International – RJ Gaito Law Firm

BREXIT and implications on recognition and execution of UK judgements in Luxembourg

admin — Tue, 18 May 2021 16:55:19 +0000

Overview

Within the framework of European Union (EU) Regulations, the recognition and the execution of judicial decisions rendered by the courts of the EU Member States was greatly simplified.

Pursuant to Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012, on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters “a judgment given in a Member State shall be recognized in the other Member States without any special procedure being required” (Article 36), as well as without further formality being required.

Furthermore, by application of articles 39 and 40 of the Regulation, an EU Member State’s judgment is enforceable by operation of law and is applicable for the purpose of protective measures.

Enforcement of United Kingdom (UK) judgments in Luxembourg post BREXIT

On 31 December 2020, the UK departed from the EU without having received the required consent to its accession to the Lugano Convention of 2007. The Lugano Convention regulates both international jurisdiction and the recognition and enforcement of foreign judgments in civil and commercial matters.

On 8 April 2020, the UK applied to accede to the 2007 Lugano Convention in its own right. However, in a recent communication to the EU Parliament and to the Council of the EU of 4 May 2021, the EU Commission is recommending to reject the application of the UK to accession of the Lugano Convention and that the UK should be treated as third countries via the application of the 2019 Hague Convention.

In that case, the UK is and will be treated in Luxembourg as a third-country jurisdiction and, therefore, an enforcement of a UK judgment will require the application of the so-called “exequatur” procedure. Such a procedure would require a final and non-appealable judgment representing a so-called “title” to be introduced to the Luxembourg District Court (“tribunal d’arrondissement”). It should be noted that the Luxembourg courts may refuse to execute a foreign judgment if it is contrary to Luxembourg International Public Order (“ordre public”).

From a practical perspective, to enforce a foreign judgment in Luxembourg, the applicant has to serve a summons (“assignation en exequatur”) on the defendant in proceedings requiring the services of a lawyer being a member of the Luxembourg Bar.

The procedure requires the involvement of the Luxembourg State Prosecution which has the right to oppose the execution of a foreign judgment on the ground of “ordre public”.

The procedure takes place in a written form, meaning that it is undertaken by exchange of written pleadings which means that it is lengthy and cumbersome. In addition, like any other Luxembourg judgment rendered in the District Court, it is appealable. Thus, the procedure may last for many months.

Our Take

It is obvious that, a failure of the UK to accede to the Lugano Convention will make the procedure for recognition and execution of UK judgments in Luxembourg cumbersome, more costly, lengthier and could result in legal uncertainty.

In international agreements and, more specifically, in international transactions’ practice, English law and English courts are amongst the most popular choices for lawyers and the business community. Therefore, in light of the recent Commission communication, the attractiveness of English law may be significantly diminished.

We are of the view that Luxembourg law could provide an attractive alternative as a choice of law and venue given that the legal framework is solid, the Luxembourg judiciary being non-interventionist by its nature and the enforcement of contracts in accordance with their terms. In recent years, we have witnessed a tendency towards Luxembourg law; one such example was the recent decision by the European Stability Mechanism to issue euro denominated bonds and bills under Luxembourg law rather than under English law.

Contact:

Ronnen Gaito gaito@rjgaito.com
Gwendoline Bella gwendoline@rjgaito.com

40 rue Glesener
L-1630 Luxembourg

Tél. (352) 20 600 333
Fax. (352) 20 600 334

https://quizzical-clarke.77-68-21-77.plesk.page

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Litigation Speed Read – RJ Gaito secures an important Luxembourg Court of Appeal judgment

admin — Thu, 07 May 2020 16:57:06 +0000

Formation of commercial contracts and enforceability of Luxembourg agreements

Highlights:

Our client, a leader in the software industry, recently prevailed in the Luxembourg Court of Appeal and received a favorable judgment that tacitly reconfirms a Supreme Court (“Cour de Cassation”) jugment of January 24, 2019. The judgment is of particular importance since it touches upon the essential elements of Luxembourg commerce and contract law and we were gratified that the Luxembourg Court of Appeal followed our reasoning.

Legal issues at stake:

Article 109 of the Luxembourg Code of Commerce states, inter alia, that “purchases and sales are evidenced by way of an invoice”. Until recently, this provision of the Code of Commerce operated as an implied and irrebuttable provision whereby the failure of a business to contest, within a reasonable time frame, an invoice rendered gave rise to an immediate debt recovery claim and served as conclusive and final evidence of the existence of a due and uncontestable debt, as well as the existence of an underlying agreement among parties (a.k.a “Facture Acceptée”). In these circumstances, irrespective of overwhelming evidence to the contrary, the Luxembourg courts were reluctant to intervene and adjudicated that, once an invoice was delivered and not disputed promptly, an irrebuttable presumption was created. Consequently, it was often the case that draconian judgments were rendered.

On January 24, 2019, the Luxembourg Supreme Court had softened this notion of “Facture Acceptée” in contracts which are non-sale of goods contracts. The Supreme Court stated that, “in the context of non-sale of goods contracts the “Facture Acceptée” is no longer an irrebuttable presumption of the existence of an alleged debt”.

Facts of the case:

Our client had a written and explicit non-sale of goods contract with certain counterparties. The counterparties spuriously served on our client a baseless (high value) invoice which was disputed. In the first instance, the Luxembourg District Court found that the invoice was not disputed in due course and further found that the invoice was based on a separate agreement on the basis of the principle of “Facture Acceptée”. The Luxembourg District Court chose, erroneously, to ignore the written contract.

We referred the matter to the Court of Appeal citing the Supreme Court judgment in question and the basic principle of Civil Law known as “Pacta Sunt Servanda” i.e. the contract governs the parties’ rights and obligations. Without citing the Supreme Court’s judgment of January 24, 2019, the Court of Appeal reversed the District Court’s decision, arguing that, in the face of our client’s disputed invoice, the burden of proof rests with the creditor to prove (i) the existence of the alleged debt and (ii) the existence of an underlying agreement. Considering the written contract produced and the lack of proof on the side of the claimant, the court applied the terms of the written agreement.

Our Take and Practical Advice:

Clear and detailed written agreements are imperative for securing parties’ rights in Luxembourg. Note that, “boilerplate clauses”, such as an “Integration Clause”, can play a material role and will be enforced in accordance with their terms.
The Luxembourg courts, de facto, reaffirmed their commitment to strict application of written agreements and enforcing agreements in accordance with their terms.
Unlike courts in other Member States of the EU, the Luxembourg courts are reluctant to intervene in written contractual terms.
Facture Acceptée remains a basic principle for sale of goods contracts. Therefore, contest your invoices promptly in a clear manner to avoid being trapped in a legal quagmire.
If confronted with a debt claim regarding non-sale of goods contracts, we recommend to promptly and clearly dispute your invoice(s), however, bearing in mind that, if one fails to do so, and with a written agreement at hand, all is not lost in advance since the existence of a debt is no longer an irrebuttable presumption.

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