EC Signs Hague Choice of Courts Convention, Will EU Member States Follow?

Last week, on April 1, the European Community (EC) signed onto the Hague Choice of Courts Convention. The treaty essentially seeks to replicate for covered commercial contracts a regime of judgment recognition in cases where parties exclusively agreed on a particular court for their disputes akin to the recognition of arbitral awards that occurs under the New York Convention.  The EC signature is interesting in a several respects.

First, the timing of the signature suggests that the EC has opted to follow the U.S. lead.  It comes weeks after the U.S. signature on January 19, in the last days of the Bush Administration.  In the three years prior to U.S. signature, the treaty had lain dormant; only Mexico had acceded to it in 2007.  How firmly either the United States or the EC will support this treaty remains to be seen, however, since they have to take the additional step of ratification or acceptance to join it.  And in doing so either might include reservations, understandings or declarations that modify the treaty’s scope or operation in significant ways.  Moreover, I’m not sure this one instance of the EC following U.S. leadership can be read to have broader political overtones for the future of U.S.-European relations.  As I understand it, this treaty would not make much sense without U.S. participation given the large number of contracts that choose U.S. courts for dispute resolution.  Thus, it might be that the EC simply held off its signature decision until it was sure a necessary party–the United States–was ready to proceed with ratification.

Second, EC signature of the treaty serves as a useful reminder of how often today the Europeans utilize their supranational institutions to join treaties in addition to (or in lieu of) EU Member States.  I say “institutions” here because although the European Union has supplanted the European Community as the overarching organizing element of the system (and can itself join certain treaties like the U.S.-E.U. Extradition Treaty), in many other instances the European Community continues to have the legal personality to operate on behalf of EU Member States in areas for which Member States have made it competent.  Here, the Hague Convention allows for participation by the EC via Article 29 which authorizes regional economic integration organizations (REIOs for short) to join the treaty:

Article 29 Regional Economic Integration Organisations
1. A Regional Economic Integration Organisation which is constituted solely by sovereign States and has competence over some or all of the matters governed by this Convention may similarly sign, accept, approve or accede to this Convention. The Regional Economic Integration Organisation shall in that case have the rights and obligations of a Contracting State, to the extent that the Organisation has competence over matters governed by this Convention.
2. The Regional Economic Integration Organisation shall, at the time of signature, acceptance, approval or accession, notify the depositary in writing of the matters governed by this Convention in respect of which competence has been transferred to that Organisation by its Member States. The Organisation shall promptly notify the depositary in writing of any changes to its competence as specified in the most recent notice given under this paragraph.
3. For the purposes of the entry into force of this Convention, any instrument deposited by a Regional Economic Integration Organisation shall not be counted unless the Regional Economic Integration Organisation declares in accordance with Article 30 that its Member States will not be Parties to this Convention.
4. Any reference to a “Contracting State” or “State” in this Convention shall apply equally, where appropriate, to a Regional Economic Integration Organisation that is a Party to it.

Third, looking at Article 29, it appears that even if EC signature is a prelude to EC acceptance of the treaty, such acceptance will not have much significance for the Convention’s entry into force or eventual operation.  As I blogged before, the treaty has the lowest hurdle for entry into force; under Article 31, only two states need to consent.  But the EC may not be a “state” for these purposes; under Article 29, it would have to declare on joining that none of its member states would become party and that it had competence over those member states to satisfy all the treaty’s obligations.  That seems highly unlikely in the context of a treaty designed to enforce choice of court provisions in contracts.  I assume many commercial entities might elect British (or French or German) courts for resolution of their disputes, which would require those states to consent to the treaty for it to operate with any real effect.  I’m betting, therefore, that unlike say fisheries, for which the EC has exclusive competence, European competence here will be mixed at best between the EC and its Member States.  Indeed, I note that the EC signature did not commit the Danes, suggesting that at least one EU Member State may not actually favor the Convention at all.

That said, EC signature does suggest that the Hague Choice of Courts Convention has pulled back from the brink of becoming a “failed” treaty.  But until it gets two states to consent to be bound, the Convention remains unperfected.  And, even after it’s in force, I think it won’t be labeled a success until many more states consent and employ the treaty in contract disputes where parties have elected judicial dispute resolutoin in lieu of arbitration or other methods.