This October, the Convention on Choice of Court Agreements enters into force. Christophe Bernasconi of the Hague Conference on Private International Law outlines the progress made by signatories, and how it could change business practices
With the entry into force of the Convention on Choice of Court Agreements (Convention) on October 1 2015 for all EU member states (except Denmark) and Mexico, the effectiveness of forum selection clauses in international litigation is set to increase. In addition, it will be interesting to see whether there is an increase in international commercial disputes being directed to courts in jurisdictions bound by the Convention, as result of its entry into force.
As a reminder, the Convention is an international instrument which contains uniform rules on choice of court clauses, and the recognition and enforcement of judgments resulting from such clauses. The Convention is based on three interwoven rules. First, the court chosen by the parties must accept jurisdiction over the case, subject to a few exceptions (article 5). Parties can hence be assured that their expressed will of only settling disputes in a certain court or jurisdiction, as represented by a forum selection clause, will be respected at the international level. Second, any court not chosen by the parties cannot hear the matter (article 6). Parties will no longer be permitted to ex-post forum shop, nor will parties be exposed to unexpected proceedings abroad. Finally, all contracting states must recognise and enforce the judgment of the chosen court (article 8) subject to a few exceptions (article 9). Litigants will therefore have no reason to fear that judgments issued from their chosen court will be denied recognition or remain unenforced in other jurisdictions. As the number of contracting states is likely to increase, international litigation should become more predictable and efficient; parties and courts will avoid lengthy and expensive trials simply to decide what court has international jurisdiction over the matter. Instead, courts will apply the Convention, and jurisdiction will revert to the chosen court. Jurisdiction agreements can therefore gain momentum as a reliable and efficient tool to settle international disputes, especially for small and mid-sized companies.
"The time has at last come for the Convention to start delivering its important benefits"
The time has at last come for the Convention to start delivering its important benefits. Its entry into force on October 1 2015 marks an important milestone. It will only encompass the contracting states; today they number 28. Some of those states, however, host important judicial hubs for international commercial disputes, and the Convention's application will no doubt enhance the obvious attraction for such international litigation magnets.
Others states are thinking along the same lines. Singapore, for example, signed the Convention on March 25 2015, and the US has been a signatory since 2009. It appears that the ratification process in Singapore is progressing rapidly; it may be in a position to ratify the Convention in 2016. In the US, the relevant authorities have deployed several initiatives over the past years to identify a mechanism for implementing the Convention in a way that would accommodate the interests of all stakeholders – at both the federal and state levels. The process is ongoing and, if successful, would be of great significance to the future of the Convention. Australia and New Zealand are also making progress towards implementation, and in the People's Republic of China a feasibility study is being conducted on its ratification. Denmark is also working on ratification of the Convention so as to be in line with other EU member states. Other states which have approached the Permanent Bureau of the Hague Conference with specific queries about signing or ratifying the Convention include Andorra, Serbia and Tajikistan.
It's hoped that the entry into force of the Choice of Court Convention among the initial 28 states will encourage others to join the instrument. There certainly is momentum surrounding the Convention's entry into force, and many initiatives have been scheduled around that milestone. APEC [Asia-Pacific Economic Cooperation] for example recently organised an important workshop for its member economies titled 'Effective enforcement of business contracts and efficient resolution of business disputes through the Hague Choice of Court Agreements Convention'. We are confident that this will raise awareness of and interest in the Convention within the Asia Pacific region.
"The traditional prevalence of non-exclusive choice of court clauses in the banking and financial sector may have to be reconsidered"
Looking further ahead, it will be interesting to monitor whether the Convention's entry into force will lead to changes in certain sectorial business practices. For instance, the traditional prevalence of non-exclusive choice of court clauses in the banking and financial sector may have to be reconsidered; for example, the International Swaps and Derivatives Association's master agreement. The Convention only covers exclusive choice of court clauses, and although there is a possibility for states to extend the Convention's application to non-exclusive agreements by means of bilateral declarations, to-date no such declaration has been made. It will be interesting to see whether the banking and finance sector shifts to the use of jurisdiction clauses covered by the Convention.
In addition, the Convention does not require a substantial connection to the chosen court's jurisdiction, nor is there a need for disputes to be governed by the law of the chosen court. This may reinforce the attractiveness of some international litigation hubs, as soon as they embrace the uniform system set up by the Convention.
More generally, the Convention aims to make international commercial litigation more predictable, more affordable, and more efficient. As more states become a party to the Convention, international dispute settlement in these states' domestic courts will become more attractive, especially to small and medium-sized companies, including by offering a valuable alternative to international arbitration.
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About the author
Secretary General, the Hague Conference on Private International Law
Christophe Bernasconi is the fourth Secretary General of the Hague Conference on Private International Law. He took office on 1 July 2013. He joined the Permanent Bureau (Secretariat) of the Hague Conference in September 1997.
As Secretary General, Bernasconi is responsible for the administration of the Hague Conference (with currently 146 connected states, and a total of 80 members from around the world) and the operation of its Permanent Bureau. He has long-standing expertise in the field of international civil procedural law, international administrative cooperation, international commercial and finance law, as well as international child protection law. He has been responsible for various meetings of Special Commissions, Experts' and Working Groups, both in relation to normative work of the Hague Conference and post-Convention services.
He holds a law degree from Fribourg University in Switzerland (magna cum laude; bilingual German/French), an LLM degree in comparative law from McGill University in Montreal (Canada), and a doctoral degree in Private International Law from Fribourg University (summa cum laude).
Before joining the Permanent Bureau, Bernasconi lectured at the University of Fribourg, worked as legal expert at the Swiss Institute of Comparative Law in Lausanne, and as scientific collaborator at the Federal Office of Justice in Switzerland. He also advised practitioners on various private international law matters.