To anyone involved in cross-border transactions, it is clear how difficult it can be to enforce contractual rights through legal proceedings where the counterparty is located abroad. Absent an arbitration clause, any claimant needs to find a way first to serve process on the foreign party to commence proceedings. Throughout the proceedings, the claimant faces problems forcing the defendant to comply with court orders. If judgment is entered in its favour, the claimant will find it difficult to enforce it against the foreign party when assets are located outside the jurisdiction.

The key practical effect of the Agreement on Trans-Tasman Court Proceedings and Regulatory Enforcement whose implementing legislation will take effect on 11 October 2013 is:

  • The courts of one country must (subject to limited exceptions) recognise contractual choice of court agreements which stipulate that the courts of the other country are to determine an issue.
  • Australian parties can rely in dealing with New Zealand counterparties on the same judicial enforcement mechanisms of their rights and obligations that are available to them in purely domestic transactions.

This is a possible model for future agreements on harmonising the rules in relation to transnational litigation.

Background

Internationally, there are efforts under way to solve cross-border issues by providing for a uniform system of rules which govern procedural matters through international treaties. The Hague Convention on Choice of Court, concluded in 2005 (though not yet in force) aims to oblige signatory states to give effect to choice of court agreements contained in contracts. More far-reaching multi-lateral agreements on wider issues such as the enforcement of judgments are difficult to achieve due to the differences in approach of the common and civil law countries to these issues.  

There is more scope for agreement on a regional level. The Australian and New Zealand Governments concluded on 24 July 2008 the Agreement on Trans-Tasman Court Proceedings and Regulatory Enforcement. On 25 July of this year, the Governor-General fixed 11 October 2013 as the commencement date of the Trans-Tasman Proceedings Act 2010 (together with relevant subsidiary legislation) which gives effect to Australia’s obligation under the Agreement.

The aim of the Agreement on Trans-Tasman Court Proceedings and Regulatory Enforcement

The aim of the Agreement is to streamline the procedures for resolving civil proceedings with a trans-Tasman element. It is anticipated that the new regime will reduce litigation costs and improve procedural efficiency by:

  1. allowing civil initiating process issued in one country to be served in the other country without leave
  2. broadening the range of civil judgments that can be recognised and enforced between the two countries
  3. enabling civil penalty orders and certain fines for regulatory offences to be registered and enforced between the two countries, and
  4. enabling specified courts in one country to grant interim relief in support of proceedings in the other country to avoid the need for duplicate proceedings.

The Agreement also obliges the courts of one country to give effect to contractual choice of court agreements which stipulate that the other country’s courts are the competent courts.

On a practical level, the Act also expands the capacity of a party or their solicitor to appear remotely (by audio or video link technology) from one country in the other country’s court proceedings.

Prior to the Act coming into force in October 2013, the position in Australia is governed by a mix of common law and specific statutory provisions which generally do not apply a different regime to proceedings involving a New Zealand party than one from any other country. This means that service out of the jurisdiction may require leave of the court; non-monetary judgments are generally not enforceable in the other country; and monetary judgments in penalty proceedings cannot be enforced abroad.

Recognising the difficulties, the Prime Ministers of Australia and New Zealand established the Trans-Tasman Working Group on Court Proceedings and Regulatory Enforcement in 2003. Studies were undertaken both of the very successful Australian model of the Service and Execution Act 1992 which applies interstate within Australia and the far-reaching European regime which applies across most of the member states of the European Union. However, none of these regimes could be adopted outright because the legal framework of the trans-Tasman relationship is different. For example, it lacks a single appellate court which settles any interpretation issues arising out of relevant legislation (and related legislation and rules).

The working group’s recommendations

As a result of their studies, the working group’s recommendations for the Australia-New Zealand legal framework were:

  • civil proceedings issued in one country could be served in the other, without leave of the court
  • a defendant who considers that a court in another jurisdiction would be more appropriate could seek a stay on those grounds (and the test for a stay would  be the same in both countries)
  • civil judgments from the courts of one country would  be enforceable in the other country, using a simple registration procedure (money and non-money judgments)
  • Australian and New Zealand courts would be able to grant interim relief in support of the proceedings in the other country
  • civil penalty orders made in one country would be enforceable in the other country.

These recommendations were accepted by the relevant governments and incorporated into the Agreement on Trans-Tasman Court Proceedings and Regulatory Enforcement and are now being given effect in national legislation through the Trans-Tasman Proceedings Act 2010.

Practical Effect

It is expected to be of significant benefit to those who are involved in the A$21.713 billion1 of trade which takes place between Australia and New Zealand (2012 figure) and it is another reminder of how important international harmonisation of these procedural issues is to provide a safe and predictable background for international trade and commerce.

The practical effect of the Trans-Tasman Proceedings Act 2010 is that New Zealand courts have to recognise choice of court agreements designating Australian courts as competent and Australian parties can rely in dealing with New Zealand counterparties on the same judicial enforcement mechanisms of their rights and obligations that are available to them in purely domestic transactions – an assumption under which perhaps many businesses have already operated. Thus, the main surprise of the new regime may be that it has not been put in place sooner.