The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters 2019 (the “Convention”) entered into force on September 1st, 2023, between the EU Member States (excluding Denmark) and Ukraine. The intention of the Convention is to remedy frustration by businesses who operate cross-border at the time, cost, and complexity of enforcing national court judgments across borders. In this article we look at the purpose of the Convention, how it operates and whether the USA and UK will ratify it in the future.
The Convention has currently been signed by Israel, Costa Rica, Russia, the United States, Montenegro, and North Macedonia, and ratified by Uruguay on 1st September 2023. To join the Convention a state must deposit a notification with the HCCH registry following which the Convention will enter into force for that state on the first day of the month following a 12-month period after the notification has been deposited.
What is the purpose of the Convention?
The Convention seeks to improve access to justice globally and to support fair multilateral trade, investment, and mobility by means of cooperation across legal systems. To achieve this objective, the Convention provides a reciprocal framework for the recognition and enforcement of foreign court judgments in civil or commercial matters. In doing so it helps to streamline legal proceedings, reduces costs and time, and empowers parties (both businesses and individuals) to make informed decisions about where to initiate their proceedings by considering the ease of enforceability in other Contracting States.
Judgments within the Convention’s scope
The Convention sets up a basic framework for the circulation of foreign judgments within its scope, leaving Contracting States the sovereignty to establish their own national provisions for the recognition and enforcement of foreign civil or commercial judgments above the base level provided for. The Convention complements the 2005 Hague Choice of Court Convention, and the 1965 Hague Service Convention. Nevertheless, it is much narrower in scope in some ways than its predecessors. It particularly pertains to the legal validity and enforceability of court decisions explicitly on civil and commercial matters, and does not apply to criminal, revenue, customs, or administrative matters. It has no bearing on matters which are treated differently across jurisdictions. Examples include insolvency, competition, or privacy and defamation matters. Its scope also does not cover technical matters addressed in more specialised treaties, such as family, arbitration and intellectual property matters.
The Convention does not apply to all judgments but only to those decisions “on the merits given by a court”, including a decree or order, and to a determination of costs or expenses of the proceedings by the court (including an officer of the court) (see Article 3). It does not apply to interim measures such as an interim injunction.
Procedure of recognition and enforcement
The main purpose of the Convention is that a judgment given by a court in one signatory state must be recognised and enforced by the courts of the of another State when both are parties to the Convention. For example, a French company contracts with a Ukrainian company regarding the supply of goods from the Ukrainian company into France. The contract states that the Ukrainian courts shall have jurisdiction. The French buyer does not pay for the goods received and the Ukrainian seller sues the French company in Ukraine. The court rules in favour of the Ukrainian company, who wish the judgment to be enforced in France where their counterparty’s assets are. Under the Convention the French court shall not refuse this application as the Convention is in force in both States and the judgment meets one of the requirements set out in Article 5 for recognition and enforcement to occur. To date, the same procedure would not work with a French buyer and a seller from the United Kingdom.
Article 5 provides a list of base criteria for courts to use to assess whether judgments should be recognised and enforced. These include, among others, if the person was a resident in the State of origin at the time they got involved in the proceedings, if their main place of business was in the State of origin at the start of the proceeding (and the judgment is based on that business’ activities), or also if they have expressly consented to the jurisdiction of the court of origin during the respective proceedings. The legal person seeking recognition must prove only one of these jurisdictional bases for the recognition and enforcement to take place.
Refusal by the requested court to recognise and enforce the judgment is permissible in a limited number of cases. Essentially the requested courts cannot review the merits of the decision of the origin court or re-open the dispute again to discuss its substance. Recognition can be postponed if one of the parties is seeking to appeal the original decision in the country where the judgment was rendered.
Articles 12 -14 of the Convention set out the procedure which must be followed by those seeking to have a judgment recognised and include the documents which must be produced and the fees to be paid. Of practical relevance is the rule that if the documents are not in an official language of the requested State, they must be accompanied by a certified translation into an official language of the requested State, unless the law of the requested State provides otherwise.
Declarations made by contracting States
Contracting states are able to make declarations in relation to the provisions of the Convention. Parties and their (inhouse) lawyers should check the HCCH website in order to find out what declarations a state may have made. For example, under Article 17 a State may declare that its courts may refuse to recognise or enforce a judgment given by a court of another Contracting State if both parties were resident in the requested State, and the relationship of the parties and all other elements relevant to the dispute, other than the location of the court of origin, were connected only with the requested State. In other words, recognition may be refused if the dispute has no international element.
Which other States have expressed interest in the Convention?
As previously mentioned, Uruguay ratified the Convention on 1st September 2023. It will therefore enter into force on September 1st, 2024 between Uruguay and the EU and Ukraine. Whilst Israel, Costa Rica, Montenegro, North Macedonia, Russia, and the United States have all signed the Convention a signatory state is not obliged to take the next step to ratify it.
Position of the USA
The United States is yet to signal when it intends to ratify the Convention although there are signs that it intends to do so at some point in the near future. At present businesses outside the US contracting with those based within the US often rely on arbitration as their preferred dispute resolution method because arbitration awards can be enforced in the US under the New York Convention. Ratification of the Convention would be an important step in enhancing the status of the Convention as an important practical international civil jurisdiction instrument. One issue that is preventing ratification now is that the recognition and enforcement of court judgments is an area of jurisdiction for each individual state. As a result, the Uniform Law Commission (the body which drafts state laws on subjects where uniformity across the states is desired) established a committee in 2022 to recommend the most appropriate method for implementing the Convention. The committee is yet to report back.
Position of the UK
On the 15th of December 2022, the UK Ministry of Justice initiated a consultation, seeking opinions on the possibility of the UK becoming a Contracting State to the Convention. Such a decision, if ratified and implemented, could potentially facilitate the recognition and enforcement of English judgments in EU Member State courts (and vice versa). This has become increasingly important to those obtaining court judgments from both UK and EU member state courts as following Brexit there are no longer reciprocal arrangements for the recognition and enforcement of court judgments between the UK and EU (unless they contain an exclusive jurisdiction clause and fall within the 2005 Hague Choice of Court Convention). The consultation closed on the 5th of February 2023, and the UK government has yet to announce its next steps.
If you would like to read more about the Convention and the impact it may have on the recognition and enforcement of judgments from the courts of countries in the EU, UK and Australia please read our article on this topic here.
With thanks to Giorgia Loredan for her help in drafting this article.
For further information, please contact:
Evelyn Tjon-En-Fa, Partner, Bird & Bird
evelyn.tjon-en-fa@twobirds.com
