09 March 2021

If your scheme’s contingent assets (CAs) are based on the PPF’s standard forms, they will include many standard clauses. One of these standard clauses may well provide for exclusive or non-exclusive jurisdiction in favour of the English & Welsh Courts (for example, version 5.0 dated January 2018 of the PPF’s Type A guarantee from a group company contains a non-exclusive jurisdiction clause). Following the UK’s exit from the EU, judgments obtained from English & Welsh Courts under such agreements are no longer enforceable in EU member states under the EU’s laws.

However, where the contract in question has an exclusive jurisdiction clause, it is likely that England & Wales Court judgments will still be enforceable in EU member states’ courts under the Hague Convention. But if the contract has a non-exclusive jurisdiction clause, the enforceability of England & Wales Court judgments in EU member states will depend on the national law of that member state.

If you are looking to re-certify a CA provided by a EU domiciled company, the PPF (as recently highlighted in their website here) want to be sure that recovery is possible against the provider - and the PPF have said that this may mean obtaining a new opinion from your relevant EU lawyers to be included with your re-certification submission.

The deadline for re-certification submissions this year is 31 March 2021.

This applies to the re-certification of all CAs – which will include parental guarantees, asset backed funding arrangements and security over real estate.

The issue

The issue the PPF has raised relates to the distinction between:

  • whether a CA provided by a EU entity but subject to English law and jurisdiction is a contract which an English Court would recognise as valid and enforceable under English law; and
  • whether the Court in the EU jurisdiction in which the provider is domiciled would recognise and enforce in the jurisdiction a judgement obtained from an English Court requiring the EU domiciled provider to pay the trustees under the CA.

The importance of the second point, is that while an English Court might give a judgment that the EU based provider must honour the CA (e.g. by paying under a guarantee), if the provider refuses to do so, the English Court does not have the power to compel the provider to comply (as the provider and, presumably, its assets are in the EU and outside of the English Court’s reach). So the trustees would need to ask the Court of the country where the provider is domiciled to recognise the English Judgment and then enforce it against the provider.

Prior to Brexit, the UK benefitted from EU rules which required EU member states to recognise and enforce judgments obtained from other EU member states. This made enforcement of England and Wales Court judgements in the EU relatively easy and cheap. 

But since Brexit, in respect of claims issued on 1 January 2021 onwards the EU rules on enforcement of judgments no longer apply to the UK. The UK is now a signatory to the Hague convention, which provides an alternative basis for ensuring that judgments obtained from the Courts of one Hague member state are enforceable in another Hague member state (England and all EU states being Hague convention members). 

However, the Hague convention only applies to judgments obtained pursuant to exclusive jurisdiction clauses. Where the CA has a non-exclusive jurisdiction clause, while an English Court may be comfortable to hear a claim by the trustee and issue a judgment saying that the foreign provider must honour its obligations under the CA, it is unclear on what legal basis you could rely on the foreign Court to enforcement that judgment. Whether or not the foreign Court will do so, depends on the law of the EU state in question. 

Whether your CAs from EU providers have exclusive or non-exclusive jurisdiction clauses, it is important that trustees satisfy themselves that their CAs are adequately enforceable post-Brexit. This is likely to involve seeking legal advice and opinions from suitably qualified lawyers from the relevant jurisdiction:

  • The commentary from the PPF makes it clear that such comfort is likely to be necessary in order to re-certify your CAs; but
  • Trustees may wish to obtain such advice themselves in any event so that they have comfort that their CAs can be readily enforced should there be a need to call on them.

How we can help

We can help you identify whether this issue applies to your CA. If it does, we can assist you in procuring advice from an appropriate lawyer based in the relevant EU jurisdiction through our unparalleled Preferred Firm Network of international law firms. We can co-ordinate submission to the PPF. However, time is tight in order to meet this year’s submission deadline of 31 March. If you would like our help, please contact us ASAP.

Key contact

Richard Knight

Richard Knight Partner

  • Head of Pensions Practice
  • Pensions Services
  • Pensions Legal Advice

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