By Huw Jones
LONDON (Reuters) - Britain should not join a cross-border accord for recognising courts and their rulings, the European Commission recommended on Tuesday, in a move which British business leaders fear could rachet up costs for smaller firms.
The Lugano Convention determines which countries' courts may hear cross-border civil and commercial disputes between the 27 European Union states, Iceland, Norway and Switzerland. It also ensures enforcement of rulings from such disputes.
Britain was a member when still part of the EU, but it fully left the bloc's orbit at the end of last year and needs the unanimous backing of all Lugano signatories to rejoin.
The Commission, which is the European Union's executive, said that current Lugano members participate to some extent in the EU’s internal market of free movement of goods, services, capital and people, which Britain no longer does.
"In view of the above, the Commission takes the view that the European Union should not give its consent to the accession of the United Kingdom to the 2007 Lugano Convention," the Commission said in a statement.
Lugano is not mentioned in any of the post-Brexit trade agreements signed by Britain.
It will be up to EU states to decide by qualified majority whether to accept or reject the recommendation. Iceland, Norway and Switzerland have indicated their backing for Britain.
"It’s hard to understand this decision or see how this recommendation helps SMEs and individuals across Europe who benefit most from the clarity and cost savings the Lugano Convention brings," Miles Celic, CEO of TheCityUK, which promotes Britain's financial and professional services, said.
"English and Welsh law will remain the law of choice for international business due to the clear, enforceable contracts it delivers, the quality of the UK legal sector, and the expert judicial system which underpins it," Celic said.
Brussels said the separate multilateral Hague Convention should be the future vehicle for civil judicial cooperation between Britain and the EU.
However, lawyers say this only covers some parts of Lugano and plans to broaden it could take years to be approved.