Hague Convention on Choice of Court Agreements

November 2015

Arbitration Update

The Convention of 30 June 2005 on Choice of Court Agreements came into force on 1 October 2015 (Hague Convention). The objective of the Hague Convention is to ensure the effectiveness of choice of court agreements between parties to international commercial transactions.

It has been heralded as potentially the litigation equivalent of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), although it will take some time before there are enough Contracting States to the Hague Convention for it to have the same breadth of impact. At present, Mexico has acceded to the Hague Convention, and 27 of the 28 Member States of the European Union have signed and ratified it. The United States and Singapore have also signed but not yet ratified the Hague Convention.

WHAT YOU NEED TO KNOW

 Although Australia is not presently a signatory to the Hague Convention, it may nevertheless have implications for parties entering into international commercial transactions here.

 When drafting dispute resolution clauses, it may be relevant to the question of whether and where to arbitrate or litigate, to consider the relevance of the Hague Convention, together with other avenues of enforcement of foreign judgments (for example, legislation on the reciprocal enforcement of foreign judgments such as the Foreign Judgments Act 1991 (Cth)).

 If you are agreeing to litigate in a State that has signed and ratified the Hague Convention, remember to agree to exclusive jurisdiction in order to obtain the benefit of the provisions in the Hague Convention.

 Keep an eye out for ratification of the Hague Convention by Singapore and the United States, and additional signatories to the Hague Convention.

Key provisions unless the parties have expressly provided otherwise (Article 3(b)). There are three key aspects of the Hague Convention. Second, a court of another Contracting State must suspend or dismiss proceedings to which First, the courts of a Contracting State chosen in an exclusive choice of court agreement applies an exclusive choice of court agreement must not (Article 6). There are only limited exceptions to decline to exercise jurisdiction (Article 5). It is this obligation – such as the agreement being important to note that where a choice of court null and void, or enforcing the agreement would agreement is silent on whether the agreement is lead to manifest injustice or would be contrary exclusive or non-exclusive, the Hague to the public policy of that other Contracting Convention deems it to be an exclusive choice State.

AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN PAPUA NEW GUINEA SAUDI ARABIA SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA

Third, the judgment of the chosen court shall be Implications recognised and enforced in other Contracting States with no review of the merits of the One of the key advantages of arbitrating judgment (Article 8). A court may refuse to disputes arising out of international contracts is enforce a judgment only in limited the enforceability of foreign arbitral awards in circumstances – for example, if judgment was the 156 countries which are signatories to the obtained by fraud, or if enforcement of the New York Convention. It remains to be seen judgment would be incompatible with the public whether the Hague Convention will be adopted policy of the State in which enforcement is as broadly as the New York Convention. sought. While Australia is not yet a signatory to the Applicability Hague Convention, it may nevertheless have implications for parties entering into It is important to note that the Hague international commercial transactions here, Convention only applies to: when weighing up the advantages of arbitration versus litigation, and the appropriate choice of  civil or commercial matters (and does not jurisdiction if litigation is preferred. apply to certain matters such as consumer agreements, employment contracts, anti- In certain circumstances, it may be that the trust or competition matters, claims for Hague Convention, together with other avenues personal injury brought by natural persons, of enforcement of foreign judgments (eg under and carriage of persons and goods); legislation providing for reciprocal enforcement  international cases; of foreign judgments, such as the Australian  cases where there is an exclusive choice of Foreign Judgments Act 1991 (Cth)), provides court agreement between the parties sufficient means of enforceability, making (although an agreement that designates the litigation an attractive option, particularly in courts of one Contracting State is deemed to light of the ability to join third parties to court be exclusive); and proceedings or to utilise the court's coercive  exclusive choice of court agreements powers. concluded after the Hague Convention enters into force for the State of the chosen court.

Contacts

Georgia Quick Lorraine Hui

Partner Senior Associate

Sydney Sydney T: +61 2 9258 6141 T: +61 2 9258 6011

E: [email protected] E: [email protected]

Ashurst Arbitration Update • November 2015 2

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This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions. For more information please contact us at [email protected]. 3 Ashurst Australia (ABN 75 304 286 095) is a general partnership constituted under the laws of the Australian Capital Territory and is part of the Ashurst GAUSTRALIAroup. Further\LHUI details\237400921.01 about Ashurst can be found at www.ashurst.com.

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