The circulation of decisions
within the European Union:
reflections on the judgment of the European Court of Justice C-700/20
Università di Sassari
SUMMARY: 1. New question concerning arbitration and civil jurisdiction in the judicial space of the Union. – 2. The notion of “judgment” and “lis pendens” in the EU regulations and the Court's arguments in case C-700/20. – 3. The solution provided by the Court. – 4. Concluding remarks. – Abstract.
1. – New question concerning arbitration and civil jurisdiction in the judicial space of the Union
The subject of the following report is part of the ongoing debate regarding the relationship between arbitration and civil jurisdiction within the European legal realm. The evolution that has occurred over the years towards common rules for the exercise of jurisdiction and the free circulation of civil and commercial judgments continues to be a goal requiring realization and construction.
This issue, which has already received significant attention from legal scholars and has been addressed by the jurisprudence of the Court, has sparked new interest following the recent judgment of the European Court of Justice in case C-700/20 [1]. This judgment delves into new considerations regarding the broad concept of a decision and the relationship between jurisdiction and arbitration.
The objective pursued over time by the European legislator has centered on formulating a notion of res judicata that could, in some way, go beyond the approach based on domestic law criteria, in order to build a European procedural law, simplifying the formalities related to the recognition and enforcement of judgments.
A fundamental step in this process was undoubtedly the conclusion of the Brussels Convention of 1968, which uniformly regulated the scope of jurisdiction and the recognition of various decisions among the Member States for approximately 30 years. Its founding principles, progressively reworked, refined, and updated over these decades, form the legislative basis upon which further specialized regulations have been built and adopted, namely Regulation No. 44/2001 (referred to as Brussels I)[2] and Regulation (EU) No. 1215/2012 (referred to as Brussels Ibis)[3].
Hence, the so-called "fifth freedom of movement" (pertaining to judgments) was administered via regulation, rather than directive, with the legislator's aim being the comprehensive "unification" (rather than mere "harmonization") of national criteria for the allocation of civil jurisdiction and the recognition of foreign judgments.
It is imperative to underscore that this shift from the former paradigm was not solely predicated upon legislative text but increasingly on the jurisprudential outcomes of the Court of Justice of the European Union, particularly in reference to seminal cases that have profoundly influenced the evolution and the fresh codification of the subject under examination. The ramifications of such jurisprudence have now become more integrally woven into a bona fide (para)normative source.
The Court is, indeed, summoned to adjudicate on preliminary references, elucidating and resolving queries presented for its contemplation through the application of fundamental tenets, including the primacy of community law and the direct effect of its provisions.
2. – The notion of “judgment” and “lis pendens” in the EU regulations and the Court's arguments in case C-700/20
With these overarching tenets in view, the initial facet scrutinized concerning the specific case pertains to the explication of the "decision" concept[4], as delineated in Article 2 of Regulation (EU) No 1215/2012 (whose formulation remains unaltered compared to the antecedent Regulation)[5]. The ambit of this notion is to be construed expansively, encompassing any measure emanating from a judicial authority of a Member State endowed with decision-making character, irrespective of its finality, without regard to nomenclature, provided it relates to substantive matters falling within the realm of civil and commercial affairs.
Regarding the European Union's provisions governing the circulation of decisions and their automatic reception, the Regulation identifies two instruments to protect the party against whom the effects of the proceedings are directed: the denial of recognition (Article 45) and the denial of enforcement (Article 46).
It is within the framework of grounds for refusal of recognition that the adjudication under scrutiny comes to the forefront, specifically as delineated in subparagraphs (c) and (d) of Article 45:
c) if the decision is incompatible with a decision issued among the same parties in the requested Member State;
d) if the decision is incompatible with a decision previously issued among the same parties in another Member State or a third country, pertaining to a dispute bearing the same subject matter and the same cause, provided that such decision meets the requisite criteria for recognition in the requested Member State.
In the case under consideration, the Court was tasked with appraising whether a judgment rendered by a court of a Member State, recognizing and declaring enforceable an arbitral award while incorporating its content, can be encompassed within the "decision" purview as articulated in Article 45 of the Regulation. The objective of this evaluation was to entertain the possibility of refusing recognition when the judgment proves incompatible with another judgment, in this instance, one emanating from the Spanish state, rendered between the parties in another Member State, addressing identical subject matter and cause.
The Court's arguments traverse this issue across multiple junctures.
Primarily, the Court underscores that arbitration cannot fall within the ambit of Regulation No 44/2001, extant at the inception of the dispute, or its subsequent iteration. This determination stems from the judgment in question assuming the substance of an arbitral award, falling within the exceptions stipulated in Recital 12 (prohibition on the circulation of judgments replicating the terms of an arbitral award). This is because the recognition and enforcement of arbitral awards are already governed by the 1958 New York Convention (recall that Article III of the New York Convention imposes an obligation on contracting States to recognize judgments, which is not merely a formality but an acknowledgment that renders the judgment binding).
Building upon this foundation, the Court next elects to categorize this species of judgment, encompassing the determinations of an arbitral award, as a "decision" in accordance with Article 34, paragraph 3 of Regulation No 44/2001[6].
The Court of Justice's conclusion posits that a judgment emanating from a court of a Member State, harmoniously aligned with an arbitral award, can, in principle, furnish the basis for withholding recognition of a subsequent judgment, which is incongruent and emanates from another Member State.
This assumption is derived from the textual provision of Article 32 of Regulation (EU) No. 44/2001, now Article 45 of Regulation (EU) No. 1215/2012. This provision posits that a fundamental criterion for characterizing a measure as a "decision" is the presence of requisites or conditions that guarantee the preservation of the right to a hearing for the affected party, without differentiation based on content. The Court's rationale proceeds from the invocation of principles intended to underpin the entire subject matter governed by the Regulation, with foremost prominence accorded to the principle of mutual trust among Member States—a cornerstone for facilitating the circulation of judicial measures within the European legal expanse[7].
In the case at hand, nonetheless contends that the arbitral award, whose terms the judgment reiterates, was conceived without due regard to the underlying principles of judicial cooperation upon which the Regulation is predicated[8]. These principles encompass legal certainty, efficient administration of justice, maximum reduction of the risk of parallel proceedings, and mutual trust in the efficacy of the legal system[9].
In an empirical leap, the Court stipulates that, to appraise the English judgment as a "decision," it is imperative to scrutinize the circumstances underpinning the issuance of the arbitral award. This culminates in an actual extension of European legislation into the domain of arbitration[10]. Within this purview, the Court opines that the arbitral award under examination violated two fundamental rules of the Regulation:
1. Firstly, by deeming the arbitration clause of the insurance contract applicable to the Spanish State, contrary to the Court's stance that this clause cannot be invoked against an injured party seeking redress from an insured event, with a direct action against the insurer.
2. The second issue pertains to the doctrine of lis pendens, as it failed to consider the pendency of another proceeding on the same matter before Spanish judicial authorities.
Regarding the first issue, the Court found that the English Judge had applied the arbitration clause of the insurance contract to the Spanish State, which, according to the Court's view, is not enforceable against the injured party seeking direct action against the insurer.
Regarding the second aspect of lis pendens[11], after highlighting that both proceedings involved the same parties, the same subject matter, and the same cause, the Court referred to Article 27 of Regulation No 44/2001, which stipulates that the subsequently seized judicial authority must suspend the proceedings ex officio until the jurisdiction of the previously seized judicial authority is established. If such jurisdictionis established, the subsequently seized judicial authority must declare its own lack of jurisdiction in favor of the previously seized judicial authority.
3. – The solution provided by the Court
The approach adopted by the Court appears to be justified in the specific context of the case by substantive reasons, namely the insurance company's attempt to obtain a judgment that replicates the terms of the arbitration award, which was subsequently endorsed by the British judge, in order to "escape" the Spanish judgment and seek refuge in the former.
The examination of both issues thus fell within the purview of the English judge who issued the arbitral award, consulted at a later time than the Spanish judge (although this consultation did not take place, resulting in circumvention of the guarantees provided by the Regulation).
On these grounds, the Court did not find the intervention of the national judge alone to be sufficient as a guarantee of the formal regularity of the judgment since reliance on mutual trust, usually invoked for the recognition of free circulation and/or the character of opposability of decisions irrespective of content, had already been undermined due to serious violations that betrayed the reasons and objectives for which the Regulation was adopted. Thus, the Court concluded that the judgment in question could not be opposed to the Spanish decision, as it was issued in violation of Regulation No 44/2001.
It is evident, then, that the instrumentalization of the lis pendens rules, governed by Article 27 of the Brussels I Regulation, should not encompass arbitration within its scope. While the main goal of this discipline is to ensure procedural order and efficiency and to protect parties from the possibility of multiple proceedings based on the same claim against the same defendant, it is also true that arbitration matters are not explicitly included in EU Regulation.
The last issue raised before the Court is to evaluate the possibility for the English judge, in the absence of the ability to oppose the recognition of the Spanish judgment, to resort, as a subsidiary argument, to the exception for violation of public policy under Article 34, paragraph 1, as the decision would violate this principle[12]. Asserting the strict and exceptional nature of such violation, the Court of Justice rejects this recognition because the judgment was rendered in circumstances that did not respect the purpose of the Regulation.
4. – Concluding remarks
In light of the interpretations provided by the Court, it can certainly be stated that, in the wake of this decision, new "issues" and new scenarios arise.
One may primarily wonder whether the Court's decision has (indirectly) subjected arbitral tribunals to the provisions of the (reformed) Brussels I Regulation and has in some way opened the door to the interpretation that arbitrators should take into account the "fundamental provisions and objectives" of the Regulation to ensure full recognition of their decisions in a Member State.
It seems that the European Court of Justice intends to impose, with increasing emphasis, the respect for principles it considers fundamental in the field of arbitration as well, including mutual trust and lis pendens, with the presumed aim of "communitarizing" the entire European legal space, despite the clear exclusion of arbitration matters[13].
This issue is also relevant in relation to the concept of a "decision" when the Court, with a clear stretch of interpretation, chooses to recognize the judgment reproducing an arbitral award as part of the decisions that can be opposed under Articles 34 and 45 of the Regulations[14], solely in order to open a door for requesting the respect for the rules on lis pendens provided by Article 27 of the Brussels I Regulation.
It has been questioned whether this ruling is in contrast with the Liberato case (C-386/17), in which, the Court, did not find it necessary to deny the recognition of a decision due to its manifest contradiction with public policy[15].In reality, the premise is different, since in the Liberato case, the question iuris concerns the scope of national jurisdiction, and secondly, these rules pertain to issues of competence. According to Article 35(3) of the Regulation, the competence of the courts of the Member State of origin cannot be subject to review. In the Prestige case, however, the context is different, as it concerns arbitration matters and not a decision from a court of another Member State.
It is clear, therefore, that defining the boundaries of these two disciplines remains complex in any case, bearing in mind that this exclusion does not concern a specific area of law but rather a different approach to handling disputes of the same nature.
Abstract
The evolution towards a European judicial area is still a reality to be achieved and realized today. The recent ruling of the European Court of Justice in case C-700/20 raises new questions concerning the concept of decision and the relationship between jurisdiction and arbitration. The innovations introduced by Regulation (EU) no. 1215/2012 (so-called «Brussels I-bis»), have indeed not addressed, except in a very sparse manner, the relationship between civil jurisdiction and arbitration in the judicial space of the Union. In the ruling in question, the Court was called upon to decide whether and to what extent an arbitral award and a national ruling transposing its content may hinder the recognition and enforcement, pursuant to the Brussels I Regulation, of a decision rendered between same parties in a different Member State.
The solution provided by the Court is certainly very "creative" and potentially heralds important implications on the system of circulation of decisions in the system of uniform European law, and in particular on the notion of decision built over the years.