

It is worth mentioning that, although the end of the transition period has affected jurisdiction,
it has no significant impact on the law applicable to contractual and non-contractual obligations. Regulation (EC) No. 593/2008 on the law applicable to contractual obligations (Rome I) as well as Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (Rome II) apply in the UK after the transition period as domestic law.

Other considerations

After 31 December 2020, there may be additional problems, such as the service of documents. In such cases, the date of the effective receipt of a letter will not be the date of posting it at a Polish post office, but the date when the British court is served with a letter. After 31 December 2020 Regulation No. 1393/2007 on service in EU Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents) will no longer apply. In addition, it may be necessary to appoint a local representative both in Poland and in the UK when serving court documents.

Summary

After 31 December 2020, businesses in Britain and EU Member States should ensure the appropriate and thoughtful regulation of jurisdiction in contracts to which they are parties or are intending to be parties. A properly formulated contractual clause may allow businesses to save costs and time related to conducting court proceedings abroad in order to determine jurisdiction or the enforceability of court judgments.

It should be remembered that, although the rules for determining the applicable law have not changed, significant changes have occurred in relation to the determination of jurisdiction for court proceedings initiated after 31 December 2020, which now require reference to both national and international legislation in order to be resolved.