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Hague Convention on Choice of Court Agreements effective 1 October 2015

10-11-2015

 

The Hague Convention on Choice of Court Agreements (the “Convention”), which was presented on 30 May 2005, has (finally) entered into force on 1 October 2015. With the ratification of the Convention by the European Union in June 2015, the requirement of a minimum of two ratifications was complied with. In 2007, Mexico was the first state to ratify. The US and Singapore have already signed the Convention, but have not ratified it as yet.

What is regulated by the Convention?

The Convention regulates the jurisdiction in case of a choice of court in international business-to-business relationships. In addition, the Convention regulates the recognition and enforcement of judgments of the chosen court.

Scope of the Convention

The Convention will apply only in respect of an exclusive choice of court agreement concluded in civil or commercial matters, between parties to an international business-to-business relationship. In other words, there must be an exclusive choice of court agreement in an international commercial contract. For the application of the Convention, it is important whether an exclusive choice has been made for a court of a state that is a party to the Convention. Whether one or more of the parties involved also resides in a contracting state, does not affect the application of the Convention.

The Convention explicitly excludes various agreements and legal relationships from its scope, including those relating to consumers, maintenance obligations, tortious acts and employment contracts.

The purpose of the Convention?

In an international context, arbitration was and is often the chosen method of dispute resolution. An important reason for this is that many countries (at the moment 156) are party to the New York Convention. This convention deals with the recognition and enforcement of foreign arbitral awards (arbitration). For judgments of regular courts, no good pendant of the New York Convention is currently available as yet. The Convention should change this situation. This would be good news indeed, especially for smaller companies that operate on an international scale, for whom the constantly rising costs of international arbitration may be an obstacle.

The current status of the Convention

At the moment, the Convention has been ratified by Mexico (on 27 September 2007) and by the European Union (on 11 June 2015). With the accession of the European Union to the Convention, all member states of the European Union (with the exception of Denmark) have automatically also become a party to the Convention. The United States and Singapore have signed the Convention and will, upon ratification, accede to the Convention as well. It is expected that Singapore, who signed the Convention early this year, will also ratify in the near future. In the United States, it is currently being discussed whether the Convention should be implemented at federal or at state level. In other countries, including Australia, the Convention is being debated.

With the entry into force on 1 October, more than ten years after the presentation of the final version of the Convention, the Convention can now go full steam ahead. Time will tell whether it has created sufficient momentum to become the equal of the New York Convention.

Sources: Press release of the European Commission of 11 June 2015, “Hague Convention on Choice of Court Agreements: approval on behalf of the EU”; News report of the Hague Conference on Private International Law of 1 October 2015, “The 2005 Choice of Court Convention enters into force”; Text of the Hague Convention on Choice of Court Agreements.

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