The new Hague Convention: Aspirations of Certainty, Efficiency and Access to Practical Justice through the Recognition and Enforcement of Foreign Judgments – Xara Kaye

On 2 July 2019, the Member States of the Hague Conference on Private International Law (HCCH) formally adopted the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019 Convention), a significant development in the private international law landscape. The aim of the Convention is to create greater legal certainty and efficiency, as well as provide a process for cost-saving and practical access to justice. While the Convention has been heralded as an important instrument that will fill a significant gap in private international law, its impact will be determined by the extent to which it is broadly adopted – an outcome which is not guaranteed.

Such a Convention has been a long time coming. In 1971, the HCCH prepared a Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (1971 Convention), which has never come into operation. In a second attempt initiated by the United States of America, the HCCH began work on the Judgments Project in 1992 (among the delegates at the Diplomatic Session there were few remaining who would see the project from its genesis to completion). The Judgments Project has focused on two tenets of private international law with regard to cross-border litigation: the international jurisdiction of courts, and the recognition and enforcement of their judgments abroad. Initial attempts to produce a composite convention addressing these areas were unsuccessful, in part due to conflicting positions of Europe and the United States of America with regard to grounds of jurisdiction. From 2001, the Project was broken into discrete issues, resulting in the 2005 Hague Convention on Choice of Court Agreements (Choice of Court Convention), the 2019 Convention, and the promise of future work on the question of direct jurisdiction.

Purpose of the 2019 Convention

The 2019 Convention aims to facilitate the circulation of judgments between Contracting Parties by providing a base standard for the treatment of foreign judgments in civil and commercial matters. This should promote certainty by allowing parties to litigation to more efficiently enforce judgment debts. Further, the 2019 Convention should reduce first, the need for judgment creditors to initiate duplicate proceedings in pursuit of assets in another jurisdiction and secondly, the likelihood of ‘forum shopping’ by judgment debtors seeking a preferable outcome.

Harmonising the law around international recognition and enforcement of judgments by creating a homogenous approach between Contracting Parties is also desirable in improving efficiency and reducing transactional and litigation costs associated with the process of foreign enforcement, which until now has been dependent on bilateral treaties, or the national law of the state being requested to enforce. The Chair of the Special Commission on the Judgments Project, Mr David Goddard QC, has suggested that a “clear, certain and predictable framework” for recognition and enforcement will enable a party deciding where to bring a claim to make an informed choice about where to bring initial proceedings.

What judgments will circulate?

The 2019 Convention provides for the circulation between Contracting Parties of “judgments”, being “any decision on the merits given by a court”, including both monetary and non-monetary judgments.

It covers a much broader mandate than the Choice of Court Convention, but is intended to complement it. The final text of the 2019 Convention has been influenced by the objective that all instruments produced under the auspices of the Judgments Project operate together without overlap. This is reflected in Article 5 which provides that a judgment rendered by a court designated in a choice of court clause will circulate under the 2019 Convention, but only if it is a non-exclusive designation; exclusive agreements are covered by Choice of Court Convention. This creates a gap in the 2019 Convention. While it seems absurd to exclude agreements on the basis that the parties made an exclusive choice, the drafting preserves the value of the Choice of Court Convention and promotes the relationship between the two instruments.  

Other bases for recognition and enforcement set out in Article 5 of the 2019 Convention include:

  • that the person against whom the judgment will be enforced or recognised:
    • was habitually resident in the State where the judgment originated;
    • had their principal place of business in the State where the judgment originated;
    • brought the claim on which the judgment was made;
    • expressly consented to jurisdiction; or
    • argued on the merits without contesting jurisdiction; or
  • that the judgment ruled:
    • on a contractual obligation which was (or should have been) performed in the State where the judgment originated;
    • on a lease of immoveable property located in the State where the judgment originated; or
    • on a counterclaim (under certain conditions).

No review on the merits is permitted, unless specifically provided for. Where a judgment falls into one of these categories it will be recognised automatically unless one of the grounds for refusal applies.

Notably, controversial subjects grounded in policy, such as intellectual property and antitrust (competition) matters have been excluded from the scope of the 2019 Convention.  This is despite having been considered extensively as part of a number of Working Groups throughout the drafting process.While in some ways this is unfortunate, these issues could have proved insurmountable obstacles to accession for many states, and therefore damaged the effectiveness of the 2019 Convention.

The grounds for refusal under the 2019 Convention are relatively narrow. Article 7 allows a requested state to refuse recognition or enforcement where there was not effective notice and service in the state of origin, in the instance fraud, contravention of a choice of court agreement, or  inconsistency with an earlier judgment (in the requested state or another state if that judgment would be eligible for enforcement). The general protection for requested states is the grounds to refuse recognition or enforcement where it would be manifestly incompatible with the public policy of the requested state.

Prospects of success

The HCCH Members have successfully adopted a new Convention on the Recognition and Enforcement of Foreign Judgments. However, the Chair of the Commission on the Judgments Project, has set the bar for success of the 2019 Convention as:

“a convention that commands broad acceptance and that is widely ratified (the aim is not to prepare an elegant and beautiful text with no practical consequences in the real world), and also a convention that has the maximum reach consistent with that goal.”

Success by this measure will not be determined for some time, despite the Convention being lauded as filling “an important gap in the landscape of private international law” by those present for the signing of the Final Act. The Secretary-General of the HCCH rightly emphasised the important work ahead in promoting the 2019 Convention and encouraging ratification and accession. This gap will not be truly filled until the 2019 Convention is operating widely, irrespective of the text.

Prior to the finalisation of the 2019 Convention, commentary was tentatively optimistic about the possibility of success. Uruguay has already signed the 2019 Convention, but old issues may still prove prohibitive to wide ratification. Separation, as far as possible, from the question of jurisdiction and the exclusion from scope of more controversial issues may facilitate a more positive response than that enjoyed by the 1971 Convention, and earlier drafts of a composite convention.

However, the 1971 Convention was not successful in practice, in part, because it required “bilateralisation” (for each Contracting Party to accept each other). None of the handful of Contracting Parties executed the required bilateral accords. The 2019 Convention sails dangerously close to imposing a similar process. Instead of requiring the acceptance of each signatory, it provides an opt-out mechanism, where Contracting Parties may make a declaration that the 2019 Convention will not be in force between them and another Contracting Party. Mutual trust in the domestic legal institutions of other States is crucial for the effective operation of the 2019 Convention, but it remains to be seen whether this opt-out mechanism will promote or prohibit the Convention’s broad acceptance.

If the passage of the Choice of Court Convention is any indication, uptake will likely be slow. That Convention entered into force in 2015, ten years after its adoption by the HCCH, and still only boasts a limited number of Contracting Parties, namely Mexico, Singapore, the European Union (with Denmark acceding separately), and Montenegro. The first case to be enforced under this Convention was granted in Singapore in 2018. The progress of the 2019 Convention may be equally slow because of its relationship to the Choice of Court Convention. To benefit fully from the operation of the 2019 Convention, Contracting Parties would need to be in a position to join both conventions; it is perhaps unlikely that where states were unwilling to join a relatively narrow convention they will readily join one that has a much further reach.

Why so slow?

It is unusual that the HCCH Member States do not quickly and easily join conventions in respect of which they have invested significant money and time into negotiation and drafting. The HCCH operates by consensus which perhaps, along with dogged commitment to achieving a result, risks producing an instrument that is the product of so much compromise by all that it is not desired by any. This incongruence may simply be due to difficulties in reconciling politics with the ideal position in this field.

The uptake of HCCH conventions varies greatly between instruments. The Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction (Abduction Convention) has 101 Contracting Parties and the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents(Apostille Convention) has 117, whereas the Hague Convention of 13 January 2000 on the International Protection of Adults has only 12. Despite these conventions being drafted and adopted by the HCCH using the same process, it is difficult to identify trends leading to broad acceptance. Arguably, widely adopted legal co-operation instruments such as the Apostille and Service Conventions are procedural in nature, and are less intrusive as far as domestic policy may be concerned. Interestingly, however, some conventions relating to human rights, particularly the rights and protection of children are widely ratified despite dealing with political (though perhaps not contentious) issues and requiring courts to reach certain outcomes (for example, the Abduction Convention). Conversely, party autonomy in contracts is paramount in many jurisdictions, yet the Choice of Court Convention which is narrowly focused on supporting the operation of exclusive choice of court agreements has been slow to have an impact. Notwithstanding Articles which narrow the scope of the 2019 Convention, as well as the public policy grounds for refusal, the 2019 Convention touches on a wide range of issues, including policy concerns, to a far greater extent than other HCCH conventions; it is walking a narrow line between disappointing those who wish the Convention covered more, and those who wish to limit its effect.

Australian impact

Undeniably, the impact of the 2019 Convention in Australia will be non-existent until Australia becomes a Contracting Party. Australia’s current framework for recognition and enforcement of foreign judgments is primarily provided by common law. The limited statutory framework set out in the Foreign Judgments Act 1991 (Cth) (Foreign Judgments Act) and its Regulations applies only to judgments in certain areas, and to a select number of jurisdictions, which notably do not include Australia’s major trading partners, China and the United States of America. The operation of the Foreign Judgments Act is dependent on an assessment of reciprocity of treatment; whether the incoming judgment is of a kind that would be given recognition if it were an Australian judgment and recognition was being sought in the state where it originated Both systems only recognise monetary judgments. Consequently, if the 2019 Convention is broadly adopted, it will offer a significant change to the predominantly common law Australian framework for recognition and enforcement. Contrariwise, if it is not broadly adopted, the 2019 Convention will suffer from the same limitations as the Foreign Judgments Act.

It should be noted that there is specific legislation dealing with some important jurisdictions for Australia. The circulation of judgments to and from the United Kingdom and New Zealand is subject to bilateral arrangements, under the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters 1994 (Cth) and the Trans-Tasman Proceedings Act 2010 (Cth) respectively.

Those seeking to enforce Australian judgments overseas are subject to equally piecemeal and uncertain systems. As such, there is considerable commercial benefit for Australia to reap from the 2019 Convention, should it become widely ratified. Reduced risk of parallel proceedings, diminished cost of enforcement proceedings, and increased certainty in international commercial transactions would all improve the efficiency and attractiveness of the Australian legal landscape for those contemplating doing business.

Australia has expressed its intention to join the Choice of Court Convention on a number of occasions in recent years, and a Joint Standing Committee on Treaties in 2016 recommended to the Government that Australia accede. To date, it has not done so, making the likelihood of the 2019 Convention coming into force in the imminent future fairly slim. On the other hand, perhaps the two Judgments Project conventions operating in tandem will offer a greater incentive for Australia to join both.

The 2019 Convention has the potential to significantly alter the international legal framework for the recognition and enforcement of foreign judgments. It represents the culmination of significant effort on the part of the HCCH Member States to find common ground and develop a base standard for treatment of incoming judgments. While the text of the Convention has either reduced or removed more contentious obstacles to accession, there are still a range of factors that could affect a broad positive reception. Whether and to what extent the potential impact of this instrument is realised remains to be seen.

Xara Kaye is a Graduate-at-law in Sydney, and former Nygh Intern at the Hague Conference on Private International Law.