The 2005 Hague Convention on Choice of Court Agreements

We previously blogged about the changes to the landscape of civil jurisdiction and enforcement brought about at the end of the Implementation Period on 31 December 2020.

One of these changes was the direct incorporation into English law of the 2005 Hague Convention on Choice of Court Agreements via the Private International Law (Implementation of Agreements) Act 2020.

This actually represents a continuation of the position pre-Implementation Period, since the Convention already applied by virtue of the UK’s membership of the EU. The EU block is a party to the Convention, as are Denmark, Montenegro, Mexico and Singapore.

But what exactly is the Convention and what does it do? In this blog post, Cressida Mawdesley-Thomas summarises the key points.

What is it?

The Convention provides a means of establishing jurisdiction and enforcing international civil and commercial contracts which contain an exclusive choice of court agreement. Such choice of court agreements may be present in contracts between, for example, tour operators and local suppliers.

These agreements also apply to contracts for insurance and reinsurance, although it should be noted that the Convention does not apply in claims for personal injury (but a commercial (re)insurance indemnity, arising out of an underlying event causing personal injury would be covered).[2]

A very helpful ‘Explanatory Report on the 2005 HCCH Choice of Court Agreements Convention’ by Professors Trevor Hartley and Masato Dogauchi is essential reading for anyone litigating a case to which the Convention pertains, it is available here.

When does it apply?

There are three core requirements: the contract must (i) be international; (ii) relate to civil or commercial matters; (iii) be exclusive.

The contract must also have been entered into after 1 October 2015 and the designated court must be in a State that is a party to the Convention.[3]

International

A case is international provided both parties are not resident in the same Contracting State and that it is not the case that all other elements relevant to the dispute are connected only with one State, regardless of the location of the chosen court.

In other words, if a case is otherwise wholly domestic, the choice of a foreign court does not make it international.

In respect of companies and corporate entities (art. 4(2)): “they are considered resident in the State— (a) where it has its statutory seat; (b) under whose law it was incorporated or formed; (c) where it has its central administration; or (d) where it has its principal place of business.”

A case will also be international for the purposes of recognition and enforcement only, if the judgment to be recognised or enforced is foreign (art. 1(3)).

As a result, a case that was not international under art. 1(2) when the original judgment was given becomes international if it is to be recognised or enforced in another Contracting State. This is because, say a chosen court is located in Portugal, any judgment by it will be entitled to recognition and enforcement in other Contracting States, even if the case is entirely domestic to Portugal. This protects the situation where a defendant might move assets out of Portugal, for example.

Civil or Commercial

The contract must relate to civil or commercial matters (art. 2), it must not relate to consumer contracts, family, employment or other private matters, including personal injury.[5]

Exclusive

The choice of court agreement must be exclusive.

However, art. 3(b) provides that choice of court agreements designating one or more specific courts of one Contracting State are deemed to be exclusive unless the parties have expressly provided otherwise.

Further, art. 22 contains an opt-in provision extending the recognition and enforcement provisions of the Convention to judgments given by a court that was designated in a non-exclusive choice of court agreement.

Formal Requirements

The exclusive choice of court agreement must be in writing or “by any other means of communication which renders information accessible so as to be usable for subsequent reference” (art. 3(c)).

What does it do?

Jurisdiction

Per art. 5(1): “The court or courts of a Contracting State designated in an exclusive choice of court agreement shall have jurisdiction to decide a dispute to which the agreement applies, unless the agreement is null and void under the law of that State.”

It should be noted that these clauses do not determine the applicable law. A choice of court agreement could, for example, specify that the court which would hear the claim be German, but another provision in the same contract could specify the applicable law is English.

Torpedo Proof!

A corollary obligation is imposed under art. 6 on courts not chosen that they shall “suspend or dismiss proceedings to which an exclusive choice of court agreement applies”.

The object is to to prevent ‘torpedo’ actions of the kind still available under the Lugano Convention (but not Brussels I (Recast). We blogged about a recent example of this here.

Denial of Jurisdiction

Jurisdiction will only be denied when one of five circumstances are met.

These are where –

  • the choice of court agreement is null and void;
  • a party lacked capacity;
  • giving effect to the agreement “would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised”;
  • “exceptional reasons beyond the control of the parties”;
  • the chosen court has decided not to hear the case.

It will be rare that the chosen court will decide not to hear the case but it is possible because under art. 19 a State may make a declaration that its courts will not accept jurisdiction. This can happen in situations where “except for the location of the chosen court, there is no connection between that State and the parties or the dispute.”

Recognition and Enforcement of Judgments

The Convention provides for the recognition and enforcement of judgments under art. 8(1), provided such judgments are enforceable in the jurisdiction of the judgment.

There is no provision for a review on the merits of the decision of the designated court under the choice of court agreement and the enforcing court is bound by their findings of fact unless there is judgment in default. Enforcement can be postponed if the judgment is the subject of review in the State of origin or if the time limit for seeking ordinary review has not expired.

This prevents courts, other than the chosen court, from exercising any kind of appellate function.

The only grounds upon which a court can refuse to recognise or enforce a judgment are set out in art. 9. These echo many of the grounds on which jurisdiction can be ousted.

These include: where the choice of court agreement is null and void, a party lacked capacity, or service of the claim was deficient or did not give defendant sufficient time to “for his defence”. Other exceptions include fraud, or when “recognition or enforcement would be manifestly incompatible with the public policy of the requested State” or enforcement would be inconsistent with another judgment between the same parties.

The enforcement of judicial settlements, “transactions judiciaires”, is covered under art. 12. These are peculiar to civil law systems and should not be confused with out-of-court settlements or consent judgments. Out-of-court settlements are not enforceable using the machinery of the Convention, but consent judgments are treated like other judgments.

Damages

Under art. 11(1), recognition or enforcement of a judgment may be refused if, and to the extent that, the judgment awards damages, including exemplary or punitive damages, that do not compensate a party for actual loss or harm suffered.

What this means is that only compensatory damages will be enforceable. However, punitive damages can still be awarded and enforced if there was such provision under the contract which was the subject of dispute.

Interim measures – not enforceable under the Convention

An important limitation is that interim measures are not within the scope of the Convention (art. 7). A freezing injunction, for example, is not required to be recognised or enforced by other Contracting States; they are not precluded from doing so but it would be subject to their national law.

Concluding Comment

In the void between Brussels I (Recast) and potential accession to the Lugano Convention, an awareness of the 2005 Hague Convention is important. It is a jurisdictional saving grace in many international commercial contracts and an important weapon in the cross-border litigator’s arsenal. We hope that this summary gives a useful practical outline of its main features.


[1] Regulation (1215/2012).

[2] See article 17 of the Convention.

[3] Note that where States, such as the UK are made up of two or more units, each with its own legal system. Article 25(1) provides that, in the case of such States, the word “State” in the Convention can apply, where appropriate, to either the larger entity – the United Kingdom, for example – or to a sub-unit of that entity – Scotland, for example.  So the agreement can specify that a legal system within that state is the designated Court, i.e. if the parties choose the courts of Alberta, “Contracting State” in Article 3 would mean Alberta; so the choice of court agreement would fall within the terms of the Convention. If, on the other hand, they designated the courts of Canada, “Contracting State” in Article 3 would refer to Canada and that would also fall within the Convention.

[4] See the commentary of Professors Trevor Hartley & Masato Dogauchi in the Explanatory Report to The Convention of 30 June 2005 on Choice of Court Agreements at [42-45].

[5] See the full list of exclusions at Article 2(2), personal injury is excluded by 2(2)(j).

[6] https://www.12kbw.co.uk/webinar/international-and-travel-webinar/

One thought on “The 2005 Hague Convention on Choice of Court Agreements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s