On January 19, 2009, the United States became the second signatory to the Hague Convention on Choice of Court Agreements (the “Convention”).3 Following the lead of the US, on April 1, 2009, the European Community (”EC”) became the third signatory to the Convention. The Convention aims to promote international trade and investment through uniform rules governing exclusive “choice of court”4 agreements between parties to commercial transactions and the recognition and enforcement of judgments resulting from proceedings based on such agreements.5 To date, only Mexico has acceded to the Convention6 and commentators have often questioned whether the treaty will fail for lack of interest. With the signatures of the US and the EC, however, the Convention is one step closer to entering into force.7 Moreover, the renewed interest of the US and EC in joining the Convention may provide incentive for other states to follow suit.
Purpose and Scope
The Convention aims to reassure contracting parties that where they agree upon an exclusive court to hear potential business disputes arising between them, that agreement and the resulting judgment will be recognized and enforced internationally. Unlike in the field of international arbitration, there has been no international treaty framework for litigation that accomplishes this.8 Mexico and the US, for example, have enforced each other’s judgments based on international comity alone. The enforceability of judgments has therefore been varied and uncertain, leading many parties to choose to arbitrate international disputes rather than to take their chances with domestic courts. The Convention seeks to provide certainty as to the enforcement of litigation judgments.
The Convention applies to international civil or commercial cases where the parties have entered into an exclusive choice of court agreement.9 An “exclusive choice of court agreement” is an agreement between two or more parties that designates the courts (or one or more specific courts) of one Contracting State for the purpose of deciding disputes which may arise in connection with the parties’ legal relationship.10 Under this definition, a court will presume that the contractual designation of the courts of one Contracting State is exclusive, unless the parties expressly provide otherwise.11 The choice of court agreement must be concluded or documented in writing or by any other means of communication that makes the information usable for subsequent reference (e.g., e-mail).12
The Convention defines an “international” case differently for purposes of jurisdiction and for purposes of enforcing judgments. For the provisions relating to jurisdiction (Chapter II of the Convention), a case is “international” unless the parties are residents of the same state and both their relationship and the elements of their dispute only involve that state.13 To come within Chapter II of the Convention, the parties cannot choose a court in a foreign state as their “chosen court.”14 For purposes of recognition and enforcement of judgments (Chapter III of the Convention), the case is “international” as long as the judgment was rendered in a court of one Contracting State and is sought to be enforced in a court of another Contracting State.15
The Convention excludes certain subject matters. For example, the Convention does not apply to choice of court agreements entered into by consumers or relating to employment contracts.16 Other areas outside the scope of the treaty include: personal injury, torts arising outside of contract, carriage of passengers and goods, insolvency, certain maritime issues, antitrust and competition, some intellectual property rights, family law, wills and succession and arbitration.17
Chapter II of the Convention governs the obligations of courts of Contracting States selected in an exclusive choice of court agreement (so-called “chosen” courts) and courts of Contracting States not selected under such agreements but seized with the matter (so-called “seized” or “non-chosen” courts) with respect to jurisdiction. First, Article 5 gives a chosen court jurisdiction to decide disputes arising out of a choice of court agreement, unless the agreement is null and void under the chosen state’s laws.18 The chosen court is likewise prohibited from declining to exercise its jurisdiction on the basis that a different forum would be more appropriate. In addition, Article 6 instructs non-chosen courts to dismiss or suspend proceedings to which an exclusive choice of court agreement applies unless: (1) the agreement is null and void under the law of the state of the chosen court; (2) a party lacked capacity to assent to the agreement under the law of the state of the seized court; (3) enforcing the agreement would be manifestly unjust or contrary to public policy of the state of the seized court; (4) the agreement cannot be reasonably performed for exceptional reasons outside of the parties’ control; or (5) the chosen court has decided not to hear the case.19
Recognition and Enforcement of Judgments
Under Chapter III of the Convention, Contracting States must recognize and enforce judgments given by chosen courts.20 When faced with a request for recognition or enforcement, the non-chosen (or “requested”) court cannot review the merits of the judgment given by the court of origin and is bound by the findings of fact on which the chosen court based its jurisdiction, unless the judgment was given by default.21 However, recognition or enforcement may be refused or postponed if the judgment is still under review in the state of origin.22
Pursuant to Article 9 of the Convention, a Contracting State may refuse to recognize or enforce a judgment of another Contracting State where: (1) the agreement was null and void under the law of the state of the chosen court; (2) a party lacked capacity to enter into the agreement under the law of the requested state; (3) the defendant did not have sufficient notice of the pending action in the chosen court; (4) the judgment was obtained through some kind of procedural fraud; (5) recognizing the judgment is against the public policy of the requested state; (6) the requested state has already rendered an inconsistent judgment in a dispute between the same parties; or (7) another Contracting State has rendered an earlier judgment between the same parties on the same cause of action, provided that the earlier judgment meets the Convention’s recognition requirements.23
Even if a judgment satisfies these requirements, under Article 11 of the Convention a Contracting State still may refuse to recognize a judgment to the extent that the award compensates the injured party for more than actual damages.24 This limitation responds to the concern over frequency and size of exemplary and punitive damage awards in the United States. Awards that include these types of damages are still enforceable or recognizable as to the compensatory damages under Article 15 of the Convention, which severs the unenforceable or unrecognizable aspect of the judgment.25
Furthermore, the Convention prescribes the documents which should accompany an application for recognition or enforcement. The documents include, inter alia, a certified copy of the judgment, the exclusive choice of court agreement, and any documents necessary to establish that the judgment has effect or is enforceable in the state of origin.26
The Convention does not become effective for agreements and judgments until it has been ratified by a second party, which could be either the US or the EC.27