Rian Matthews and Dr Max Oehm from Baker McKenzie have published an article in the Butterworths Journal of International Banking and Finance Law. The article looks at the applicability of English court Schemes of Arrangement under the Hague Convention on Choice of Court Agreements.
The authors examine the future of English Schemes of Arrangement after Brexit, and consider how English schemes might be enforced under the Hague Convention both in Europe and in other states which have acceded to the Convention.
- The Hague Convention on Choice of Court Agreements is a multi-lateral treaty, the aim of which is to promote the enforcement of exclusive choice of court agreements between parties to international transactions, i.e. an agreement between two or more commercial parties to submit to a designated national court’s jurisdiction all disputes between those parties, so that their dispute can be resolved by that designated court exclusively.
- The current signatories to the Hague Convention are Mexico, the United States of America[*], the European Union, Ukraine[*] and Singapore ([*] not yet ratified). The UK is currently a party to the Hague Convention via its EU membership. Once the UK leaves the EU, it would need to separately accede to the Hague Convention.
- Under English law, a Scheme of Arrangement enables a company to effect a compromise or arrangement with its members or creditors, subject to sanction by the English courts and certain legal requirements. English Schemes of Arrangement are currently thought to be enforceable in the EU under the Recast Brussels Regulations. Once the UK leaves the EU, however, it may no longer be possible to rely on the Recast Brussels Regulations in this way.
- The Hague Convention may provide an alternate means of enforcing English Schemes of Arrangement in the EU, as well as route to enforce in other states which have acceded to the Convention, assuming the UK becomes a signatory to the Convention. Enforcement under the Hague Convention, however, would be subject to certain limitations. In particular, the Convention would only come into play where there was an exclusive jurisdiction clause in favour of the English courts in whichever finance agreement or other contract or document was intended to be subject to the scheme.
- Bond agreements and other finance documents sometimes contain contractual amendment mechanisms. A debtor seeking a Schemes of Arrangement in the English courts might try to use such a mechanism to incorporate an English court exclusive jurisdiction clause into the relevant bond / finance document and thereby come within the Hague Convention. It is an open question whether this can be done under the Hague Convention, however there is some English case law with respect to the Recast Brussels Regulations (which shares some similarities with the Hague Convention) which suggests this strategy might work in some cases.
This article was first published in Butterworths Journal of International Banking and Financial Law.