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

by Duncan Hollis

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.

http://opiniojuris.org/2009/04/08/ec-signs-hague-choice-of-courts-convention-will-eu-member-states-follow/

3 Responses

  1. According to Opinion 1/03 of the Court of Justice of the European Communities dated 7 February 2006,  The European Community has exclusive competence to conclude the Lugano Convention. Thus, it also has exclusive competence to conclude, ratify or accede to the Hague Choice of Court Convention and does not require separate EU Member State approval.

    See, http://curia.europa.eu/en/actu/communiques/cp06/aff/cp060010en.pdf

    See also, Martin George’s post on conflictoflaws.net:

    http://conflictoflaws.net/2009/ec-signs-hague-choice-of-court-convention/

  2. Antonin I. Pribetic — Thanks a lot for the update, especially the link to Opinion 1/03.  If the EC does have exclusive competence over recognition of judgments I concur that its acceptance of the Hague Convention would bring that treaty into force (at least for Mexico and the EC).  That said, I’m still trying to wrap my arms around the Lugano Convention and whether exclusive competence there necessarily means exclusive EC competence for the Hague Choice of Courts Convention.  For example, if the EC accepts the Convention, what happens to a choice of German courts in a contract otherwise covered by the Convention?  Must a party seek enforcement only in Germany or could any EC member state’s court suffice since it was the EC, not Germany, that accepted the treaty?  Also, I assume the ECJ would enforce recognition of covered choice of courts agreements, but when and how do national courts have the same obligation?  In other words, I’m having trouble (and this isn’t the first time) trying to translate an assertion of exclusive EC competence into the actual requirements of the Hague Convention, especially since it’s framed in terms of inter-state obligations.  I’d welcome more specifics therefore on how EC exclusivity plays out here (and, indeed, I recognize that at least it’s a simpler situation than those of mixed competency, which are only rarely accompanied by fully-formed explanations of where the division of authority lies between the supranational EC and EC/EU member states).

  3. Duncan,

    Admittedly, the subject-matter is complex and a fulsome response is difficult in this blog forum.

    The short answer is that the Brussels/Lugano Regime (the Brussels Regulation, the Brussels Convention and the Lugano Convention) is based on a concept which differs slightly from the Hague Choice of Court Convention (Hague Convention). If the defendant is domiciled in another Brussels/Lugano Member State, then jurisdiction may be only exercised on grounds specified within the applicable instrument. However, if the defendant is not domiciled in a Brussels/Lugano Member State, then jurisdiction may, subject to certain exceptions, be exercised on any ground permitted by local (i.e. national) law; nevertheless, the resulting judgment must be recognised and enforced in the other Brussels/Lugano Member States.

    In a conflit de conventions, the Brussels Regulation prevails over the Hague Convention only where none of the parties is from a Contracting State that is also not a Member State of the EC. Where one or more of the parties is resident in a Contracting State that is not a Member State of the EC, the Hague Convention prevails.

    Using your example, if the EC adopts the Hague Convention, and an American company and a German company choose the Italian district court, the Hague Convention prevails. Alternatively, if a Belgian company and a German company choose the Italian district court, the Brussels Regulation prevails.

    A party (judgment creditor) is not limited in seeking enforcement only in Germany, as all Contracting States (within or without the EC)  are obliged to recognize and enforce judgments based upon reciprocity.

    The key exception is the lis pendens rule, which governs over an exclusive choice of court agreement under the Brussels Regulation, but not under the Hague Convention.

     
     Regards,
     
    Antonin

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