Case of the Week: Brexit Does Not Facilitate Freezing Orders

olg-frankfurt-ganz-neu2In my opinion, obtaining a freezing order (Arrest) against the debtor pending final judgment tends to be rather difficult in this jurisdiction. Often, the courts set the bar for showing that “the enforcement of the judgment would be frustrated or be significantly more difficult”, as Section 917 German Code of Civil Procedure (ZPO) puts it, frustratingly high. It is somewhat easier if the debtor is situated abroad: Section 917 para. 2 ZPO stipulates that it is sufficient grounds for a freezing order if the judgment would have to be enforced abroad and there is no reciprocity with the foreign jurisdiction (Arrestgrund der Auslandsvollstreckung). As there is reciprocity across all member states of the European Union, this does not work, however, with respect to a debtor situated in the United Kingdom – at least for now.

In a recent case in the Frankfurt Court of Appeals (Oberlandesgericht), the applicant was seeking a freezing order against a German national who had moved to the United Kingdom. The applicant argued that given the United Kingdom’s decision to leave the European Union and given that a final judgment would not be in place prior to the current Brexit deadline of 31 October 2019, the reciprocity exemption should not apply to the United Kingdom, the freezing order should be granted pursuant to Section 917 para. 2 ZPO.

The Frankfurt Court of Appeals did not follow that line of argument. It held that at present, it was not “predominantly likely” that the United Kingdom will leave the European Union without a deal. It further thought that it was predominantly likely that any such deal would address the issue of enforcement of judgments and would, more or less, perpetuate the current legal situation:

“It is true that Great Britain’s withdrawal from the European Union would in principle also render the above-mentioned regulation* ineffective, since its applicability presupposes the membership of the states in the European Union. However, the European Union and Great Britain endeavour to implement the withdrawal of Great Britain from the European Union by means of an agreement. The agreement negotiated and drafted inso far  (2019/C 66 I/01) contains the following provision in Article 67 (2):

“In the United Kingdom and in the Member States, the following acts or provisions shall apply to the recognition and enforcement of judgments, decisions, authentic instruments, court settlements and choice of forum agreements in cases relating to the United Kingdom:

(a) Regulation (EU) No 1215/2012 shall apply to the recognition and enforcement of judgments given in judicial proceedings instituted before the end of the transitional period and to authentic instruments …”.

It is true that the House of Commons has repeatedly failed to approve this agreement with the European Union. Nor is there any indication at the moment that it will approve it. The fact that the United Kingdom will ultimately withdraw from the European Union without any withdrawal agreement with the European Union, however, does not appear to be predominantly likely at present. In particular the renewed extension of the deadline, now until 31 October 2019, has the stated objective to reach an agreement – which is the general objective of both sides – by way of further negotiations. If this should happen, it can be presumed that the future recognition and enforcement of European Union judgments in Great Britain would also be agreed in a comparable manner. Apparently, this issue is not one of the controversial areas of the political debate.”

In the case at hand, the lower courts had granted the freezing order based on other reasons, namely the obstructive behaviour of the defendant. The Frankfurt Court of Appeals upheld the order, and the applicant did not go unprotected.

For what it’s worth, I believe that the court got its assessment of Brexit as a grounds for a freezing order wrong. The legal and political default option is for the United Kingdom to leave without a deal on 31 October 2019. This ought to have been the starting point, and then the court ought to have argued why, given the fact that the Withdrawal Agreement failed three times in the House of Commons and no majority was in sight, it still believed a deal was more likely than a no-deal scenario.

Looking at the enforcement of a German judgment in the United Kingdon after 31 October 2019, the right approach must be to treat the United Kingdom, for the purposes of Section 917 ZPO, as a non-member state, that is, as a jurisdiction which whom there is no reciprocity. This must be the case as long as there is a real risk of a no-deal Brexit. The closer we get to 31 October 2019, the more persuasive the argument advanced by the applicant in this case becomes, and I would not hesitate to apply for a freezing order on that basis.

One further thought on this: The United Kingdom could, by adopting the Hague Convention on Choice of Court Agreements, unilaterally “create” reciprocity vis-a-vis European Union. Indeed, the UK govermnet has stated its intention to do so. But this reciprocity would only apply within the relatively narrow circumstances in which the Hague Convention applies, namely in cases where there is an express and exclusive choice of court agreement. All other means to create reciprocity would require an agreement between the United Kingdom and the European Union or with the individual member states.

* The Court had referred to Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels recast).

 

Share and Enjoy

Leave a Reply

Your email address will not be published. Required fields are marked *


1 + = five

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>