EUROPEAN COMMISSION Brussels, 16.7.2021 SWD(2021) 192 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT REPORT

Accompanying the document Proposal for a Council Decision on the accession by the European Union to the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters {COM(2021) 388 final} - {SEC(2021) 279 final} - {SWD(2021) 193 final}



Table of contents 1.Introduction: Political and Legal Context 2.Problem definition 2.1 What are the problems and who is impacted by them? 2.2What are the problem drivers? 2.3How will the problem evolve? 3.Why should the EU act? 4.Objectives: What is to be achieved? 4.1General objectives 4.2Specific objectives 5.What are the available policy options? 5.1What is the baseline from which options are assessed? 5.2Description of the policy options 6.What are the impacts of the policy options? 6.1.Impacts of policy option 0 - baseline scenario 6.2.Impacts of policy option 1a – EU accession without any declaration 6.3.Impacts from policy option 1b – EU accession with a declaration under Article 18 6.4 Impacts from policy option 1c – EU accession with a declaration under Article 19 6.5Impacts from policy option 1d – EU accession with a declaration under Articles 18 and 19

7.How do the options compare? 8.Preferred option 9.How will actual impacts be monitored and evaluated? Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Who is affected and how? Annex 4: Analytical methods Annex 5: Analysis of the possible declarations Annex 6: Sensitivity analysis Annex 7: Study Supporting the Preparation of the Impact Assessment – Excerpts from the Final Report by Deloitte Glossary Term or acronym Meaning or definition Brussels Convention 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, OJ L 299, 31.12.1972 Brussels I Regulation Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 12, 16.1.2001 Brussels Ia Regulation Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 351, 20.12.2012 CAGR Compounded average growth rate Charter Charter of Fundamental Rights of the European Union, OJ C 326, 26.10.2012 Choice of court agreement An agreement by which parties agree that any present or future dispute arising out of their relationship should be resolved by a particular court Choice of Court Convention Convention of 30 June 2005 on Choice of Court Agreements CJEU Court of Justice of the European Union* (*and its predecessors where applicable) Contracting States/Parties States/Parties that joined the Judgments Convention Court addressed The court which is asked to recognise or enforce a judgment Declaration A unilateral statement by a State or an international organisation made when joining the Judgments Convention (or thereafter) which purports to specify the scope of the application of the Convention with respect to the declarant. Declarations can only be made where envisaged by the Judgments Convention and have to be notified to the depository of the Convention. DG JUST Directorate-General for Justice and Consumers of the European Commission European judgment A judgment which originates from a Member State of the EU Enforcement The act of a public authority by which a judgment or administrative order is put into practice through coercive measures against the judgment debtor EUR/€ Euro EU European Union Exequatur procedure Formal court procedure by which a foreign judgment is declared enforceable (i.e. "validated" for enforcement) in the state where enforcement is sought. Explanatory Report Explanatory Report on the 2019 HCCH Judgments Convention by Professor Francisco Garcimartín and Professor Geneviève Saumier FDI Foreign direct investment Forum (plural: fora) A judicial body, e.g. a court or tribunal, where a dispute can be brought GDP Gross domestic product Ground for refusal, refusal ground A circumstance in which the recognition or enforcement of a judgment otherwise entitled to recognition and enforcement may be refused GVA Gross value added HCCH Hague Conference on Private International Law An intergovernmental organisation with its seat in The Hague, which works on the progressive unification of the rules of private international law mostly by means of international conventions IMF International Monetary Fund Indirect grounds of jurisdiction (also called a jurisdictional filter) Criteria which determine whether the foreign court that issued the judgment in question was a competent one and whether the judgment in question is thus entitled to recognition and enforcement IO Input-Output Judgment Here: a judgment given in civil and commercial matters Judgments Convention, the Convention Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters Judgment creditor The winning party in a lawsuit that is entitled to benefit from the judgment in their favour Judgment debtor The losing party in a lawsuit that is obliged to satisfy a court decision Jurisdiction/International jurisdiction The power conferred upon a court or tribunal to hear a specific case; international jurisdiction is the competence of the courts of a particular country to hear a case Lis pendens [Latin, ‘pending suit’] Situation in which at the moment when one court is seised, another court is already in the process of examining the same dispute Lugano Convention Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 339, 21.12.2007 Member State Member State of the European Union National Reports National Reports were compiled by Spark Legal Network in the context of the Study by an external contractor (see below). They were based on a questionnaire completed by national legal experts. New York Convention Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 UST 2517, 330 UNTS 3 OECD The Organisation for Economic Co-operation and Development Re-litigation Here: The act or process of litigating a dispute again even though the dispute has already been resolved by a foreign court Recognition The act of accepting a judgment or other act of sovereignty of another State and giving it the same effect in one's own State which it has in its State of origin Reference period Period for which the impacts are assessed, i.e. years 2022-2026 Requested State The State in which the court addressed is situated RSB Regulatory Scrutiny Board Selected third countries Reference countries selected for the purposes of this Impact Assessment: Argentina, Australia, Brazil, Canada, China, Japan, South Korea and the United States SMEs Small and medium-sized enterprises State of origin The State in which the court that rendered a judgment is situated Study by an external contractor / Study Deloitte. (2021). Study supporting the preparation of an impact assessment on the potential EU accession to the 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters – Final Report. The Study was commissioned by DG JUST in the framework of this Impact Assessment. TFEU Treaty on the Functioning of the European Union Third countries Countries which are not members of the EU* * Throughout this report, Iceland, Norway and Switzerland should not be considered as third countries where the (possible) application of the Judgments Convention is discussed since the circulation of judgments with the above-mentioned countries is governed by the Lugano Convention which takes precedence over the Judgments Convention. Third-country judgment A judgment which originates in a third country UK United Kingdom US United States of America USD US dollar WTO World Trade Organization



1.Introduction: Political and Legal Context Globalisation and growth in international trade and investment increase the chances of disputes arising between parties from different countries. As a result, it is common that judgments need to “travel” internationally and be recognised and enforced in foreign jurisdictions. This circulation of judgments takes place both ways – the judgments given by the courts in the EU may need to be brought for their recognition and enforcement in a third country (“European judgments”) where judgment debtors have their assets, and the judgments from third countries (“third-country judgments”) may need to be recognised and enforced in the EU. To enable such a global circulation of judgments, a reliable and transparent system for the recognition and enforcement of foreign judgments is needed. Without such a system, the companies and individuals involved in international dealings risk that the judgments handed down in their favour will not be accepted in another jurisdiction for the recognition and enforcement.

The currently existing rules on the recognition and enforcement applicable between the Member States and third countries include national rules and bilateral, regional, and international instruments. This dense legal framework makes it a complex landscape to navigate for all parties involved. The new Convention (“the Judgments Convention” or “the Convention”), adopted under the auspices of the Hague Conference on Private International Law in 2019, holds the prospect of becoming an instrument to create an international framework for the acceptance of foreign judgments in civil and commercial matters. This Impact Assessment assesses the desirability of the accession of the European Union to the Judgments Convention. Since the Judgments Convention applies only to judgments given in civil or commercial matters, the term “judgment” should also be understood narrowly in this report as only a judgment given in civil or commercial matters. Legal and political context The Union derives its competence to regulate the matters of recognition and enforcement of judgments in civil and commercial matters from Article 81(2) TFEU. On this basis, the EU has already adopted internal rules governing the jurisdiction and recognition and enforcement of judgments – the Regulation (EU) No 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) of 12 December 2012 (“Brussels Ia Regulation”). The provisions of the Brussels Ia Regulation are applicable among 26 Member States of the European Union . Under the Regulation, a judgment given in a Member State shall be recognised and enforced in the other Member States without any special procedure being required. It is relevant in the present context that the Brussels Ia Regulation does not in principle apply in relation to third, non-EU countries and in particular it does not contain rules on the recognition and enforcement of judgments rendered in third countries. Given the non-application of the Brussels Ia Regulation externally, the European Union has up to now acceded to two other international instruments governing the recognition and enforcement of foreign judgments in civil and commercial matters: -The Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Lugano Convention”) entered into force in 2010. Its effects and material scope are the same as the Brussels I Regulation but it geographically extends the rules of the Brussels I Regulation to relations between the European Union and its Member States on the one side and Iceland, Norway, and Switzerland on the other side.

-The other instrument concerning the recognition and enforcement of foreign civil and commercial judgments which the EU joined is the Convention of 30 June 2005 on Choice of Court Agreements (“Choice of Court Convention”). The Choice of Court Convention applies to the recognition and enforcement of judgments given by courts designated in exclusive choice of court agreements concluded in civil and commercial matters. The Choice of Court Convention is currently applicable among EU Member States (including Denmark) on the one side and Mexico, Montenegro, Singapore, and the United Kingdom on the other. The Choice of Court Convention, also negotiated and adopted under the umbrella of the Hague Conference on Private International Law, is a sister instrument to the Judgments Convention insofar that they are drawn up as complementary instruments. Aside from the Lugano Convention with its limited geographical scope and the Choice of Court Convention applicable only to the judgments given by courts designated in exclusive choice of court agreements, the Union has not to date harmonised the rules on the recognition and enforcement of judgments in civil or commercial matters given in third countries. Currently, there are no bilateral agreements between the EU and third states on the recognition and enforcement of third-country judgments. Since the Union has not exercised its competence and regulated the field, the recognition and enforcement of third-country judgments are governed by the national rules of each Member State and by bilateral treaties that some Member States have with third countries. Indeed, several EU Member States have bilateral agreements with certain third countries covering the mutual recognition and enforcement of foreign judgments in civil and commercial matters. These bilateral treaties date back to the time when the EU did not have exclusive external competence in this matter or before the accession of a given Member State to the EU. These bilateral treaties continue to apply even nowadays, however, Member States are no longer competent to negotiate new bilateral agreements or to amend the existing ones that are out of date. The situation outside of the EU resembles in its complexity the one in the Union. Previous international instruments on the recognition and enforcement of civil and commercial judgments were limited – either by their subject matter, geographical scope or by their limited uptake. Countries thus generally either rely on their national law or bilateral agreements or on a small number of regional instruments as a basis for the recognition and enforcement of foreign judgments in civil and commercial matters. As a result, the rules for the recognition and enforcement of foreign judgments vary considerably around the world, as well as among the EU Member States, and judgments between the EU and certain countries do not circulate at all. In this context, the Judgments Convention, adopted under the auspices of the Hague Conference on Private International Law (“HCCH”), has the potential to improve the current system of the circulation of foreign judgments. The Convention aims at promoting effective access to justice for all and facilitating rule-based multilateral trade and investment, and mobility, through judicial co-operation. The EU has been always supportive of creating a multilateral system for the recognition and enforcement of judgments in civil or commercial matters and was thus actively involved in the negotiation process of the Convention with a view to its possible accession to this future international system. Based on the mandate given by the Council to the European Commission in May 2016, the Commission represented the interests of the block during the negotiation process at the HCCH. As members of the HCCH, Member States also participated in most meetings leading up to the adoption of the Convention. In addition, the positions to be taken in negotiations were discussed with the Member States in advance in the Council’s Working Party on Civil Law Matters. The European Parliament was also regularly informed about the progress of the negotiations. A potential future proposal for the EU accession to the Judgments Convention would be in line with the objectives of the Commission set out in the Political Guidelines for the European Commission (2019-2024), in particular related to the priority “A new push for European democracy”. It would also epitomize the Union’s commitment to multilateralism in international relations and likely encourage other countries and EU trading partners to join the Judgments Convention. The EU accession to a multilateral convention on the recognition and enforcement of judgments in civil and commercial matters would also be in line with the Union's policy aimed at increasing growth in international trade and foreign investment and the mobility of citizens around the world. The Judgments Convention The HCCH Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial matters (Judgments Convention) is an international treaty aiming at creating a uniform set of minimum rules on the recognition and enforcement of foreign judgments in civil or commercial matters. The Judgments Convention is a result of long-standing efforts of the Hague Conference on Private International Law and the international legal community to work towards an instrument that would facilitate the international recognition and enforcement of judgments in civil and commercial matters. The Judgments Convention represents the culmination of many years of preparatory work. It builds on the previous unsuccessful attempts to negotiate a comprehensive international instrument including both the rules on recognition and enforcement of foreign judgments and jurisdictional rules. Another international Convention that crystallized from these attempts is the Choice of Court Convention. The troubled background to the Convention led its negotiators to opt for a more minimalist approach which would gain the consensus of all the states participating in the negotiation. This consensual nature may also induce a larger number of states to join the Convention. Indeed, three countries, Israel, Ukraine and Uruguay, have already signed the Convention thereby indicating their intention to later ratify it. Moreover, several countries indicated that they consider adopting the Convention. Nevertheless, despite any indications of interest in the Judgments Convention by any countries, it is difficult to predict which countries will eventually join the Convention.

The main obligation set out in the Convention is the reciprocal recognition and enforcement of judgments in civil or commercial matters between Contracting States. To this end, the Convention lays down a set of “indirect grounds of jurisdiction” that indicate a sufficient link between the court of origin and the dispute. This means in practice that a judgment is eligible for recognition and enforcement in another Contracting State if the jurisdiction of the court that gave the judgment complied with one of the grounds of jurisdiction enumerated in Articles 5 or 6 of the Judgments Convention. The Convention applies to judgments given in civil or commercial matters as specified in Articles 1 and 2 of the Convention. The Contracting States may exclude the application of the Convention to further matters and judgments by using a declaration as provided in Articles 18 or 19 of the Convention. If a judgment falls within the scope of the Convention and is given in compliance with the indirect grounds of jurisdiction in Articles 5 or 6 of the Convention, such a judgment must in principle be recognised and enforced in the other Contracting States. This applies unless a justification exists to refuse the recognition of the judgment in question. The refusal grounds listed in Article 7 of the Convention delineate the cases wherein a Contracting Party “may” refuse the recognition of judgments where the Convention would otherwise command recognition. The States may, but are not obliged to use these grounds for refusal. The Convention provides only a mandatory minimum standard for the acceptance of foreign judgments. Its Contracting States may keep their more favourable national regimes and recognise even judgments that go beyond what the Convention obliges them to. The Judgments Convention thus does not interfere with the currently applicable national systems where they provide for more generous rules on the recognition and enforcement of foreign judgments. The Convention also takes into account both bilateral and multilateral agreements on the recognition and enforcement of foreign judgments that have been adopted before the Judgments Convention, such as the Lugano Convention, the Choice of Court Convention or bilateral agreements. In its Article 23(2), the Judgments Convention provides that “this Convention shall not affect the application by a Contracting State of a treaty that was concluded before this Convention”. The earlier treaties thus continue to apply. Finally, the Judgments Convention also does not affect the intra-EU system for the recognition and enforcement of judgments between Member States as based on the Brussels Ia Regulation. The Judgments Convention contains a “disconnection clause” included in Article 23(4) of the Convention, according to which the Convention also does not interfere with the intra-EU system for the recognition and enforcement of judgments between Member States. Moreover, since the Brussels Ia Regulation applies between Member States and the Judgments Convention applies to third countries, both instruments have a different scope of application and the potential for overlaps is thus limited. The goals of the Convention The Judgments Convention seeks to promote access to justice globally through enhanced international judicial cooperation. This is expected to reduce risks and costs associated with cross-border litigation and dispute resolution. As a result, the implementation of the Convention should facilitate international trade, investment, and mobility. This will benefit both outward and inward trade and investment. The Convention is set to achieve these goals in several ways, namely by: -ensuring that judgments to which the Convention applies will be recognised and enforced in all Contracting States, thereby enhancing access to justice for the parties involved; -reducing the need for duplicative proceedings in two or more Contracting States: a judgment determining the claim in one Contracting State is to be effective in other Contracting States, without the need to re-litigate the merits of the claim; -reducing the costs and timeframes associated with obtaining recognition and enforcement of judgments, thereby granting access to faster and less costly justice; -improving predictability: individuals and businesses in Contracting States should be able to ascertain more readily the circumstances in which judgments will circulate among those States;

-enabling claimants to make informed choices about where to bring proceedings, taking into account their ability to enforce the resulting judgment in other Contracting States and the need to ensure fairness to defendants. No other global instrument exists that has the potential represented by the Judgments Convention to meet those objectives. 2.Problem definition 2.1 What are the problems and who is impacted by them? What are the problems? Currently, to have a European judgment recognised and enforced outside of the EU, the judgment creditors have to navigate through a patchwork of national laws of third countries on the acceptance of foreign judgments, as well as bilateral, regional and multilateral treaties in place. This is typically a complex exercise, often with an uncertain result. Notably, in case a judgment does not prove to be acceptable in other countries, the litigants may end up in a situation where they have obtained a final judgment but this judgment is not enforceable in the country where judgment debtors have their assets. This may either dissuade the judgment creditors from continuing with pursuing their claim or may lead to the need to re-litigate the claim in the country where the assets are located. In both cases, the judgment creditors face economic losses – whether from the unenforced claim or from the additional costs and time spent re‑litigating. There is also a danger that re-litigation may bring about a different decision on the merits than the initial litigation and thus produce conflicting judgments. Aside from creating economic losses, the non-recognition of judgments thus also affects the general trust in the possibility to vindicate one’s claim in an international dispute. To stand a chance that their judgment will be enforced abroad, those engaging in international litigation must invest resources and time to gather expertise on the third‑country procedural laws (e.g. with the help of an external legal counselling) and to prepare a robust litigation strategy. This may be challenging, costly and time‑consuming. Indeed, 82% of respondents to the online survey have faced challenges in complying with different requirements and procedures either to some extent or to a great extent. Aside from the costs for the preparation of litigation strategy, the parties involved in international litigation bear further costs during the actual recognition and enforcement proceedings, such as: -court fees; -costs for legal advice; -travel costs and time taken to travel (e.g. to a hearing); -fees for expert opinions; -costs for the translation of requests and/or evidence (e.g. testimonies) as well as interpretation; -additional costs associated with exequatur procedure; costs of security, bonds, or deposits (in case where enforcement is initiated by a foreign national) and -costs for possible re-litigation. While some of these costs would be borne by the parties even if a comprehensive system for the recognition and enforcement of foreign judgments was in place, other costs could be significantly reduced in such cases (such as the cost of additional legal advice, costs incurred due to lengthier proceedings, costs for re-litigation, fees for expert opinions or costs of security, bond, or deposits in cases where enforcement is initiated by a foreign national). Therefore, the average cost for requesting recognition and enforcement of European judgments in third countries is currently deemed to be greater due to the complex legislative framework in place in third countries. For instance, some countries currently accept foreign judgments only where reciprocity is established, i.e. where it is established that the state of origin of a judgment would in the same circumstances also recognise and enforce a judgment from the requested state. In the absence of any bilateral treaty on the recognition and enforcement of judgments, reciprocity may need to be verified factually by proving that judgments from the requested country have already been accepted in the state of origin of the judgment. This may require a costly and lengthy fact-finding procedure requiring legal and expert support.

Box 1: On the overall costs involving foreign judgments The court fees involving foreign judgments (mainly fees for the application for recognition and declaration of enforceability) vary on a case-by-case basis. The rate of court fees may also be dependent on the status of applicants - with natural persons having a different rate than businesses. Countries either do not require any court fees for the recognition and enforcement of foreign judgments or charge a fixed fee or a fee calculated based on the value of the claim. The EU Member States either do not require any fee or charge fees ranging from some dozens of euros (e.g. in Belgium, Bulgaria, and Poland) to over a few hundred euros (in Greece). The same differences in court fees are pertinent also for the selected third countries; however, the differences in the court fees are even more considerable – the court fees range from some dozens of euros in Brazil and China to hundreds of euros in the United States and potentially EUR 700 in Australia. In addition to court fees, litigation leads to additional expenses such as lawyer fees, travels costs and other fees such as expert opinions or translation costs. The average lawyer fees differ vastly per country and per case at hand with significant differences both within the EU and in third countries. The other fees (expert opinions, translation costs, interpretation etc.) were estimated to amount to an average of EUR 850 both within the EU and in third countries. An additional problem faced by EU parties when attempting to have European judgments recognised and enforced in a non-EU country is excessive length of proceedings. Box 2: On the length of the recognition and enforcement proceedings Currently, the average length of proceedings for the recognition and enforcement of third-country judgments in the EU is estimated to be between 7 and 14 months. When cases are more complicated or appeals are made, proceedings can be delayed by an additional year or two. Another factor influencing the length of proceedings for the recognition and enforcement of third‑country judgments in the EU is whether the claim is uncontested or contested. In case of an uncontested claim, the average length of proceedings ranges between 6 and 8 months, whereas in case of a contested claim the average length increases to between 11 and 17 months. In third countries, the average length of proceedings related to the recognition and enforcement of European judgments varies on a case-by-case basis and depending on the country. However, on average, the proceedings are longer than in the EU. The average length ranges between 9 and 23 months in general - with a range of between 7 and 11 months for uncontested cases and between 15 and 30 months for contested cases. However, there are outliers – e.g. Brazil – with proceedings lasting from 20 to 32 months for uncontested claims and from 32 to 56 months for contested claims. Notably, the average length of the proceedings can be partially exacerbated by the difficulties related to obtaining information about the recognition and enforcement procedures abroad (e.g. whether the debtor has assets in the given country and what the requirements are for the recognition and enforcement of foreign judgments in that country) and by the possible need for re-litigation. Indeed, 18% of respondents to an online survey mentioned the length of the recognition and enforcement proceedings as the main challenge caused by the absence of a comprehensive treaty on the recognition and enforcement of foreign judgments. Other problems described above have been also mentioned by the respondents to the survey - 32% of the respondents regarded having to litigate the same dispute in two different states as the main issue. For 25% the most problematic aspect was potentially contradictory judgments issued by two different states and 11% saw the main problem in the costs of proceedings. Aside from the factual problems with the recognition and enforcement of foreign judgments, another significant problem in the current system is legal uncertainty as to whether a judgment would later be recognised and enforced abroad and under what conditions. The legal uncertainty manifests itself in various phases of the process – it influences the decision whether to pursue one’s claim through international litigation and later whether to request the recognition and enforcement of a foreign judgment. Indeed, given the uncertainties concerning the future enforceability of a judgment, some parties may prefer to opt for an immediate financial loss instead of pursuing an international claim. The limited knowledge of the legal framework for the recognition and enforcement of foreign judgments in foreign countries as well as the costs associated with international litigation and enforcement proceedings can be particularly strong deterring factors against pursuing one’s claim in a third country. Indeed, the above-described factual problems and legal uncertainty can lead to decreased confidence in legal systems and negatively affect access to justice for all parties involved. The above-described factual problems and legal uncertainty can also lead to the increased demand for arbitration. While arbitration is often a preferred option for disputes of high value, it has inherent disadvantages in other circumstances. Due to its very high costs, using arbitration for disputes of lower value may prove to be ineffective. The hefty price tag on arbitration also often dissuades mainly smaller entities, SMEs, and individuals from pursuing it. Therefore, it is mostly large enterprises that resort to arbitration. As arbitration is not a viable alternative to litigation for SMEs and individuals, they are more often impacted by the problems related to the missing international standard for the acceptance of foreign judgments. The recourse to arbitration and the avoidance of international litigation by some parties in case a dispute arises affects the number of judgments that are given in civil and commercial matters. Therefore, the number of cases brought for recognition and enforcement globally is negatively affected by the persisting absence of any harmonised rules on the mutual recognition and enforcement of judgments. Box 3: On the number of cases brought for recognition and enforcement between the EU and selected third countries Precise data about the number of judgments in civil and commercial matters circulating among the EU Member States and third countries (i.e. either European judgments that are brought for recognition and enforcement in third countries or third-country judgments brought for recognition and enforcement in the EU) are not available. Many countries, both EU Member States and third countries, do not systematically collect data about the judgments brought for the recognition and enforcement in their jurisdiction. The data concerning the number of European judgments enforced in third countries was especially scarce. It is estimated that currently, the number of third-country judgments from the selected third countries (Argentina, Australia, Brazil, Canada, China, Japan, South Korea, the USA) brought for recognition and enforcement in the entire EU is approximately 770 judgments yearly. The overall number of third-country judgments is about 2.000 for the whole EU. The estimated number of European judgments brought for recognition and enforcement in the eight selected third countries was about 150 in 2020. It differed per country – ranging from an estimated 10 cases in Argentina to 60 in the USA per year. The number of European judgments brought for the recognition and enforcement in third countries reflects not only the intensity of the economic relations with the EU but also the relative difficulty and costs of having a foreign judgment recognised and enforced in that country. On a general note, it should be noted that due to the limited availability of statistics on the outgoing European judgments, the numbers above may be undercounted. Furthermore, the complexity of the enforcement of judgments abroad, the related costs and legal uncertainty may be deterring factors which may move companies and citizens to decide not to engage in international dealings altogether. EU export and growth potential is thus negatively impacted by the current situation. Indeed, some businesses and consumers may be more reluctant or less willing to deal with foreign businesses, clients, and suppliers. Such foregone benefits in international trade will also impact the transnational investment, thereby decreasing market opportunities and hampering the overall economic upswing. While the legal uncertainty about the possibility to enforce a judgment abroad exists to some extent in relation to all foreign countries, the problem with the non-recognition of European judgments manifests itself in particular with some foreign countries depending on the openness of their systems for the acceptance of foreign judgments. For instance, several common law countries have a more restrictive approach to enforcing judgments. Some Asian countries require reciprocity to recognise foreign judgments. Who is affected by the problems? The above-described factual problems with the recognition and enforcement of foreign judgments and related legal uncertainty may affect all EU parties involved in cross‑border dealings. Large companies usually engage in international trade and investment more intensively, therefore, due to the volume of their transactions, they are potentially the most affected by the problems described above. However, they typically have the resources to get expert advice on third countries’ legal systems to minimise the legal uncertainty. They also more frequently opt for alternative dispute resolution, in particular arbitration. Consequently, the most affected by the problems with the circulation of foreign judgments are smaller and medium enterprises (SMEs). SMEs typically choose litigation over costly arbitration and they often lack easily accessible and readily understood specialist knowledge on the rules on the recognition and enforcement procedure abroad and timely awareness of possible pitfalls of the procedure. Although the costs of litigation are higher for larger corporations and higher-value claims in absolute terms, they still make up a bigger percentage of the value of the smaller claims of SMEs. Against that background, SMEs are also more likely to get discouraged from pursuing international business because of the fear of international dispute. With regard to consumers and other individuals, legal uncertainty is even greater as a recourse to arbitration is typically not an option and they often lack expertise in legal procedures in third countries. In comparison to businesses, their engagement in international dealings (and thus also international litigation) is however more limited. The most common ground for legal action concerning consumer rights relates to the online purchase of goods or services.

The absence of a comprehensive international framework for the recognition and enforcement of foreign judgments also affects national authorities to a certain extent, depending on the current system of the recognition and enforcement of foreign judgments in the respective Member State (existing national law, number of cases etc.). In 10 out of 17 responses to a questionnaire, national authorities of Member States confirmed that the lack of a comprehensive treaty on the recognition and enforcement of foreign judgments poses problems to their country. Finally, while EU companies and other parties may struggle with having their European judgments recognised abroad, third-country parties may likewise face the same difficulties of legal uncertainty and inadequate access to justice when trying to bring their third-country judgments for the recognition and enforcement in the EU. The lack of legal certainty and predictability for the recognition and enforcement of third-country judgments may also deter non-EU companies from investing and trading in the EU or with EU counterparts. 2.2What are the problem drivers? The problems illustrated above stem from the current fragmented legal framework consisting of disparate national rules on the recognition and enforcement of foreign judgments and the absence of a widely accepted international standard, e.g. in a form of a convention. The scope of existent multilateral and regional conventions on the recognition and enforcement of foreign judgments is limited either geographically or materially (as explained above in section 1). The acceptance of foreign judgments is thus regulated mainly in the national law of each country or through bilateral agreements. With regard to the latter, Member States have concluded several bilateral agreements – mostly concerning the Eastern Partnership, the Southern Neighbourhood, and in some cases former colonies. However, the number of bilateral or other agreements with major trading partners is limited, with some EU trading partners having only a small number of bilateral agreements with the EU Member States (e.g. Argentina, Brazil, China) and some having none (e.g. Australia, Canada, Japan, South Korea, the United States). In the absence of a treaty commanding the mutual acceptance of judgments, the recognition and enforcement in a third state will be governed by its national law and sometimes conditioned by reciprocity. Word should be added here about the specific situation of the recognition and enforcement of judgments between the EU and the United Kingdom. This country was a full Member State of the European Union until 31 January 2020 and the EU acquis still applied in the UK during the transition period, until 31 December 2020. In accordance with the Withdrawal Agreement, the mutual recognition and enforcement of judgments is still to be governed by the Brussels Ia Regulation where the proceedings have been instituted before the end of the transition period. Therefore, the situation in this field would be comparable to the one described above for other third states only for proceedings which are instituted after 1 January 2021. For those judgments it is expected that the problems mentioned here will be similar because of the absence of a clear legal framework for the recognition and enforcement of foreign judgments between the EU and the UK. The disparate approaches to recognition and enforcement of foreign judgments are a clear driver of legal uncertainty and thus unpredictability in international dealings. This current patchwork of disparate rules on the recognition and enforcement of foreign judgments is also difficult and costly to navigate leading to various factual problems described above. 2.3How will the problem evolve? In the absence of EU action, the problems would persist. First, the factual and legal difficulties with the recognition and enforcement of judgments abroad will remain, causing undue delays and costs in international enforcement proceedings and hampering the access to justice of both EU and foreign parties. Second, legal uncertainty and unpredictability in international dealings will continue to contribute to the reluctance of parties to engage in international dealings. While the status quo regarding the enforcement of foreign judgments will persist in the coming years, the trade in goods and services is expected to continue to grow after a temporary decline due to COVID-19, in particular with the EU’s main trading partners. Due to increased trade volumes, the number of international disputes is expected to gradually increase for the coming years. It is estimated that in the reference period 2022-2026, the number of European judgments where the recognition and enforcement is sought abroad will increase proportionally to the expected increase in foreign trade and investment. In the short term, the number of judgments can be affected by the COVID-19 pandemic. The disruption caused by COVID-19 is expected to lead in the near future to significant economic losses worldwide, including defaults of obligations. The enforcement of due payments and obligations would thus have a direct effect on the market situation and companies’ cash flow. In the context of consumer litigation, the most affected by COVID-related litigation will likely be tourism-related sectors. Therefore, the demand for speedy and predictable enforcement procedures for foreign judgments would probably grow as an indirect effect of the pandemic. As compared to 2020, it is expected that the number of judgments circulating between the EU and third countries will steadily increase in the reference period of 2022-2026. In 2026, more judgments will be brought for their recognition and enforcement both in the EU (by about +179 third‑country judgments from the selected third countries in 2026) and in the selected third countries (about +39 European judgments in 2026). Therefore, the number of incoming third‑country judgments will grow by 9% by 2026 and the number of outgoing European judgments by 25%. The increase in the number of cases will have an impact on all the parties involved. Moreover, it will also impact the judiciary that will have to deal with a greater caseload. However, given the fact that recognition and enforcement proceedings represent only a small share of cases, the additional burden for Member States’ judiciary will generally remain marginal. While the number of cases will grow in the reference period, the present length of the recognition and enforcement procedure and costs borne by the parties to the dispute are predicted to remain comparable with the current situation. 3.Why should the EU act? The competence of the Union to regulate matters of recognition and enforcement of foreign judgments in civil and commercial matters is based on Article 81(2)(a) TFEU. In line with Article 3(2) TFEU the Union has exclusive competence for the conclusion of an international agreement insofar as such conclusion may affect common EU rules or alter their scope. As a result of the adoption of the Brussels I Regulation, the Union has acquired such exclusive external competence to regulate matters concerning the recognition and enforcement of third-country judgments in civil and commercial matters. The Judgments Convention on the recognition and enforcement of foreign judgments thus falls within this exclusive external competence of the Union. The Union may accede thereto on the basis of Articles 81(2)(a) and 218(6)(a) TFEU. The subsidiarity principle does not apply. Given the Union’s exclusive external competence on the subject matter of the Judgments Convention, Member States cannot ratify the Judgments Convention in their own right and likewise cannot enter into any other bilateral or multilateral international arrangement on the recognition and enforcement of foreign judgments. Therefore, to tackle the problem driver of the absence of an international convention on the recognition and enforcement of foreign judgments (as explicated in section 2), action on the part of the EU would be needed. 4.Objectives: What is to be achieved?

The following general and specific objectives reflect the problems identified in section 2 and set out goals to the achievement of which the below policy options contribute. The objectives are in line with the logic underpinning Article 81 TFEU that the EU should strive to improve the recognition and enforcement of judgments in civil matters. 4.1General objectives The overarching objectives of the action are as follows: ·To enhance access to justice for EU businesses and citizens through a system that facilitates the recognition and enforcement of foreign judgments everywhere in the world where the judgment debtor happens to have assets; ·To promote international trade and investment, thereby increasing economic growth and creating jobs. 4.2Specific objectives The specific objectives of the action are: ·To increase legal certainty and predictability of international litigation for EU businesses and citizens involved in international trade and investment; ·To reduce costs and length of proceedings for EU businesses and citizens involved in international dealings or in international dispute resolution; ·To allow for the recognition and enforcement of third-country judgments in the EU only where fundamental principles of EU law are respected and EU internal acquis on the same subject matter is not affected. 5.What are the available policy options? Policy options are limited by the very nature of the question of the accession to an existing international convention. They are essentially reduced to acceding or not acceding. In the case of accession, some sub-options are conceivable concerning declarations which are possible under the Convention and which affect the scope of its application. Against that background, the following policy options will be considered below: -Option 0: Baseline scenario: no policy change. The Union will not accede to the Judgments Convention and the current status quo will continue. -Option 1a: The Union will accede to the Judgments Convention without making any declaration. -Option 1b: The Union will accede to the Judgments Convention, excluding: (I)Certain matters reflecting the EU’s policy objective of protecting weaker parties, such as consumers, employees or, in matters relating to insurance, the policyholder, the insured or the beneficiary; or/and (II)Certain matters falling under the exclusive jurisdiction of EU courts, for instance with regard to disputes relating to commercial lease of immovable property. -Option 1c: The Union will accede to the Judgments Convention excluding cases to which State entities are parties from the application of the Convention.

-Option 1d: A combination of Options 1b and 1c. The Convention allows several declarations that Contracting Parties can make when acceding to the Convention or at any time thereafter. The declarations may be modified or withdrawn at any time. A disadvantage of the declarations under Articles 18 and 19 of the Convention is that they apply in a reciprocal manner – i.e. they allow the declaring state not to recognise and enforce certain judgments under the Convention but also the judgments on these matters would not circulate if given in the declaring state. Without the declarations, the Convention would then apply more widely. The declarations limit the scope and the added value of the Convention. As such, they should generally be made only where a state has a strong interest in not applying the Convention (Article 18(1)) and should be no broader than necessary (Articles 18(1) and 19(1) of the Judgments Convention). 5.1What is the baseline from which options are assessed? Under the baseline scenario, the European Union would not accede to the Judgments Convention. By not acceding, the EU would not take part in this new legal framework facilitating international circulation of foreign judgments and the current patchwork of rules would continue to apply. Under this scenario, the problems described in section 2 would persist, since the underlying problem drivers, the disparate national rules on the recognition and enforcement of foreign judgments and the lack of international standard, would remain unaffected. As a result, the factual problems (such as the non-recognition of foreign judgments, the need for re-litigation, excessive costs and length of the proceedings) and the legal uncertainty for the parties involved in international dealings would continue. These problems would continue to hamper the access to justice of EU parties. Moreover, some EU parties, in particular large enterprises, would resort to arbitration in order to avoid the uncertainties of international litigation. Some EU parties would continue avoiding not only court litigation but also just about any international dispute resolution mechanism. Some EU parties would be discouraged from pursuing international dealings altogether. This would further negatively affect foreign trade and investment. In the baseline scenario, where the EU would not accede to the Judgments Convention, the above problems will continue and might get aggravated because of the increase in the instances of international litigation as a result of an increase in foreign trade and investment that is forecasted for the reference period of the years 2022‑2026. As foreign trade is expected to grow, the number of businesses and SMEs affected indirectly by EU export will increase by around 25% for both export in goods and services. The number of enterprises and SMEs affected by the current problems would thus also increase. From the perspective of fundamental rights, the absence of a clear international convention would perpetuate the issues currently faced by EU parties when litigating abroad. In the current status quo, EU parties may be subject to proceedings in third countries in breach of the fundamental rights protected under EU law. These can entail for example the special protection of weaker parties in the context of international transactions, parties’ procedural rights and other principles and rights. The rights may for instance include consumer protection, right to property, equality before the law, workers’ rights, the right to protection of data and freedom to conduct a business. If the Judgments Convention provided a framework for the recognition and enforcement of foreign judgments, foreign courts would be incentivised to deliver judgments that would not be in violation of the public policy of the Member States and that could hence be recognised and enforced in the EU. In contrast, under the baseline scenario, some EU principles and fundamental rights may continue to be disregarded in foreign proceedings. It should however be underscored that only a minimum of the consulted stakeholders were aware of any cases where fundamental rights were not respected in the proceedings before a third-country court. Finally, it is to be highlighted that under the baseline scenario all bilateral agreements between Member States and third countries continue to apply. Nonetheless, this is also the case for all other policy options, i.e. even if the EU accedes to the Judgments Convention. It could be clearly concluded from the consultation activities that the stakeholders and Member States are overwhelmingly in favour of the EU accession to the Judgments Convention. In particular, at a workshop with Member States’ representatives, the participants unanimously favoured accession to the Judgments Convention. Given this support for the accession and the positive impacts of the Convention which will be further detailed in section 6, the baseline scenario was considered rather as a benchmark scenario for assessing the other policy options. 5.2Description of the policy options 5.2.1Policy option 1a: EU accession to the Judgments Convention without making any declarations Under this policy option, the EU would conclude the Judgments Convention without making any declaration. The Convention provides a mandatory minimum standard for the acceptance of foreign judgments in Contracting States. If a judgment given in one Contracting state meets the criteria laid down by the Convention, such a judgment has to be recognised and enforced in other Contracting states. For details regarding the Convention, see section 1 – political and legal context. In the consultation activities conducted in the framework of this Impact Assessment, the replies varied on whether the EU should accede with or without making any declarations. Most stakeholders and Member States consulted did not have definitive views on the need for any declaration. It could be safely inferred from the results of the consultation activities that an appetite for a declaration under Article 19 is very limited. On the other hand, the views of the Member States and stakeholders were divided as to whether a declaration under Article 18 is desirable or the EU should accede to the Convention without making a declaration. About a third of the stakeholders did not indicate any preferred option (accession with or without a declaration), which could partially be attributed to a lack of interest in any particular declaration. 5.2.2.Policy option 1b: The Union will accede to the Judgments Convention with declaration(s) pursuant to Article 18 of the Convention Article 18 of the Convention allows the Contracting States to not apply the Convention with respect to certain specific matters, and thereby to extend the list of matters already excluded from scope of the Convention by its Article 2(1). If a Contracting Party makes a declaration excluding judgments with respect to certain specific matters from the circulation under the Convention, it has a twofold effect: the country in question will not have to enforce such foreign judgments and equally, the judgments given by courts in that country on these specific matters will not circulate. This Impact Assessment will assess whether declarations should be made excluding the following: ·Certain matters reflecting the EU’s policy objective of protecting weaker parties:

oConsumers; and/or oEmployees; and/or oin matters relating to insurance, the policyholder, the insured or the beneficiary; or/and ·Judgments relating to tenancies or commercial leases of immovable property, a matter for which courts in the EU have exclusive jurisdiction. The reason behind the contemplated exclusion of the above-mentioned matters from the scope of the Convention is that in these areas the rules on the recognition and enforcement of foreign judgments in the Convention differ from those in the Brussels Ia Regulation. Taking into consideration that the Brussels Ia Regulation applies to the recognition and enforcement of civil and commercial judgments between the EU Member States and the Judgments Convention applies in relation to third countries, they both have a different scope of application. Thus, if the European Union accedes to the Judgments Convention, the internal EU rules on the recognition and enforcement of judgments among Member States would not be affected. This is true even if the EU made none of the declarations under Article 18 (or, for that matter, under Article 19). However, the Impact Assessment report considers declarations based on Article 18 where the Convention adopted a different approach regarding certain specific matters than the ones adopted by the EU legislator. The declarations are considered with the intention to protect also internationally the policy approaches that the EU legislator made for intra-EU relations. In essence, the declarations aim to prevent a situation where judgments from third countries should be recognised and enforced in the EU under the Judgments Convention even if the same judgments would not circulate under the Brussels Ia Regulation if they were given by a court in the EU. Therefore, the discrepancy between the Brussels Ia Regulation and the Judgments Convention is only limited to policy and there are no direct legal overlaps. When acceding to the Judgments Convention, the EU could use the declarations under Article 18 and exclude matters from the application of the Convention, where the Convention does not mirror the specific jurisdictional rules that are commonplace in the EU. For instance, when it comes to commercial leases of immovable property, the EU courts have exclusive jurisdiction in the Member State where the property is located. No other court in the Union can decide the case. In contrast, the application of the Judgments Convention may lead to the result that the courts in the EU might be compelled to enforce third‑country judgments on property located within the EU even though these judgments were not given in the country where the property is located but in a third state instead. Therefore, the EU courts would have to recognise and enforce third-country judgments where in the same type of situation they would have to refuse a judgment issued in another EU Member State. (Under the Convention, the judgments on commercial tenancies given e.g. at the place of habitual residence of the defendant must be recognised by other Contracting Parties.). In the consultation activities conducted in the framework of this Impact Assessment, the majority of interviewed stakeholders and legal professionals and majority of respondents to an online survey favoured accession without any declaration. With regard to the possible declarations under Article 18, 12% of respondents to the online survey and most of the interviewed legal professionals and stakeholders favoured making a declaration concerning the commercial leases of immovable property. Some respondents to an online survey supported the declarations aiming at protecting a weaker party – declaration on consumer and employment matters (12% of respondents) and on insurance matters (15% of the respondents). On the other hand, several stakeholders specifically pointed out that the number of judgments concerning the consumer, employment and insurance matters is limited, the declarations would thus not affect a significant share of the judgments circulating under the Convention. Targeted consultation of the insurance sector showed that the insurance sector did not consider that the Judgments Convention would significantly affect their sector and most consulted insurance stakeholders thus considered making a declaration on insurance matters unnecessary. In general, it should be noted that the limited number of judgments on consumer, employment and insurance matters has been mentioned both as a reason to make and not to make the respective declarations. None of the Member States expressed its support for a declaration on consumer matters and only one Member State preliminarily supported a declaration on employment matters, pending further assessment. Only a few Member States expressed a preliminary opinion on the declarations concerning insurance matters and commercial tenancies. Some Member States preliminarily supported a declaration on insurance matters with a view to ensuring consistency with the Choice of Court Convention where the EU made a declaration on in that regard. Three Member States also informed that they were considering a declaration on commercial tenancies. 5.2.3.Policy option 1c: The Union will accede to the Judgments Convention with a declaration pursuant to Article 19 of the Judgments Convention Article 19 of the Convention permits a State not to apply the Convention to judgments arising from proceedings involving that State or government agency thereof, or a natural person representing that State or governmental agency, and to do so even for the cases where they acted in the civil and commercial context. However, States may not exclude from the application of the Convention judgments pertaining to State-owned enterprises – something that could have otherwise created an unfair advantage in comparison to foreign private enterprises that operate on the same markets. In the consultation activities conducted in the framework of this Impact Assessment, the majority of respondents to the online survey (88%) and vast majority of interviewed legal professionals and stakeholders advised against making a declaration under Article 19. The same sentiment was voiced in the workshop with the Member States where none of the experts supported such a declaration. 5.2.4.Policy option 1d: The Union will accede to the Judgments Convention with declaration pursuant to both Article 18 and 19 of the Convention

This policy option is a combination of policy options 1b and 1c – i.e. it would involve the EU accession to the Judgments Convention with declaration(s) under Article 18 and a declaration under Article 19. 6.What are the impacts of the policy options? This section assesses the judicial, legal and the economic impacts for each policy option. The indicators to assess these impacts have been: (1) impact on the number of cases; (2) impact on the length of proceedings; (3) impact on the legal environment, fundamental rights, and protection of weaker parties; (4) impact on Member States’ public administrations and (5) macro-economic impacts, (6) micro‑economic impacts and (7) impacts on competitiveness. Finally, social impacts are briefly expounded. No direct environmental impacts are envisaged from the policy options, the environmental impacts will thus not be further considered . In particular, the study considers the impacts of the accession on two levels. On the one hand, the report identifies the consequences of the enhanced recognition and enforcement of European judgments in third countries, and on the other hand, the impact of recognition and enforcement of third-country judgments in the EU (where appropriate). The assessment covers the impacts on all EU Member States, apart from Denmark. Furthermore, for the purposes of the analysis, it is assumed that eight selected third countries (Australia, Argentina, Brazil, Canada, China, Japan, South Korea, and the United States of America) would accede to the Convention and the Convention would become applicable between the EU and those countries in 2022. It is acknowledged that this approach has limitations insofar that it is unclear whether the said third countries will accede to the Judgments Convention and whether they will do so in the given timeframe. However, as the EU has no influence over the decision of other countries to join the Convention and the timing thereof is thus unpredictable, this “best-case” scenario provides a clear benchmark against which the desirability of the EU’s accession can be assessed. It could be inferred that in case any of the third countries selected for the purposes of this Impact Assessment does not accede to the Convention, the impacts would have to be slightly adjusted to display that reality. However, even in such a scenario it is highly likely that the general and the specific objectives described in section 4 will be achieved. It should also not be underestimated that also the EU’s accession to the Convention could encourage other countries to join the Convention. Furthermore, while the impacts were assessed only with respect to the selected third countries, it is likely that other countries, including with markets of considerable size, may join the Convention and thereby amplify the impact of the Convention as compared to the status quo. Against this background, the selection of only eight trading partners for a Convention (that may, if successful, be of worldwide application) may overestimate impacts in relation to those eight countries (since not all of them may ratify the Convention) but it may also considerably underestimate impacts since it does not take into account the likely effects of ratification by other States. In order to consider the possibility that not all selected third countries join the Judgments Convention and/or that other than the selected third countries will join it, an illustrative sensitivity analyses has been included in Annex 6. With regard to the relation between the EU and the UK, as mentioned in section 2.2 above, the positive impact of the Convention can be assessed only when compared to the situation after 1 January 2021, because the Brussels Ia Regulation still applies for all judgments resulting from proceedings instituted before 31 December 2020. Therefore, if both the EU and the UK will accede/ratify the Convention, the impacts described below for the selected third countries are expected to also apply in relation to the UK when compared to the situation post-transition period. However, because that period started only on 1 January 2021 and no quantitative data is available, it is not certain that the figures mentioned above will apply also in this case. At the same time, it is clear that the non-quantifiable positive effects of the Convention in terms of enhanced access to justice, increased legal certainty and predictability in international dealings will also apply in relation to the UK. The reference period for assessment of the impacts of all policy options is 2022 to 2026, as it is assumed that a decision on the potential accession to the Convention would be made in 2021 and that the Convention would therefore enter into force in 2022 at the earliest. It should nevertheless be noted that some estimates are subject to a high degree of uncertainty given the many unknown variables, including recovery time from the current COVID-19 pandemic. Therefore, where specific figures are provided, the level of specificity should be interpreted with caution as these represent estimates of the precise value. 6.1.Impacts of policy option 0 - baseline scenario As detailed in sections 2.3 and 5.1, the baseline scenario will result in the persistence and possibly even growth of the current problems, as the underlying problem drivers will remain unaffected. 6.2.Impacts of policy option 1a – EU accession without any declaration Under this policy option, the EU would accede to the Judgments Convention without making a declaration excluding any judgments from the scope of application of the Convention. 6.2.1.Judicial and legal impacts The EU accession to the Judgments Convention would tackle the problem driver insofar that it would provide a comprehensive international convention on the recognition and enforcement of foreign civil and commercial judgments. As a result, it would thus mitigate the legal uncertainty and unpredictability in international dealings as well as decrease delays and undue costs related to such proceedings. The Convention would thus improve the access to justice for EU parties. Impact on the number of cases The accession to the Convention would likely result in slightly increased number of cases. Indeed, as the Convention would bring about a reliable minimum standard and legal predictability it would encourage:

-a larger portion of companies to give preference to court litigation over arbitration; -companies (especially SMEs) and consumers to pursue their claims that they currently do not pursue because of concerns regarding their enforceability. Moreover, in case the EU accedes to the Convention, the comparatively better degree of the global acceptance of European judgments may increase the appeal of the European courts as a sought-after forum in international litigation thereby enabling the better protection of EU concepts of procedural fairness and protection of weaker parties in civil litigation. Overall, however, the amount of new cases compared to the increase in the baseline is not expected to be significant. The number of European cases brought for the recognition and enforcement in the selected third countries is estimated to grow by +11 as compared to the baseline scenario and the number of third-country judgments brought to Europe by +47. Impact on the length of proceedings Under this policy option, the burden from delays involved in international dealings is expected to decrease to some extent. Although it is complicated to assess the overall magnitude of this impact due to the different experiences based on the complexity of the cases and the efficiency of the judicial systems in the Member States or third countries, it is estimated that this decrease in length would range from 3 to 6 months on average, both for proceedings related to the recognition and enforcement of third-country judgments in the EU and of European judgments in third countries. Impacts on the legal environment and fundamental rights The Convention would impact each Member State to a different extent, depending mostly on the currently applicable grounds for recognition and enforcement of third-country judgments in those Member States, and grounds for refusal of such judgments. The positive impact will be particularly high in Member States that currently have more restrictive regimes for the recognition and enforcement of third-country judgments. On the other hand, the Convention will bring about more limited or even no changes in those Member States that already have a national law on the recognition and enforcement of third-country judgments that is either as liberal as the Convention or more liberal. Table 1: On the recognition and enforcement of third-country judgments in civil and commercial matters based on the current national rules of the Member States Liberal approach to third‑country judgments* Less liberal approach to third‑country judgments* Restrictive approach to third‑country judgments* Bulgaria Hungary Netherlands Portugal Cyprus Estonia Greece France Ireland Italy Latvia Malta Austria Belgium Czech Republic Germany Spain Finland Croatia Lithuania Luxembourg Poland Romania Sweden Slovenia Slovakia Little to no improvement in the acceptance of third-country judgments under the Convention as compared to national law Moderate impact of the Convention on the acceptance of third-country judgments as compared to national law Considerable increase in acceptance of third-country judgments under the Convention as compared to national law * as compared to the Judgments Convention On the other hand, the Convention will not curtail the acceptance of foreign judgments in systems which are more liberal than the Convention. Potentially negative impacts of the Convention were voiced by some either during the consultation activities in the framework of this Impact Assessment or in literature: -The Convention may create some confusion as certain matters covered in the Convention fall under the exclusive jurisdiction of EU courts; -The Convention may create an additional layer of complexity as joining the Convention would entail that a new system is added to the one existing under the EU regulations and to the existing national and international rules; -The Convention may create some confusion as certain matters are covered both by the Convention and EU legal instruments. These issues could however be overcome by providing better information about the Convention to the relevant national authorities and legal professionals (members of the judiciary, lawyers, bailiffs, etc.). Any training costs for judges and legal professionals could possibly be reduced by the fact that some of the provisions of the Convention are comparable to those in the Brussels Ia Regulation and the Choice of Court Convention that are both already in force. At the same time, overall positive impacts on the legal environment are expected as the Convention would help to align the existing disparate rules on the recognition and enforcement of foreign judgments worldwide and simplify the current fragmented regime. This would have a positive impact on the administrative burden of EU businesses and citizens trying to have judgments given by EU courts recognised and enforced in third countries. The Convention reflects to a large extent the rules on the recognition and enforcement of third-country judgments applicable internally in the EU – the Brussels Ia Regulation. Consequently, the Convention in principle does not diverge from EU fundamental principles and principles of procedural fairness. In particular, as the Brussels Ia Regulation, the Convention provides a ground to refuse the recognition and enforcement of judgments incompatible with fundamental principles of procedural fairness or with the public policy of the State where recognition and enforcement is sought. This would help to ensure on the basis of a tested approach that fundamental principles and/or rights such as the right of the defence or the right to a fair trial have been duly observed in a third country. However, the Convention differs from the EU acquis when it comes to the protection afforded to weaker parties (consumers, employees or policyholders, beneficiaries or the insured in an insurance contract) or has rules which do not correspond to the Brussels Ia rules on exclusive jurisdiction. If these differences would prove to be detrimental to the achievement of EU’s policy objectives of protecting weaker parties or to attribute exclusive jurisdiction to EU courts for disputes related to immovable property situated in the EU, then declarations under Article 18 may be used (as further detailed in the policy option 1b).

Impact on Member States’ public administrations Under this policy option, it is expected that some one-off costs related to the adoption of the Convention may be necessary, such as amendments of national legislation or training activities and awareness-raising campaigns to inform about the Convention. However, in line with to the position taken by 12 out of the 17 EU Member States who responded to the national questionnaire, it can be assumed that the current resources would be sufficient to cover the moderate costs that the Convention would imply. Moreover, it is assumed that the slight increase in cases will be offset by the expected decrease in the lengths of proceedings. Consequently, no overall impact on the Member States’ public administration is expected. 6.2.2.Economic impacts Micro-economic impacts (businesses, consumers, and citizens) With the EU accession to the Judgments Convention, the average cost for proceedings related to the recognition and enforcement of foreign judgments is expected to decrease because of the enhanced legal certainty achieved through clear rules and standardised procedures. While the Convention may not have a direct impact on the costs of the enforcement procedures, the more efficient procedures and smaller administrative burden would cause a decrease in overall legal fees. In particular, a decrease is expected in legal fees necessary for instance to research the foreign law on recognition and enforcement of foreign judgments or for expert opinion necessary to prove reciprocity with the state of origin of the judgment to be recognised and enforced. For the reference period, this means an estimated cost reduction for EU businesses and citizens ranging from EUR 1.1 to 2.6 Million in the selected third countries. On average, an estimated decrease in the costs of proceedings for EU parties related to the recognition and enforcement of European judgments in selected third countries is expected to range between 10% and 20% compared to today’s costs. This decrease might differ per third country, depending on whether the current recognition and enforcement system is liberal there. The decrease in costs achieved by the accession to the Judgments Convention is likely to be highest in relation to Argentina, China, and Australia. In Argentina and China, this higher effect could be explained by current lower degrees of legal certainty. Efficiency gains and a decrease in costs are particularly relevant for SMEs and consumers. Larger companies will also benefit from this effect, but proportionally to a lesser extent (as they generally already have more resources and in-house expertise and they tend to favour arbitration). In this context it should be noticed that these estimated direct benefits for the reference period would decrease should the assumption made above, that all selected third countries join the Convention. For instance, if the US did not join the Convention, two effects would arise: 1.No additional trade benefits in trade with the US are expected as compared to status quo. Hence, the status quo continues. 2.The decrease in costs per case does not materialise. This in effect leads to an estimated decrease in savings for EU businesses and citizens of between EUR 518 647 and 1 197 245 compared to the situation in which the US acceded to the Convention. This impact is relatively high because of the importance of the trading relationship between the US and the EU. Given that the economic impacts of the accession with declarations do not differ vastly from those when the EU accedes without any declarations, these estimates, once rounded, are the same under all the policy options 1a), 1b), 1c), 1d). Macro-economic impacts As the Convention contributes to enhancing legal certainty and access to justice, the accession would result in speedier and less costly court proceedings, thereby making the international dealings more predictable. This, in turn, has the potential of boosting trade in goods and services and foreign direct investment (“FDI”). The macro-economic effect with all third countries is expected to be positive under this policy option. However, the effects on FDI may be more limited where free trade and investment agreements providing a reliable standard for foreign investment are already concluded. Out of the countries assessed, the macro-economic impact is expected to be the largest on the EU’s exports to China, Brazil, and Argentina in relation to which the legal uncertainty seems to be the highest. For instance, under this policy option, the trade volume and FDI with China will increase by about 1.2% for the years 2022-2026 as compared to the baseline. The trade volume with Australia is also expected to increase as the Convention can significantly reduce the complexity of the access to courts in recognition and enforcement proceedings in this country. The exports to Japan, South Korea and the United States will be impacted to a slightly lesser extent.

AR AU BR CA CN JP KR US Goods 1.5 1.2 1.5 1.5 1 1 1 1 Services 1.3 1.2 1.6 1.1 1.6 1 1 0.9 FDI 0.4 0.4 0.5 0.2 0.5 1 0.2 0.3 In addition, the Convention may facilitate the recognition and enforcement of judgments where it is currently exceedingly difficult to have European judgments enforced for the benefit of EU creditors, with the indirect effect of further promoting trade with such countries. Finally, by 2026 the number of indirectly affected enterprises will have increased under this policy option. Impacts on competitiveness of EU businesses In general, policies that encourage international trade and investment also indirectly affect the competitiveness of EU businesses. International trade opens access to foreign markets and enables further economies of scale. Nowadays, products are rarely made in a single country but rather assembled using parts and services from many countries to achieve the competitive advantage of having the best price and quality. As exporting businesses need to have a competitive edge globally, international trade is a catalyst for the greater efficiency and productivity of businesses. As explained above, the accession to the Judgments Convention would positively impact foreign trade (albeit to a limited extent). Consequentially, it will likely have a positive indirect impact also on the competitiveness of EU businesses. In view of the fact that SMEs would profit from the Convention proportionally to a greater extent than large companies, the accession to the Convention may improve their competitiveness. This is so because the costs of international litigation and thus indirectly of doing business internationally for EU SMEs will decrease, which will provide these businesses with a comparative advantage on businesses from countries that did not ratify the Convention. These positive impacts on competitiveness of EU businesses are estimated mainly based on economic theories, as specific data on the impact of the Judgments Convention on the competitiveness are not available. This Impact Assessment also does not consider the impacts on competitiveness in specific sectors as it is expected that no economic sector will be disproportionately affected by the accession to the Convention. Finally, the Judgments Convention is not expected to have a direct impact on research and innovation (aside from the spill-over effect linked to the increased international trade which may act as an impetus to boost innovation to achieve a competitive advantage). 6.2.3.Social impacts At best, the impacts of the Convention on the creation of jobs, real wages and welfare and on specific social groups will be negligible and indirect – i.e. caused by the link between international trade, economic growth, and employment. Overall, wages in economies that are open are typically higher than in closed economies and export‑supported jobs often benefit from a wage premium. Many jobs are linked to international trade directly, particularly in industries like retail, shipping, express delivery, and logistics. Other sectors are impacted by international trade indirectly. Citizens of all Member States would benefit thanks to integrated supply chains in the internal market . Furthermore, due to global value chains, the employment mobilised to support EU exports would not be confined to the European borders but the increase in international trade could have positive social impacts also in third countries. Given the positive impact of the Convention on international trade and investment, albeit limited, it can be deduced that the Convention would also have a generally positive social impact. The positive effect that the Convention would have on EU exports and international trade could stimulate economic growth and generate welfare and employment opportunities. While no specific data on social impacts of the Convention were collected given the indirect and unpredictable nature of such impacts, their magnitude can be estimated as negligible. This (minor) impact of the accession on social rights will not markedly differ in specific sectors and among specific social groups. 6.3.Impacts from policy option 1b – EU accession with a declaration under Article 18 Under this policy option, the European Union would accede to the Judgments Convention with a declaration with respect to one or more specific matters – i.e. declarations excluding consumer matters, and/or employment matters, and/or insurance matters and/or certain judgments related to commercial leases of immovable property.

In case a declaration is made, it should be no broader than necessary and the specific matter excluded should be clearly and precisely defined. This is also in the interest of the Union as its general policy objective has been to have comprehensive rules for the recognition and enforcement of foreign judgments having the largest possible scope. The general approach to declarations both under Articles 18 and 19 should thus be that the EU would use these declarations only in instances where there is a sufficiently serious interest in not applying the Convention to such area(s). In addition, it should be noted that any declaration under Article 18 would have a reciprocal effect – i.e. while it would prevent the recognition and enforcement in the EU of third-country judgments given in the excluded matters, it would equally prevent similar European judgments from circulating under the Convention. It should be noted that by excluding certain matters from the scope of the Convention, the impact on the current status quo would generally be smaller than under the policy option 1a) because certain matters will not benefit from the regime of the Convention. In particular, for those matters excluded by the declaration, all indicators would remain the same as the status quo. However, considering that these matters only concern a limited number of cases, the overall impacts of the accession with or without these declarations would generally not differ significantly for most of the indicators (the number of cases, legal certainty, impact on Member States’ public administrations, macroeconomic impacts etc.). The following part thus only lists indicators where the impacts might differ more significantly under the policy option 1b) as compared to 1a) described above. 6.3.1.Impacts on the legal environment and fundamental rights The reason behind the contemplated exclusion of certain matters from the scope is that the rules in the Convention on the recognition and enforcement of foreign judgments in certain matters differ from the rules in the Brussels Ia Regulation. This raises the question whether the rights of weaker parties, duly protected in the acquis, as well as the EU general policy objective of attributing exclusive jurisdiction to EU courts to rule on disputes related to commercial tenancies of immovable property situated in the EU, would be best preserved by excluding these matters from the scope of application of the Convention. Therefore, to protect the weaker parties in consumer, employment and insurance contracts not only internally in intra-EU relations but also with respect to third countries, declarations under Article 18 of the Judgments Convention were considered. The Convention does provide for a sufficient protection for the weaker parties to consumer and employment contracts in its Article 5(2), even though the level of protection for the weaker parties under the Judgments Convention is different than that under the Brussels Ia Regulation. With regard to insurance matters, the Judgments Convention does not include any special protection to the weaker parties (the policyholders, the insured and the beneficiaries of the insurance contracts). However, the Convention does protect the weaker parties when they are also consumers. Finally, a declaration excluding commercial leases (tenancies) of immovable property situated in the EU was considered. The Brussels Ia Regulation affords exclusive jurisdiction in the Member State where an immovable property is located to all tenancies irrespective whether they are residential or commercial. The Judgments Convention however includes specific jurisdictional rules only for residential tenancies. As a result, under the Convention the Member States would be obliged to recognise and enforce third-country judgments on commercial lease of immovable property that is situated in their territory. This would be in a contradiction to the policy objective sought by the EU legislator in the Brussels Ia Regulation to attribute exclusive jurisdiction to courts in the EU for disputes related to immovable property located in the EU. For a closer analysis of the comparison of the Judgments Convention with Brussels Ia Regulation and the reasons why the declarations were contemplated, see Annex 5. In case a declaration is made and a matter is thereby excluded from the application of the Convention, the current fragmented rules will continue to apply. This is true both for the national laws of the EU Member States and for the application of the national regime in third countries where European judgments issued in the excluded areas might be brought for recognition and enforcement. Moreover, if a declaration excluding certain specific matters from the scope of the Convention is made, legal uncertainty may also emerge about the interpretation of such a declaration and about its scope, in particular if the declaration could give raise to different interpretations. 6.3.2.Economic impacts For matters excluded by the declaration, no macro-economic effect is expected as the status quo remains for these sectors. The overall economic impacts are thus slightly smaller than under the policy option 1a). AR AU BR CA CN JP KR US Goods 1.4 1.1 1.4 1.4 0.9 0.9 0.9 0.9 Services 1.3 1.2 1.6 1.1 1.6 1 1 0.9 FDI 0.3 0.3 0.4 0.15 0.4 0.9 0.15 0.2 If consumer and/or employment and/or insurance matters are excluded from the scope, the parties to these types of agreements (e.g. consumers, employees, insurance policyholders, beneficiaries or insured persons) will not be able to benefit from the Convention and the economic impact would thus not change as compared to the baseline scenario. The same is valid also for the parties to a commercial lease agreement. This means that the overall microeconomic direct benefits of the Convention will remain the same (cost reduction of between 10% and 20%) but will not apply for the excluded categories of EU citizens and businesses. However, due to the small number of judgments given in the potentially excluded matters, the overall benefits for the reference period will remain unchanged, ranging from EUR 1.1 to 2.6 Million in the selected third countries. As a potential declaration would have a reciprocal effect the benefits for third-country parties seeking to have a foreign judgment recognised and enforced in the EU in one of the excluded matters will also not materialise. Even though the overall cost savings for EU parties are similar to those in option 1a, some citizens will not be able to reap the benefits of the Convention if consumer, employment and/or insurance matters are excluded (option 1b(i)). At the same time, the economic impact on citizens if only judgments related to commercial leases are excluded (option 1b(ii)) is rather positive and is comparable to that of option 1(a). Due to the very small number of judgments given in this particular area, only a small number of businesses is expected to be negatively impacted by such a targeted exclusion.

One can notice that the differences in trade and FDI volumes between this option and option 1a are rather insignificant. As mentioned above, this has to do with the low number of judgments given in these areas (approximately 5% of the total numbers), mainly in disputes about trade in goods or tourism related services subject to insurance policy. 6.3.3.Social impacts While the mild positive social impacts will continue to exist under the Convention even if a declaration under Article 18 is made, it should be noted that by excluding judgments concerning employment matters from the scope of the Convention, employees, employers, and social partners (trade unions and employers’ organisations) will not benefit from the simplified regime under the Convention. However, it should be acknowledged that this type of international litigation is generally uncommon. At the same time, such potentially negative social impacts are not expected for option 1b(ii) because a limited declaration with regard to commercial leases of immovable property will not affect citizens. Its social impacts would thus be comparable to those under option 1(a). Therefore, since the combined impacts of both strands of this option, and in particular the economic ones, are negligible when compared to option 1a, the decisive factor should be the policy interest in ensuring coherence with the intra-EU system. Next section will show how best this coherence could be achieved. 6.4 Impacts from policy option 1c – EU accession with a declaration under Article 19 Under this policy option, the European Union would accede to the Convention with a declaration under Article 19 of the Convention (“Declaration with respect to judgments pertaining to a State”) and would thereby exclude judgments involving States, a government agency of a State or natural persons acting for States from the application of the Convention. Just like with the declarations under Article 18, it should be noted that any declaration under Article 19 would have reciprocal effect, in the sense that while it would prevent the recognition and enforcement in the EU of third-country judgments in which an EU Member State is party, it would equally prevent similar European judgments in which foreign States are parties from circulating under the Convention. A declaration under Article 19 would concern rather a small number of cases. Therefore, the accession of the EU to the Convention with a declaration under Article 19 is not expected to make a significant difference to most of the indicators as compared to an accession without any declaration (policy option 1a). 6.4.1.Impacts on legal environment and fundamental rights The declaration under Article 19 could provide additional legal certainty regarding the interpretation of the term “civil and commercial matters” in cases that involve a state, governmental agency or a natural person acting on behalf of a state where it is unclear whether they acted in a public or private function since straightforwardly all cases to which they are parties would be excluded (whether civil and commercial or not). In case a declaration under Article 19 is made by the Union, the Convention will not apply to judgments arising from proceedings involving States, a government agency or natural persons acting for these entities. As a result, national law on the recognition and enforcement of such foreign judgments will continue to apply. On the other hand, the declaration can decrease legal certainty to a certain extent by adding an additional interpretation issue as to what is and what is not a governmental agency, especially in countries where the boundary between the public and private domain is blurred. 6.4.2.Economic impacts The macro-economic impacts for the EU-26 (without Denmark) depend on the respective third country. On the international stage, this declaration would affect more extensively the states where the state is more deeply involved in the economy or has less liberalised markets. According to interviewed third-country legal experts, this could apply to third countries such as China, and to a certain extent Brazil and Argentina. In the case of China, this declaration could lead to increased legal uncertainty as public institutions in the country can act as such, but also develop business internationally. On the microeconomic level, it should be noted that the accession to the Convention with a declaration under Article 19 is not expected to impact consumers, citizens, and SMEs. This is because SMEs, consumers and citizens are typically not involved in international dealings with states entities. This policy option is thus more relevant for larger businesses as they contract more frequently with state and governmental agencies. As state-owned enterprises cannot benefit from this declaration, the Convention does not give them an unfair advantage over European private companies, for instance by shielding such state-owned enterprises from the enforcement of judgments. 6.5Impacts from policy option 1d – EU accession with a declaration under Articles 18 and 19

Under this policy option, the European Union would accede to the Convention with declarations under both Articles 18 and 19. Therefore, judgments with respect to specific matters (consumer, employment, insurance matters and/or commercial leases of immovable property) and those pertaining to a State would be excluded from the Convention. As policy option 1 d) is a combination of the policy options 1 b) and 1 c), the effects of both policy options would logically add up under this variant. Since more matters would be excluded from the circulation, the effects (such as economic effects, effects on the length and costs of the proceedings etc.) brought about by the EU accession to the Convention will generally be more limited than in the policy options 1 a), b), and c). However, even under this combined option, the change to the indicators described under the policy option 1 a) (accession without any declaration) is not significant. 7.How do the options compare? The options described above are compared based on three criteria, as follows: ·Effectiveness of the policy option, in terms of the capability to achieve the general and specific objectives of the initiative, as described above in section 4; ·Efficiency of the policy option, in terms of the probability of achieving cost reductions in the process of recognition and enforcement of European judgments in third countries; ·Coherence of the policy option, in terms of how the option would integrate in the legal landscape, at the national level of the Member States, at the EU level and internationally. With regard to its effectiveness, policy option 1a whereby the Union would accede to the Judgments Convention without making any declarations would address all the objectives of this initiative. By providing EU businesses and citizens with a legal tool in order to seek recognition and enforcement of European judgments wherever the debtor happens to have assets, this option will enhance access to justice. Compared to the current situation, it will equally increase legal certainty by providing a clear and comprehensive set of rules to be applicable instead of disparate national strict regimes for recognition and enforcement. The impacts described above show that this option is expected to lead to a reduced length of proceedings and to lower costs for EU parties seeking to enforce an European judgment in a third country. Finally, the increase in legal certainty and the decrease in costs and length of proceedings is expected to encourage parties to claim their rights more often in international court litigation, thereby leading to more international dealings, which could contribute ultimately to an increase in international trade and in investment. The effectiveness of policy option 1b is comparable to that of option 1a. This option will equally achieve the general and specific objectives of this initiative, but to a somewhat lesser degree because in the excluded matters, b