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| 2 minutes read

UPC invokes Brexit in costs decision, but did it really matter?

Harvard College has been awarded security for costs in the sum of EUR 300,000 in revocation proceedings brought against it by NanoString in the Munich Central Division of the UPC. 

In the UPC, the court has the discretion to order a security for legal costs and other expenses if: the financial position of the other party gives rise to legitimate and real concerns about recovering costs; and/or, there is a likelihood that the cost order by the UPC may be unenforceable or unduly burdensome to enforce.

In this case, the court was persuaded to order the security by a number of factors:

  • The claimant's own submission in related UPC proceedings that an injunction would create an “existenzielle Risiko” for its group (a preliminary injunction was subsequently ordered).
  • That the claimant group had never been profitable and therefore relied on money from investors. 
  • That the group had long-term debts exceeding the amount of its cash position.

And, there was another consideration: the UK domicile of the claimant. 

Harvard argued that because the UK was – post-Brexit – no longer party to the Brussels Ibis Regulation or the Lugano Convention, both of which regulate the recognition and enforcement of judgments, orders rendered by EU Courts will no longer automatically be recognised in the UK. 

The court recognised that UPC cost judgments should in principle be enforceable in the UK according to UK national procedures. But it also thought there was an additional procedural burden and uncertainty on the party seeking to enforce a UPC cost judgement in the UK compared to EU jurisdictions.

This was a "factor that weighs in favour of ordering a security”. How much of a factor? 

Well, compare this with a decision of the Munich local division in Edwards Lifesciences v Meril rejecting an application for security for costs, just a month earlier. In that case fears that a US court would not enforce a UPC costs order were regarded as an unfounded reason for ordering security for costs. 

The US, like the UK, is not a member of the Brussels Ibis Regulation or the Lugano Convention. So what is happening here?

Whilst the court did acknowledge the enforcement concern, it is seems from the context that it was a minor factor at most. Instead, the decision to award the security in the Harvard case turned on the findings about the financial circumstances of the claimant. 

But, having been noted in this decision, this is unlikely to be the last time we hear Brexit invoked against UK parties in this context. 

They would best be ready for it.


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