Worldwide treaty governing jurisdiction and enforcement on the horizon?

Posted on: October 1st, 2015

Some ten years after it was concluded, 1 October 2015 finally sees the entry into force of the so-called Hague Choice of Court Convention. The Convention could significantly impact international dispute resolution, with one commentator stating that it “has the potential to achieve for litigation what the New York Convention achieved for arbitration”.

The Convention’s focus is on commercially-agreed jurisdiction clauses, which seek to prescribe the identity of the court tasked with resolving disputes between parties to a contract. Such clauses can either be exclusive (i.e. prescribe one court for that task to the exclusion of all others) or non-exclusive (i.e. prescribe a court for that task without preventing a party from commencing proceedings elsewhere).

Notwithstanding that jurisdiction clauses are regularly entered into by parties to a contract, such clauses are not always respected by national courts. Such courts are often guided by their own rules as to whether such clauses are effective and, if so, what that effect is.

Against this background, the Convention’s aim is to create a level of predictability for parties who have entered into jurisdiction clauses, so that they know where proceedings can be commenced. In so doing, the intention is to eliminate the risk of parallel proceedings being initiated elsewhere. Accordingly, where the courts of a contracting state have been nominated to determine a dispute, the Convention precludes them from declining jurisdiction in favour of an alternative forum. Conversely, save for certain circumstances, the Convention mandates the courts of other contracting states to suspend or dismiss proceedings where those courts are not the court contractually chosen to determine the dispute.

Similarly, the Convention seeks to regularise rules concerning enforcement of judgments, so that judgments can be recognised and enforced elsewhere (save for in certain prescribed circumstances such as where a judgment was obtained by fraud). Although the rule applies to exclusive jurisdiction clauses, contracting states are also permitted to recognise and enforce judgments of courts prescribed by non-exclusive jurisdiction clauses.

Whilst it does not yet have the range of coverage of the New York Convention – at present, only the European Union (save for Denmark) and Mexico have acceded to the Convention, and Singapore and the US have signed but not ratified the Convention – if it gains traction internationally, the Convention foresees the possibility of a worldwide treaty governing jurisdiction and enforcement. As such, in the increasingly global world of business, it is certainly important for parties and their lawyers to monitor developments closely.