European Commission recommends ‘No’ for Lugano as Brexit fallout intensifies

EU Executive argues that Lugano Convention is a ‘Single Market Instrument’ and therefore UK ineligible for membership

By Andreas Rogal

Andreas Rogal is a senior journalist at the Parliament Magazine

12 Aug 2021

A convention between EU Member States and most EFTA and EEA Member States (except Liechtenstein) that’s virtually unknown outside specialised legal and administrative circles, is causing headlines in mainstream media. Last week, CNN reported under the title: “the explosive Brexit spat that no one is talking about could slam the UK economy”.

If this sounds perhaps a little alarmist, the Lugano Convention, signed in the eponymous Swiss lakeside city in 2007 could very well become notorious among millions of citizens, thousands of businesses and English law courts.

The Lugano Convention clarifies which national courts can deal with certain cross-border civil and commercial legal cases, and provides for easy mutual recognition of rulings.

It covers areas important to citizens and businesses, like disputes over contracts, insurance, employment law and family law - think in particular child custody - thus regulating both international jurisdiction and the recognition and enforcement of foreign judgments in these cases.

In particular for commercial cases, the UK has been a place of choice for many cross-border litigants to settle their disputes, helped by competent lawyers and the pragmatic approach of its common law system based on case rulings, an exception in Europe.

The UK automatically left the convention when it exited the European Union, but applied for accession in April last year. The EFTA countries and Switzerland expressed their consent for the UK to rejoin pretty swiftly but the EU kept quiet, even beyond the stipulated one-year timeframe for a decision.

Then, in early May this year, the European Commission dropped the bombshell publishing a communication and subsequently informing the Swiss government - depository of the convention - that it was “not in a position to recommend for the United Kingdom to accede”, arguing that the Lugano Convention is a “flanking measure for the EU’s economic relations with the EFTA/EEA countries”, i.e. essentially a Single Market instrument.

Commenting on the situation, former UK MEP Mary Honeyball told The Parliament Magazine, “The UK has been the main beneficiary of Lugano. Not only does it help the UK with cross-border disputes and gives Britain considerable soft power, the use of courts in Britain for cross-border disputes also raised revenue.”

“But if the EU does insist on the Single Market connection, and the UK government insists on not wanting any part of it, it is difficult to see where Britain can go. The UK Government should understand that this is not a sovereignty issue but is essentially practical.”

Some observers believe that the Single Market aspect, while genuine, is not the main reason for the Commission’s stance. In a recent blog, Zach Meyers and Camino Mortera-Martinez of the Centre for European Reform (CER) think tank argue that, “A more likely explanation for the Commission’s reticence to allow the UK to re-join the convention is that Britain remains a difficult partner for the EU on a range of issues, not least in honouring its own word.”

The pair continue, “EU officials remain understandably wary of the UK government’s perceived willingness to pick fights with the EU to boost its domestic popularity. The continuing row over the Northern Ireland protocol, which the UK government signed at the beginning of last year, has dampened relations with both EU governments and the EU institutions.”

Meyers and Mortera-Martinez however, do call for both sides to try and overcome these issues for the benefit of their citizens:

“Rather than bicker about providing more business for British lawyers, the EU and UK ought to cooperate to protect their nationals - such as those dealing with cross-border family law and employment disputes - who will be hardest hit by these changes.”

There is, however, another interpretation of the EU’s position, best summed up by what the former EU lead negotiator on Brexit, Michel Barnier is alleged to have suggested: that it would make little sense for the EU to do the British a favour so they can keep their legal services when EU countries can provide these themselves instead.

Of course, the Commission does not actually decide whether to grant the UK’s wish of accession. The European Parliament’s opinion will have to be heard and the European Council will have to vote on it. None of which has been scheduled so far, probably wisely, as an actual negative decision would no doubt fan the flames of an already heated diplomatic conflict.

The UK government has so far not reacted to the EU’s possible rejection.