Security deposit for the costs of the proceedings for UK plaintiffs after Brexit

The United Kingdom (UK) has already left the European Union (EU) on 31 January 2020. However, the effects of this are only now becoming noticeable because the interim ruling expired at the end of 2020. According to section 1 of the BrexitÜG, the United Kingdom was considered a member state of the European Union until 31.12.2020. The question therefore arises whether plaintiffs from the United Kingdom will have to provide security deposit for the costs of the proceedings after the expiry of the transition period.

I. Security deposit for the costs of the proceedings according to section 110 (1) ZPO

Plaintiffs from the United Kingdom did not have to provide security deposit for the costs of the proceedings under section 110 Code of Civil Procedure until 31 December 2020 because the negative requirements under section 110(1) ZPO did not exist due to the interim ruling under section 1 BrexitÜG (see Regional Court of Dortmund, interim judgment of 15 July 2020 – 10 O 27/20). Pursuant to section 110 (1) ZPO, plaintiffs must provide security deposit for the costs of the proceedings if the plaintiff is not habitually resident in a Member State of the European Union or the EEA. Since 01.01.2021, plaintiffs from the United Kingdom would therefore generally have to provide security deposit for the costs of the proceedings under section 110(1) ZPO, unless an exception under section 110 (2) ZPO applies.

II. Exception according to section 110 (2) no. 1 ZPO

Pursuant to section 110 (2) no. 1 of the Code of Civil Procedure, the plaintiff does not have to provide security deposit for the costs of the proceedings if security cannot be required on the basis of international treaties.

1. German-British Convention of 1960

According to Art. 14 of the German-British Convention, a national of one Party may not be obliged to provide security for costs of any kind in the territory of the other Party in cases where a national of the other Party is exempt from doing so. However, this only applies in the case that the nationals of one part are domiciled in the relevant other part. The requirements to be attached to the domicile of companies are open. It could also be conceivable, for example, that according to Art. 14 it is sufficient if the company maintains a branch in the relevant other part. In principle, however, Art. 14 of the German-British Convention is likely to be meaningless compared to the provision in section 110 (1) of the Code of Civil Procedure, because this provision is already based on habitual place.

It is also unclear whether the German-British Convention will apply between Germany and the United Kingdom in the future. In principle, there is nothing to prevent the German-British Convention from applying alongside the existing Withdrawal and Cooperation agreements between the EU and the United Kingdom. However, the EU Commission and the United Kingdom themselves assume that the agreement will not apply (BMJV handout). It remains to be seen how the German courts will decide.

2. Trade and Cooperation Agreement (TCA) between the EU and the United Kingdom

The Trade and Cooperation Agreement of 31.12.2020 between the European Union and the United Kingdom also offers a starting point. According to Article IP.6, the other contracting party may not be placed in a less favourable position with regard to the enforcement of intellectual property rights. However, Article IP.6 does not make any specific reference to the provision of security deposit for the costs of the proceedings, so that it is not explicitly stipulated that plaintiffs from the United Kingdom do not have to provide security deposit for the costs of the proceedings in infringement proceedings in Germany.

However, the rule would be undermined if United Kingdom plaintiffs had to provide security deposit for the costs of the proceedings, because this would prevent companies from enforcing claims and would put a party in United Kingdom proceedings in a worse position. It is therefore reasonable that United Kingdom plaintiffs should not have to provide security deposit for the costs of the proceedings.

This could also apply to invalidity proceedings. According to Article IP.6, the above also applies to the maintenance of intellectual property rights. Although the purpose of an invalidity action is precisely not to maintain the patent in suit, the provision can be understood in such a way that, for reasons of equality of arms, the invalidity plaintiff does not have to provide security for the costs of the proceedings. The wording of the provision therefore leaves some room for interpretation. It therefore remains open how the Federal Patent Court will decide.

3. 1954 Hague Convention on Civil Procedure

According to Article 17 of the 1954 Hague Convention on Civil Procedure, plaintiffs who are domiciled in another Contracting State are exempt from providing security deposit for the costs of the proceedings (HRC Munich, court order of 11.2014 – 7 W 2290/14). Accordingly, plaintiffs from Contracting States do not have to provide security deposit for the costs of the proceedings in other Contracting States.

However, this exemption from the obligation to provide security for legal costs is not applicable to the United Kingdom because the United Kingdom has not acceded to the Convention (contrary to the handout of the Federal Ministry for Economic Affairs and Energy).

4. Interim conclusion

The Trade and Cooperation Agreement of 31.12.2020 can be interpreted as meaning that plaintiffs from the United Kingdom do not have to provide security deposit for the costs of the proceedings pursuant to Section 110 (2) No. 1 ZPO in infringement proceedings as well as in invalidity proceedings.

III. Exception according to section 110 (2) no. 2 ZPO

According to section 110 (2) no. 2 Civil Code of Procedure plaintiffs also do not have to provide security deposit for the costs of the proceedings if the decision on the reimbursement of costs to the defendant would be enforced on the basis of international treaties.

1. EU Withdrawal Agreement of 17.10.2019

A provision on the enforcement of judgments can be found in the EU Withdrawal Agreement of 17.10.2019. Pursuant to Article 67 (2) a), Regulation (EU) No. 1215/2012 (Brussels Ia Regulation or Brussels Ia Regulation) shall apply to the recognition and enforcement of judgments given in proceedings commenced before the expiry of the transitional period. The regulation is thus only applicable to proceedings commenced before 31 December 2020. In the case of cost assessment orders, however, the question arises as to whether the time of the filing of the complaint or the time of the request for the assessment of costs is relevant. On the one hand, the costs assessment procedure is an annex to the original action, because it only deals with the costs of the proceedings. On the other hand, the costs assessment procedure is only carried out upon request, so that one could argue that it would depend on the time of filing the request for the assessment of costs. However, the better argument is that it should be based on the time of filing the complaint.

According to Art. 39 Regulation (EU) No 1215/2012, a judgment given in a Member State that is enforceable in that Member State is enforceable in the other Member States without the need for a declaration of enforceability. Accordingly, legal costs for proceedings commenced before 31.12.2020 can be enforced under the Regulation (EU) No 1215/2012. For proceedings initiated after 31 December 2020, the EU Withdrawal Agreement does not contain any provision on enforceability.

2. 1968 Brussels Convention

According to Article 31 of the Brussels Convention, a judgment may be enforced in the United Kingdom if, on the application of an interested party, it has been registered for enforcement in that part of the United Kingdom. The question already arises here whether this is sufficient under section 110 (2) no. 2 of the Code of Civil Procedure because the judgment must be registered for enforcement in the United Kingdom. However, as long as the registration is not linked to further requirements, this should not prevent enforcement.

The decisive question is therefore whether the Brussels Convention of 1968 applies again. In principle, the VO EG/44/2001 largely replaced the Brussels Convention on 1 March 2002. Regulation EC/44/2001 was later replaced by Regulation 1215/2012. According to Art. 68 (1) of Regulation 1215/2012, the Brussels Convention of 1968 is superseded by the Regulation 1215/2012 in the relationship between the member states. After that, the Brussels Convention was no longer applicable in relation to the member states.

The question now is whether the Brussels Convention will be revived once the Regulation 1215/2012 no longer has any effect vis-à-vis the United Kingdom after the expiry of the transition period. The Withdrawal Agreement does not contain any explicit provisions regarding the Brussels Convention. Against the background that the Regulation 1215/2012, as the successor to the Brussels Convention, only applies to proceedings commenced during the transition period, it can be concluded that the Brussels Convention, as understood in the withdrawal agreement, should no longer apply.

3. Hague Convention on Choice of Court Agreements

Furthermore, the United Kingdom acceded to the Hague Convention on Choice of Court Agreements of 30 June 2005 (Hague Convention) with effect from 1 April 2019. According to Article 8(1) of the Hague Convention, a decision of a court of a contracting state designated in an exclusive choice of court agreement is recognised and enforced in the other contracting states. For classical patent infringement litigation, this provision is regularly not applicable because the parties do not enter into a choice of court agreement beforehand.

The situation is different for disputes in connection with licence agreements. In these, the parties in many cases agree on an exclusive choice of court agreement. In these cases, plaintiffs from the United Kingdom also do not need to provide security for litigation costs.

IV. Summary

Whether one can infer from the Trade and Cooperation Agreement between the European Union and the United Kingdom that plaintiffs from the United Kingdom do not have to provide security deposit for the costs of the proceedings under section 110 of the ZPO remains exciting. There is much to be said for it. This should then also apply to nullity proceedings before the Federal Patent Court under Section 81(6) Patent Act. The situation is different for proceedings that have already been initiated before 31 December 2020. In such a case, companies from the United Kingdom will in principle not have to provide security deposit for the costs of the proceedings due to the withdrawal agreement between the EU and the United Kingdom. Applications under section 111 of the German Code of Civil Procedure (ZPO) are therefore likely to be unfounded for proceedings initiated before 31 December 2020.

In addition to the regulations presented here, the other exceptions according to section 110 (2) no. 3 – 5 of the Code of Civil Procedure naturally continue to come into consideration.

Overall, it remains exciting to see how the courts will assess the international treaties addressed in relation to the United Kingdom. As soon as decisions on this are published, we will discuss them.

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