In a positive development for cross-border litigation, the UK Government has recently announced that it intends for the UK to join the Hague Judgments Convention. This follows the closure of a formal consultation it held into the issue; to which our banking litigation team contributed.
What is the Hague Judgments Convention 2019 (HJC)?
The HJC is an instrument which provides a recognition and enforcement regime for court judgments, in civil and commercial matters, amongst states who become party to it (HJC Contracting States). It is concerned with the treatment of a judgment from one HJC Contracting State (the State of origin) in another HJC Contracting State (the requested State).
As with any such instrument, it is technical and contains detailed provisions. A “taster” is as follows.
Bases for recognition and enforcement: At the heart of the HJC is its list of “bases”. If any one of these are met then the judgment becomes eligible for recognition and enforcement under the HJC’s scheme.
These “bases” contains grounds which, broadly speaking, establish a connection between the defendant and the State of origin (e.g. defendant was habitually resident there), or a connection between the claim and State of origin (e.g. place of performance of a contract). The HJC is “holistic” in the sense that the bases cover a range of grounds and are not limited to, for example, contractual claims.
Notably, one of the bases is the existence of a choice of court agreement in favour of a court of the State of origin other than an exclusive choice of court agreement. The meaning of that term is then derived from the 2005 Hague Convention on Choice of Court Agreements (“HCCC”) (the HCCC and the HJC are intended, in a broad sense, to be complimentary but their operation is different and there is no requirement on a state to be party to both).
General effect/regime: Where it applies, the HJC’s recognition and enforcement regime requires recognition and enforcement in any HJC Contracting State without a review of the merits of the case. There are, however, certain grounds (broadly familiar from other international law instruments) upon which this can be refused.
Entry into force provisions: The HJC contains reasonably complex provisions as to its entry into force. In summary, however, when one state deposits its instrument of ratification/acceptance it can choose to opt-out of the HJC’s application between it and any other HJC Contracting State. Each HJC Contracting State also then has a 12 month period in which it has an equivalent, individual, right to decide that the HJC will not apply as between it and the joining state. Subject to these notifications, the HJC then enters into force accordingly between the joining State and the other HJC Contracting States on the first day of the month after the expiry of that 12 month period. Furthermore, in order for it to apply to a particular set of proceedings, the HJC’s transitional provisions require the proceedings to have been instituted at a time when the HJC had effect between the State of origin and the requested State.
Recently, the HJC entered fully into force for the first time and as between the EU Member States (excluding Denmark) and Ukraine (for more on this, and the HJC generally click here). Uruguay also, in September 2023, recently ratified the HJC (so the 12 month period referred to above will expire in relation to Uruguay on 1 October 2024).
What is happening in relation to the UK?
Early in 2023, the UK Government opened a consultation into whether the UK should join the HJC. At the time, our banking litigation team provided a response to the consultation. In our response, we expressed the view is that the UK should ratify the HJC, as it would improve the mechanisms available for the enforcement of English assist litigants before the English courts, and promote their use as a forum for cross-border dispute resolution.
Following on from that process, the UK Government has now issued its report containing its policy intentions in relation to the HJC. The report notes that 39 responses were received in total and that these were all unequivocal in their assessment that the UK should join the HJC and that any potential benefits of joining the HJC outweighed any downsides.
In its report, the UK Government was, essentially, in agreement. It recognised that the HJC offers a strong multilateral framework, would give business and consumers greater confidence in cross-border transactions and that its geographic reach is likely to increase over time. Overall, it therefore concluded that it was the right time to join the HJC and that it would take steps to do so as soon as practicable.
Why does this matter?
At this point in time, first and foremost, because it carries the potential to help rebuild cross-border judicial co-operation with the EU. As is well known, aside from the HCCC (which is relatively narrow in scope), following the UK’s exit there has been no holistic EU/UK arrangement covering mutual recognition and enforcement of judgments, with the result that national law may apply in many cases. The HJC could help plug that gap, as well as offering coverage in respect of other states. More specifically for the financial services sector, given the prevalence of jurisdiction agreements in favour of the English courts, and which incorporate some form of non-exclusivity (for example asymmetric agreements), the potential coverage that the HJC may provide for such choices will doubtless be of particular interest.
What happens next?
In the short term it seems likely that the UK will sign the HJC. Although signature carries no legal significance, it is to be hoped that the UK would take the (more important) step of ratification soon after.
Once that takes place, given the HJC’s relatively lengthy, and complex, entry into force provisions (including the 12 month lead time for other HJC Contracting States to “opt-out” in relation to a ratifying state), parties will still need to wait a while before they can consider making positive decisions (including those concerning jurisdiction agreements) based on any application of the HJC to the UK. Overall, however, that the UK is starting out on this path is a positive development for cross-border litigation. Progress will be monitored with interest.
For further information, please contact:
Patrick Robinson, Partner, Linklaters