The UK will now need to take steps to propose domestic legislation to bring effect to Hague 2019 before it formally ratifies it. Hague 2019 will only come into force 12 months after it has been ratified.
This article considers the implications of Hague 2019 for sureties.
Enforcement regime post Brexit
Following Brexit, the UK ceased to be a party to the EU’s Recast Brussels Regulation. Among other things, the Recast Brussels Regulation provided for expedited, mutual recognition of each EU member state’s court judgments.
Post Brexit businesses therefore had to look at other (potentially more involved) avenues when looking to enforce UK judgments in the EU or EU judgments in the UK.
To address this, at least in part, the UK proceeded to ratify the 2005 Hague Convention on the Choice of Court Agreements 2005 (Hague 2005).
However, Hague 2005 does not provide a full alignment with the position under the Recast Brussels Regulation.
Most pertinently from a surety perspective, Hague 2005 does not apply to contracts containing non-exclusive jurisdiction or asymmetric jurisdiction clauses. This means that a deed of indemnity which contains an asymmetric jurisdiction clause would not enable that surety to benefit from the expedited enforcement of a UK judgment in an EU member state (or any other Hague 2005 signatory state).
For this reason, symmetric exclusive jurisdiction clauses have commonly been adopted in English law governed Deeds of Indemnity. These clauses have the advantage of being Hague 2005 compliant but the trade-off is that they do not allow the surety to pursue a non-UK indemnitor directly in its home courts, eg to obtain a freezing order against that indemnitor’s assets.
Enforcement regime Post Hague 2019
Unlike Hague 2005, Hague 2019 does not require parties to have agreed a symmetric exclusive jurisdiction clause in their agreement in order to take advantage of the streamlined enforcement process. This means that sureties will once again be able to include non-exclusive, asymmetric or unilateral dispute resolution clauses in their Deeds of Indemnity and still take advantage of the streamlined enforcement process under Hague 2019.
What should a surety be doing now? Should a surety move away from a symmetric exclusive jurisdiction clause?
Once the UK Government has ratified Hague 2019, it will take 12 months before it comes into force. Therefore, the short answer is that no immediate action is necessary. However, sureties should continue to consider whether they wish to have the benefit of Hague 2005 and if or when they might wish to update their Deeds of Indemnity to take advantage of the position under Hague 2019.
Read more on this topic in our Hague Convention 2019 article.
If you wish to discuss further, please contact any of our Mills & Reeve surety team contacts.
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