Security for Costs after Brexit: New Federal Patent Court Decision and a Question Mark

On 1 March 2021, the Federal Supreme Court (Bundesgerichtshof) held in a patent case that as of 1 January 2021, British claimants have had to provide security for costs under Section 110 para. 1 German Code of Civil Procedure (ZPO) (see here for the related post). In its decision, the Federal Supreme Court found, without providing any detailed reasoning, that no exception pursuant to Section 110 para. 2 ZPO applied: There was no international treaty in force that would exempt British claimants from the obligation to provide security for costs (for the European law background to Section 110 ZPO, see my post at zpoblog.de). Implicitly, the Federal Supreme Court hence also addressed the question whether “old” multilateral treaties such as the 1968 Brussels Convention or bilateral treaties such as the 1960 British-German Convention were revived after Brexit.

Facts

The Federal Patent Court (Bundespatentgericht) shortly thereafter had to decide the same issue on a comparable set of facts: In a patent anulment action, the defendant had requested that the UK-based claimant provide security for the costs pusuant to Section 81 para. 6 Patent Act (PatG), which refers to Section 110 para. 2 Nos. 1 to 3 ZPO.

Decision

Like the Federal Supreme Court, the Federal Patent Court ordered the British claimant to provide security for costs. However, unlike the Federal Supreme Court, the judges at the Federal Patent Court did discuss several international agreements in their order which would potentially exempt a UK claimant from the obligation to provide security for costs.

The Federal Patent Court first stated that the 1954 Hague Convention on Civil Procedure in Article 17 does provide for an exemption from the obligation to provide security for costs. However, the Convention was not ratified by the United Kingdom.

The second treaty the court looked at was the 1928 Convention Between His Majestiy and the President of the German Reich regarding Legal Proceedings in Civil and Commercial Matters. Under this Convention, only UK nationals domiciled in Germany would be protected – and they would not come within the scope of Section 110 ZPO in the first place, since this provsion requires the claimant to be domiciled outside the EU.

The court then goes on to state:

“Although the 1955 European Convention on Establishment applies also in relation to Great Britain, it provides for an exemption from the requirement to provide security under Articles 9, 30 only for individuals, but not for companies such as the present claimant.

The Trade and Cooperation Agreement between the European Union and the United Kingdom of Great Britain and Northern Ireland of 31 December 2020, which is directly applicable in the Member States and hence in Germany pursuant to Article 216 TFEU, but which is currently only provisionally applicable, in Art. IP.6 (2) does provide for equal treatment of nationals of the other party with regard to the availability, acquisition, scope, maintenance and enforcement of intellectual property rights, but – irrespective of the question whether the provision, which is only provisionally applicable, could be used for this purpose at all – according to settled case law (…) this is generally not sufficient to exempt such national from providing security for costs pursuant to Section 110 para. 2 no. 1 ZPO.”

Finally, the Federal Patent Court held that no other exemptions pursuant to Sec. 110 para. 2 no. 1 ZPO applied.

Comment

The Federal Patent Court reaches the same conclusion as the Federal Court of Justice. But whereas one could ony deduct from the Federal Supreme Court’s order decision that the court did not identify any old international treaties that would be applicable, the Federal Patent Court explicity made that point. It is therefore safe to assume that legal entities from the United Kingdom have to provide security for costs if they commence proceedings in Germany.

Nevertheless, a question mark remains: Johannes Ungerer, Erich Brost Lecturer in German Law and EU Law at the University of Oxford, pointed out that, in his view, the question whether international law conventions hitherto “superseded” by the Brussels Regulation are “revived” is not relevant in these cases:

Both cases were commended prior to 1 January 2021. Therefore, pursuant to  Article 67 (2) (a) Withdrawal Agreement, the Brussels Regulation continues to apply. This must be taken into account for the purposes of Section 110 ZPO. Johannes Ungerer argues that in these “legacy cases” there is no obligation for the UK claimant to provide security because a German costs decision will get recognised and enforced in the UK under the Brussels Regulation, which continues to apply by virtue of theWithdrawal Agreement.

Even if this implies that several federal judges as well as counsel for the parties must have overlooked Article 67 (2) (a) Withdrawal Agreement, I believe that Johannes Ungerer’s argument is correct. The transitional provision in the Withdrawal Agreement reads:

“Article 67

Jurisdiction, recognition and enforcement of judicial decisions, and related cooperation between central authorities

(…) 

Thus, Regulation (EU) No 1215/2012 – commonly known as the Brussels Regulation – will continue to apply in relation to the United Kingdom for the recognition and enforcement of both judgments and cost orders in proceedings commenced by UK claimants in the German courts before 31 December 2020.

A more detailed discussion of the case can be found at zpoblog.de (in German).

Federal Patent Court (Bundespatentgericht), order (Beschluss) dated 15 March 2021, file no. 3 Ni 20/20 (EP).

Photo: Building of the Federal Patent Court in Munich,  (Source: Court’s press material)