Worldwide: Update - The Hague Convention On Choice of Court Agreements

The Hague Convention ('Convention') has come into force on 1 October 2015. The Convention aims to ensure the effectiveness of choice of court agreements. This is to be achieved by creating an international framework to ensure court agreements are respected and judgments based on such agreements are enforceable. This has the potential to bolster litigation as a means of resolving international disputes.

A choice of court agreement expresses the parties' intention that the courts of a specific country will have exclusive jurisdiction to decide any disputes between them. Whilst such clauses are often used to manage risk in international commercial contracts they are not always respected under divergent national rules. The Convention was designed to address this issue by creating a uniform set of rules on choice of court agreements by providing an "international legal regime". This will provide greater legal certainty and predictability to commercial parties who enter into choice of court agreements. The ultimate aim is to "promote international trade" through "enhanced judicial co-operation".

Scope of the Convention

The Convention applies in international cases to exclusive choice of court agreements in civil or commercial matters (Article 1(1)) after its entry into force (Article 16). By default a case is international in the context of jurisdiction unless the parties are resident in the same Contracting State and the relationship of the parties and all other elements relevant to the dispute are connected only with that State (Article 1(2)). In the context of recognition or enforcement a case is international if a foreign judgment is sought (Article 1(3)).

It should be noted that the Convention only applies to exclusive choice of court agreements. This means non-exclusive agreements are outside the scope of the Convention. However, if the clause is silent as to whether the jurisdiction of the chosen court is exclusive the choice of court will be deemed to be exclusive (Article 3). Article 2 provides a list of exclusions to the Convention. This includes consumer (Article 2 (1)(a)) and employment contracts (Article 2 (1)(b)). The Convention does not apply to arbitration proceedings (Article 2(4)). Finally, the Convention will not apply to determine questions of jurisdiction and the enforcement of judgments between EU member states, as these will continue to be determined by the Brussels I (Recast) Regulation (1215/2012).

Jurisdiction

The obligation of a Contracting State court designated with an exclusive choice of court agreement is to decide the dispute to which the agreement applies (Article 5(1)). This applies unless the agreement is null and void under the law of that State. The obligation of a Contracting State court that is not chosen under an exclusive choice of court agreement is to suspend or dismiss proceedings (Article 6). This is subject to a number of broad exceptions listed in Article 6 (a)-(e). This includes whether giving effect to the agreement would lead to a manifest injustice (Article 6(c)) or the chosen court decided not to hear the case (Article 6(e)).

Recognition and Enforcement

A judgement given in a Contracting State court designated with an exclusive choice of court agreement shall be recognised and enforced in other Contracting States (Article 8). This obligation shall be followed without review of the merits of the judgment given by the court that decided the matter (Article 9(2)). Recognition or enforcement may be refused under Article 9 if sub paragraph (a)-(g) applies. This includes the situation where recognition or enforcement would be manifestly incompatible with the public policy of the requested State (Article 4(e). This is a potentially broad ground that could be open to abuse.

Comments

Parallels have been drawn between the New York Convention on Arbitral Awards ('New York Convention') and the Hague Convention. Many commentators cite that the Convention has potential to create a predictable and enforceable system of decisions on choice of court agreements in the same way that the New York Convention has done for arbitration.

The Convention has entered into force in the European Union (except Denmark) and Mexico. Singapore and the United States of America have signed the Convention but are yet to ratify it. The success of the Convention is dependent on more signatories. Should the USA and Singapore ratify the Convention this is likely to encourage other states to follow suit. Singapore is likely to do soon, given its intention to become a hub for dispute resolution.

A copy of the Convention can be accessed here.

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