The UK has not yet reported whether it intends to join Hague 2019 although it is likely that will occur sooner rather than later. We set out below what it would mean for UK and EU counterparties who deal with each other who are looking to agree a jurisdiction in which to resolve their disputes if the UK joins Hague 2019.
What is Hague 2019?
Hague 2019 is a convention designed to create a uniform set of rules for the recognition and enforcement of foreign judgments in civil and commercial matters. It provides that a judgment obtained in one contracting state which complies with one of the requirements set out in Article 6 of the convention will be recognised and enforced by the courts of another contracting state without review of its merits.
Unlike Hague Convention on the Choice of Court Agreements 2005 (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 unliteral 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.
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 in the event the UK joins Hague 2019 because if there is an exclusive jurisdiction clause, the protections under Hague 2005 will be engaged where 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. Whilst these types of scenarios do occur, they are relatively few and far between.
What is the UK’s position?
The issues around enforcement of UK judgments in the EU and vice-versa since Brexit and the UK’s departure from the Brussels Recast regime has been widely reported. Prior to the EU announcing it would join Hague 2019, the UK’s preference to resolve the issues created by its departure from the Brussels Recast regime was to join the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. However, since the European Commission’s decision in 2020 not to recommend inviting the UK to join the Lugano Convention, the framework to enforce UK judgments in the EU and vice-versa has been left dependent on either enforcing under:
- the Hague Convention on the Choice of Court Agreements 2005 (Hague 2005) where parties have agreed an exclusive jurisdiction clause in their agreements and the commercial arrangements between the parties comply with the other requirements of Hague 2005 (eg the contract is of an international basis), or
- through local legal frameworks.
The UK’s position on whether it will now seek to join Hague 2019 has not been reported. However, joining Hague 2019 would resolve most of the issues around enforcement of UK judgments in the EU and vice-versa which have arisen since Brexit. Joining Hague 2019 would mean that parties would not have to ensure they have exclusive jurisdiction clauses in their agreements to take advantage of the streamlined enforcement process under Hague 2019. This is likely to be welcomed in the banking community who often wish to adopt non-exclusive or asymmetric dispute resolution clauses.
Given this, it would be unsurprising if the UK looked to join Hague 2019 before too long. It will however take time for that to come into effect for UK parties transacting with EU parties and vice-versa. That is because Hauge 2019 shall only enter into force twelve months after a State has acceded to or ratified it.
What should parties be doing now?
Given the UK has not yet sought to accede to or ratify Hague 2019, it is still likely to be some time before Hague 2019 benefits UK parties who are looking to resolve their disputes with EU counterparties before the UK courts. UK parties should therefore 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.
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 here. 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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