The Evolution of the Choice of Court Clauses : the “Hague Convention of 30 June 2005 on Choice of Court Agreements”

The evolution of jurisdiction clauses : from the Hague Convention of 30 June 2005 to the report of 29 June 2010 on the implementation and review of Brussels I Regulation No 44/2001

Abstract: The purpose of the present contribution is to laid down the evolution of the appreciation of the importance of the jurisdiction clauses in International Commercial matters.

The importance of such clause was consecrated by the Hague Convention on Choice of Court Agreements of 30 June 2005 in order to harmonize at least some of these issues, and to create greater predictability and reliability in this field.

Generally, the Convention aims to ensure three basic rules, each of those subject to certain exceptions: first, for the designated court to assert jurisdiction, essentially excluding judicial discretion under the forum non conveniens doctrine; second, for any other court to decline jurisdiction; and finally to recognize and enforce judgments rendered by a designated court abroad, without a review of the merits of the case

The report of 29 June 2010 on the implementation and review of Brussels I Regulation No 44/2001 completes this evolution and refers to this Convention in its preamble.

Finally, this report states that the Brussels I Regulation No 44/2001 should be amended in order to allow a reflexive effect to be given to exclusive choice-of-court clauses in favor of third States’ courts.

This element set out a substantial evolution in the approach of the current Brussels I Regulation No 44/2001 which is only limited to the jurisdiction clauses in favor of a State Member’s courts. 

1.    The importance of jurisdiction clauses in Commercial International Contracts

1.- Jurisdiction clauses in which parties of a contract provide, for example, a specific court, or the courts of a specific country to have jurisdiction over disputes arising between them in connection with that contract, are widely utilized.

A survey prepared for the Hague Conference on Private International Law (2002) found that such clauses are particularly common in certain industries, such as insurance contracts, cross-border distributorships, loan contracts, guarantees and international commercial agreements.

Despite they prevail in contracts, national systems vary considerably as to the prerequisites of choice of court clauses.

While a number of countries place strict formalities on the acceptance of such clauses, such as the identification of a particular court, other countries also limit the possibility of choice of court clauses to business-to-business (B2B) contracts, or provide special requirements and limitations for clauses involving consumers.

For instance, the Brussels I Regulation n°44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters allows choice of court clauses in consumer contracts, which depart from the specific consumer jurisdiction rules set out in the Regulation, only under strictly limited conditions, for example if the agreement is entered into after the dispute has arisen (Art. 17).

2.    The forum non conveniens doctrine and the jurisdiction clauses in US

2.- The forum non conveniens doctrine, a legal doctrine coming mostly from common law countries, allows courts to refuse to hear an action because jurisdiction might be more appropriately or efficiently asserted by in an alternate forum.

In practice, however, for example in the US, courts will almost never rely on this doctrine so long as there is any plausible connection to the legal forum selected by the parties. Legal precedent has created a strong presumption that a forum freely selected by the parties is valid.

Hence, the party wishing to void a choice of court clause will have a heavy burden of proof in establishing that the chosen venue is improper.

3.    The adoption of the Hague Convention on Choice of Court Agreements

3.- In order to harmonize at least some of these issues, and to create greater predictability and reliability in this field, the 65 Member States of the Hague Conference on Private International Law adopted, on June 30, 2005, a new treaty, the Hague Convention on Choice of Court Agreements.

In 1992 the US proposed that the Hague Conference for Private International Law should devise a worldwide Convention on Enforcement of Judgments in Civil and Commercial Matters.

The member states of the European Community saw in the US proposal an opportunity to harmonize the bases of jurisdiction and also had in mind the far-reaching bases of jurisdiction in some countries outside of Europe as well as the dual approach of the Brussels and Lugano Conventions (i.e. Bussels I Regulation and Convention Lugano of 2007) which combines recognition and enforcement of judgments with harmonization of bases of jurisdiction (double convention).

Despite great efforts, the Hague Conference did not succeed in devising a convention that laid down common rules of jurisdiction in civil and commercial matters.

4.- After long negotiations the Conference was only able to agree on the lowest common denominator and accordingly concluded the Convention of 30 June 2005 on Choice of Court Agreements (Choice of Court Convention).

This Convention aims to do for choice of court agreements what the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards has done for arbitration agreements.

4.    The three basic rules of the Convention and the current status of its ratification

5.- In principle, the Convention applies only to exclusive choice of court agreements. However an opt-in provision allows contracting states to extend the rules on recognition and enforcement to non-exclusive choice of court agreements as well.

Generally, the Convention aims to ensure three basic rules, each of those subject to certain exceptions:

•    the chosen court in a contracting state must hear the case when proceedings are brought before it and may not stay or dismiss the case on the basis of forum non conveniens;
•    any court in another contracting state before which proceedings are brought must refuse to hear the case;
•    a judgment given by the chosen court must be recognized and enforced in principle in all contracting states, without a review of the merits of the case.

The European instruments like the Brussels I Regulation and the Lugano Convention will continue to apply in appropriate cases albeit with a somewhat reduced scope.

The European Union has exclusive competence to sign and ratify the Convention.

6.- The Convention was signed up by the European Union in April 2009, by the United States in January 2009 and by Mexico in 2007. Since Mexico had already acceded in 2007, only one more ratification or accession is needed for the entry into force of the Convention, which is open to all States.

However at this stage, the European Union and the USA have not ratified the Convention which is not entered into force yet.

5.    Conclusion : the evolution of jurisdiction clauses in the future Brussels I Regulation

7.- When this Convention enters into force, it shall harmonize at least some of these issues, and to create greater predictability and reliability in this field.

In this respect, the report of 29 June 2010 on the implementation and review of Brussels I Regulation (2009/2140(INI)) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters refers to the Convention.

Finally, the report states that the Brussels I Regulation should be amended in order to allow a reflexive effect to be given to exclusive choice-of-court clauses in favor of third States’ courts.