The UK will now need to take steps to propose domestic legislation to bring effect to the convention before it formally ratifies Hague 2019. Hague 2019 will only come into force 12 months after the UK has ratified the convention. Once in force, Hague 2019 will help alleviate some of the issues faced by UK businesses dealing with EU counterparties and vice versa when they are considering how they will enforce any judgment.
We set out below what Hague 2019 is, what issues it remedies following Brexit and what parties should be doing in the meantime.
The enforcement landscape before Brexit
Prior to Brexit, the UK was party to EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (commonly referred to as Brussels Recast). Brussels Recast regulated jurisdiction and the recognition and enforcement of judgments between EU member states. In effect, it provided a simplified mechanism to allow judgments in one member state to be automatically recognised and enforced in another.
What is the position now after Brexit? What is Hague 2005?
Post Brexit, the UK ceased to be a party to the Brussels Recast regime and therefore businesses had to look at other avenues when looking to enforce UK judgments in the EU or EU judgments in the UK.
The UK hoped to join the 2007 Lugano Convention which is a treaty between the EU and EFTA States (Denmark, Norway and Switzerland). This operated on a similar basis to the first iteration of the Brussels Regulation before it was recast in 2012. However, the EU blocked the UK joining on the basis that the UK was not a party to the single market.
Accordingly, the UK proceeded to ratify the 2005 Hague Convention on the Choice of Court Agreements 2005 (Hague 2005). That provided some respite for UK businesses dealing with EU counterparties and vice versa. However, as UK businesses will be aware, Hague 2005 does not provide a full alignment with the position under the Brussels Recast regime.
For example, Hague 2005:
- Only applies to contracts:
- containing exclusive jurisdiction clauses
- which are “international” in nature (eg between commercial businesses from different countries)
- Does not apply to contracts containing non-exclusive jurisdiction or asymmetric jurisdiction clauses
In many contractual relationships, particularly where there is an exchange of data, information or confidential material, a non-exclusive jurisdiction clause may be needed to enable effective recourse in the defendant’s home state.
In the context of asymmetric clauses, no authoritative decision has been reached about whether they are enforceable under Hague 2005; a Dutch court has ruled that asymmetric clauses are not “exclusive” for the purposes of Hague 2005, but there have been conflicting positions from the UK courts.
In situations where parties do not have the benefit of Hague 2005, parties needing to enforce any UK judgment in an EU state and vice versa have to rely on local law procedures for registering and enforcing foreign judgments. While some EU member states have a relatively simple procedure for registering and enforcing foreign judgments, it adds an extra layer of complexity which parties need to consider when entering into contractual agreements.
What will Hague 2019 do?
The EU and Ukraine are already parties to Hague 2019 having come into force in September 2023. Unlike the Lugano Convention, the EU cannot block the UK’s accession to Hague 2019 as it is a multi-lateral international treaty.
Hague 2019 provides a clear framework for the recognition and enforcement of judgments from one contracting state in the courts of another contracting state without review of its merits. This will help facilitate international trade on the basis that it reduces time and costs associated with enforcement of foreign judgments.
Unlike Hague 2005, it does not require parties to have agreed an “exclusive jurisdiction” clause in their agreement in order to take advantage of the streamlined enforcement process. That means parties can agree non-exclusive, asymmetric or unilateral dispute resolution clauses in their agreements (or bring an action before a court under procedural jurisdictional rules), and still take advantage of the streamlined enforcement process under Hague 2019. It will also apply to a number of non-contract claims such as certain tort claims.
Parties should note however that Hague 2019 only applies to civil and commercial judgments. Judgments arising from matters concerning issues such as defamation, intellectual property or family law disputes are excluded. Further, interim measures of protection are also excluded.
Recognition and enforcement can only be refused under Hague 2019 for specific examples such as:
- Judgment is not final (ie it is subject of an appeal)
- The defendant was not notified of the proceedings
- Judgment was obtained by fraud
- Judgment is contrary to public policy in the enforcing state
- Proceedings were brought in breach of an agreement that any dispute would be heard before another court
- Judgment conflicts with another judgment on the same subject matter which has been made earlier
- Judgment awards exemplary or punitive damages that do not compensate the judgment creditor for the harm or loss they have suffered
One point parties should note is that Hague 2019 does not address the situation where a claim has been commenced in the wrong court in breach of a jurisdiction agreement. This is unlikely to matter in the context of UK/EU contracts once the UK joins Hague 2019, because if there is an exclusive jurisdiction clause, the protections under Hague 2005 will be engaged and the court in which the claim has been wrongly brought should refuse to hear the claim. Where there is a non-exclusive jurisdiction clause, a court will need to consider if there is a basis on which it has jurisdiction. While these types of scenarios do occur, they are relatively few and far between.
Outside of the EU, it should be noted that other states such as the US, Israel and Russia have signed Hague 2019 but have not yet ratified it. Should they ratify Hague 2019, that will provide an added benefit for parties who have agreed UK court jurisdiction clauses who may need to enforce in those jurisdictions. Uruguay has ratified Hague 2019 and it will come into force in Uruguay in October 2024.
The UK Government cited in its announcement in November 2023 that one of its justifications for proposing to sign up to Hague 2019 was “evidence of the potential benefits of Hague 2019 for litigating parties dealing in international civil and commercial disputes, including the reduction in costs and increased efficiency of proceedings, and the increased attractiveness of the UK for dispute resolution if judgments from its courts are enforceable abroad under the Convention.”
What should parties be doing now?
Once the UK Government has ratified Hague 2019, it will take 12 months before it comes into force.
In the meantime, UK parties should continue to consider whether they wish to have the benefit of Hague 2005 if they want a streamlined process of enforcing a UK judgment against an EU counterparty and vice-versa.
For more information of what is required in a dispute resolution clause between the parties to obtain the streamlined enforcement and recognition benefits of Hague 2005, please see our article: Is it a no to Lugano? That article also considers what parties should consider before commencing a claim in the UK courts which they need to enforce in the EU where Hague 2005 is not engaged.
For more information about the above or on how you can structure your dispute resolution clauses to best protect your position in the event that you have a dispute, please contact the authors of this article.
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