Cookies on our website

We use cookies on our website. To learn more about cookies, how we use them on our site and how to change your cookie settings please view our cookie policy.

Read more Close
Skip Ribbon Commands
Skip to main content
Sign In

Publications

New Hague Convention on enforcement of foreign judgments – a “gamechanger” in international dispute resolution?

 

30 July 2019

On 2 July 2019 the Hague Conference on Private International Law announced the conclusion of a new international convention, the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the Judgments Convention).  It requires Contracting States to recognise and enforce judgments given in civil or commercial matters in other Contracting States, and is intended to operate as a sister instrument to the Hague Convention on Choice of Court Agreements 2005. We look at the key provisions and consider the practical impact for commercial parties engaged in cross-border business.

What types of judgment are in scope?

The definition of “judgment” in the Judgments Convention is, on the face of it, very wide, covering “any decision on the merits given by a court”, including both money and non-money judgments and costs rulings (where the underlying decision falls within the scope of the Judgments Convention).

However, not all judgments in the civil and commercial context are in scope:

  • There are subject matter exclusions relating to insolvency, the validity of companies and the decisions of their organs, intellectual property, privacy and certain antitrust matters. This means that judgments in these subject areas will not be subject to recognition and enforcement under the Judgments Convention.
  • Arbitration and related proceedings are excluded.
  • Interim measures of protection are not considered “judgments”.
  • Judgments for damages that do not compensate a party for actual loss (eg judgments for exemplary or punitive damages) are not enforceable.
  • The judgment will only be recognised abroad if it has effect in the jurisdiction in which it was given (the state of origin) and will only be enforced abroad if it is enforceable in the state of origin.
  • The Judgments Convention will only apply to a judgment if, at the time the proceedings were instituted in the state of origin, the Judgments Convention had effect between the state of origin and the state in which recognition or enforcement is sought.

Jurisdictional requirement

A judgment must meet one of the jurisdictional requirements set out in Article 5 of the Judgments Convention to be eligible for recognition or enforcement.  There are some familiar concepts here relating to residency, consent to jurisdiction, place of performance of a contractual obligation and jurisdiction agreements.  By way of example, a judgment will be eligible if:

  • the person against whom recognition is sought was habitually resident in the state of origin, was the claimant in the proceedings in the state of origin or consented to the jurisdiction of the courts of the state of origin during the course of the proceedings;
  • the judgment ruled on a contractual obligation and the court that gave the judgment was in the state of the place of performance of that obligation; or
  • the judgment was from a court “designated in an agreement…other than an exclusive choice of court agreement” (provided the agreement was in writing or documented in writing or in another form that is subsequently accessible).  Exclusive choice of court agreements are out of scope as these are covered by the Hague Convention on Choice of Court Agreements.

Scope to limit the application of the Judgments Convention

The Judgments Convention provides for a number of circumstances in which a Contracting State may make declarations that limit its application. For example, a state with a strong interest in not applying the Judgments Convention to a specific matter can declare that it will not apply the Judgments Convention to that matter.  That declaration will have effect both in the relevant state itself and also in other Contracting States, who need not apply the Judgments Convention to judgments from the relevant state with regard to that matter.

A Contracting State can also refuse to have a reciprocal relationship with another Contracting State.  It can do this by notifying the depositary that ratification by another state should not have the effect of establishing relations between them, in which case the Judgments Convention will have no effect as between those two Contracting States.

There are also provisions that make it clear that the Judgments Convention will not affect the application of other treaties where certain criteria are met, eg where the treaty in question was concluded before the Judgments Convention.

When can recognition or enforcement be refused?

Where a judgment is on the face of it enforceable under the Judgments Convention, it must be recognised and enforced without any review of the merits. There are only limited grounds on which recognition or enforcement can be refused. These grounds include where, broadly, there was improper notice of the proceedings, where the judgment was obtained by fraud or where recognition or enforcement would be manifestly incompatible with public policy. Enforcement may also be refused if the proceedings in the state of origin were contrary to an agreement to determine disputes in a different jurisdiction or, in certain cases, if the judgment is inconsistent with another judgment.

What impact will the Judgments Convention have in practice?

The Hague Conference has stated that the Judgments Convention should reduce costs, promote access to justice, facilitate multi-lateral trade and promote the better management of transaction and litigation risk. The Hague Conference is certainly optimistic about the Judgments Convention’s potential impact, describing it a “a true gamechanger in international dispute resolution”.

The Judgments Convention certainly has the potential to meet these ambitious objectives and to be of real benefit to commercial parties involved in cross-border business:

  • It provides a simple route to recognition and enforcement without a merits review and subject to only limited grounds for refusal.
  • It has the potential to harmonise to a significant extent (although not fully, given the exclusions and scope for declarations) what would otherwise be a fragmented analysis for parties looking at enforcement risk across multiple jurisdictions.
  • If the UK and the EU27 sign up, it could be a helpful fix for any residual concerns regarding the enforcement of English judgments in the EU27 in the event of a no-deal Brexit.
  • While commercial parties with assets in Contracting States may find that they are slightly more exposed to foreign judgment enforcement risks than is currently the case, the checks and balances that are built in to the Judgments Convention should mitigate to a significant extent any concerns that might arise regarding the enforcement of rogue or penal judgments or those given in the absence of due process.

The Judgments Convention will only really be a “gamechanger”, however, if ratification is sufficiently widespread and takes places relatively quickly.  Fourteen years after the Hague Convention on Choice of Court Agreements was concluded, only the EU, Mexico, Montenegro and Singapore have ratified.  Although awareness of the potential benefits of multilateral enforcement treaties has arguably increased since the Choice of Courts Convention was concluded, it is nevertheless likely to be some time before the Judgments Convention has enough signatories to have a real impact. It will be longer still before it comes close to rivalling the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, with its 159 contracting states. To date, only Uruguay has signed up to the Judgments Convention, and the position of other Hague Conference states in relation to ratification is unclear, so this is one to keep an eye on over the next few years.  Of particular interest will be whether states that are now active in international trade but have historically not been parties to bilateral or multilateral enforcement treaties, choose to participate.  The PRC will be one to watch.  

 

Publications search




Related people

Client alerts

Already signed up for Client alerts? Click here to access your portal



  • Add comment (optional)