There are a number of significant hurdles and uncertainties when engaging in international commercial litigation, including (1) the risk of parallel proceedings and jurisdictional disputes where multiple jurisdictions apply to the relevant transaction; (2) the risks arising from delays in the administration of justice in unfamiliar legal fora, or even having no forum in which to litigate, and (3) the risk of being unable to enforce a judgment debt obtained in one State against assets held in another.
The risks of cross-border litigation are particularly striking when compared with the relative ease with which parties are able to resolve jurisdictional disputes and achieve recognition and enforcement of foreign arbitral awards when they elect to resolve a dispute through international arbitration. The greater legal certainty afforded to parties that choose international arbitration as the method by which to resolve their dispute is largely a consequence of the success of the New York Convention. Thus, the Hague Convention on Choice of Court Agreements (“the Convention”), is intended to be the New York Convention equivalent, as it aims to facilitate the recognition and enforcement of judgments rendered by courts chosen in exclusive choice of court agreements.
The Convention, which entered into force on 1 October 2015 with the accession of the European Union (EU), and is now in force as between Mexico (which acceded to the Convention in 2007) and all EU Member States with the exception of Denmark, holds the promise of providing greater legal certainty and predictability for parties engaged in cross-border litigation.
Scope of the Convention
The Convention is limited in scope. It only applies to international civil and commercial matters – thereby ruling out cases where both parties in the initial proceedings are resident in the same Contracting State and all other elements relevant to the dispute are connected only with that State (Art. 1(2)).
At the enforcement stage, however, the definition of international is much broader. The case will be considered international where one of the parties is seeking to have the original judgment recognised and enforced in another Contracting State (Art. 1(3)), such that the Convention will also apply to a judgment where parties are from the same Contracting State, but seeking to enforce a judgment in a third jurisdiction.
The Convention is also limited to exclusive choice of court agreements. This means that if parties wish for any disputes between them to fall within the scope of the Convention they will need to specify one or more courts of one particular Contracting State in their agreement (Art. 3). The Convention does, however, introduce a presumption that the choice of court agreement is exclusive, unless the agreement provides otherwise (Art 3(b)). It also gives Contracting States the option to declare that they will recognise and enforce judgments given by courts of other Contracting States designated in a non-exclusive choice of court agreement (Art. 22).
Article 2 of the Convention specifies the matters to which the Convention does not apply, including consumer and employment matters, and certain intellectual property rights. Contracting States to the Convention also have the option of eliminating additional specific subject matters from scope, as was the case with the EU, which upon ratification filed a declaration excluding the application of the Convention to certain types of insurance contracts.
Finally, the Convention provides that interim measures of protection (e.g. injunctions) are not governed by the Convention and are therefore left to national law (Art 7). Consequently, the Convention does not require the court to grant measures, nor does it preclude the court from granting such measures. Similarly, courts in other Contracting States are not required to, nor are they precluded from, recognising and enforcing interim measures of protection.
The Key Provisions
The Convention is premised on the following three basic principles:
Relationship with the recast Brussels I Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters in the EU (“Brussels Regulation”)
If the Convention’s provisions on jurisdiction conflict with the Brussels Regulation then the latter will only prevail if all parties reside in a Contracting State bound by the Brussels Regulation (i.e. inside the European Community) (Art. 26(6)(a)). By contrast, the Brussels Regulation’s provisions on recognition and enforcement of judgments will prevail in any case where the court that rendered the judgment and the court in which recognition and/or enforcement is sought are both located in states bound by the Brussels Regulation (i.e. the European Community) (Art. 26(6)(b)).
Future of the Choice of Court Convention
If widely ratified, the Convention could be a major development in international litigation, providing greater certainty for all parties by reducing the risk of engaging in costly jurisdiction disputes and allowing parties to enforce their judgments abroad more easily.
To date, in addition to the accession of the EU and Mexico, the Convention has been signed by the United States (2009) and Singapore (2015). The Permanent Bureau of the Hague Conference on Private International Law has also reported that Australia, New Zealand and Hong Kong are also actively considering joining the Convention.