BLOG POST WRITTEN BY ALEX GUEST, FROM CHAMBER BENEFACTOR SIGNATURE LITIGATION.
International legal framework
The establishment of an adequate international legal framework for the circulation of civil and commercial judgments, which provides for legal certainty and easy access to justice, has been highlighted by businesses as an important factor in attracting investment and promoting international commercial relations.
The absence of such international legal framework has led to:
- Businesses which are a party to a litigation being denied access to rights and remedies, despite succeeding in their litigation.
- The issuing of new and unpredictable court proceedings in another State, simply to obtain relief to which businesses had already established entitlement.
- An increase in costs, including the costs of taking foreign legal advice on enforcement of the judgment.
- Increasingly complicated transactional arrangements.
- Obstructions to the flow of international trade and investment.
The need for a comprehensive and private international framework covering civil and commercial judgments has become apparent, following the convolution and unpredictability introduced to UK and EU businesses by Brexit. However, this is likely to change with the UK signing the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“the Convention”) on 12 January 2024, following its decision on 23 November 2023 to join it.
The Convention is an international agreement which requires that a judgment given by a court of a Contracting State must be recognised and enforced in another Contracting State, without any review of the merits of the judgment, subject to limited grounds for refusal of recognition and enforcement.
The Convention only applies to the recognition and enforcement of judgments relating to civil or commercial matters, and it excludes various matters such as revenue, customs or administrative matters, defamation, intellectual property, privacy, the carriage of passengers and goods, marine pollution, insolvency, certain anti-trust (competition) matters, and arbitration and related proceedings.
The Convention is in force in the EU (except Denmark) and Ukraine, and it is due to enter in force in Uruguay in October this year. It has also been signed by Israel, Costa Rica, Montenegro, North Macedonia, the Russian Federation, and the United States, but is not yet in force in those states.
The Convention will be in force in the UK twelve months after ratification, so, if ratified this year, it may be introduced as early as 2025. Thereafter, the Convention will only apply to any English judgment obtained in proceedings instituted while the Convention has been operational in the UK.
What does it mean for EU and UK businesses?
The fact that the UK has signed the Convention (which, let’s not forget, includes the EU as a Contracting State) should be positive news for UK and EU businesses, as it:
- a) Offers greater legal certainty to businesses involved in international transactions by providing a clear framework which ensures most civil and commercial judgments are recognised and enforced.
- b) Simplifies the process of enforcing foreign judgments in contracting states.
- c) Provides legal certainty and predictability to businesses involved in cross-border transactions, by setting out commonly accepted conditions for recognition and enforcement, as well as grounds for refusal. It clarifies whether, and to what extent, a judgment delivered by a court of a Contracting State will be recognised and / or enforced in another Contracting State.
- d) Improves access to justice by ensuring the recognition and enforcement of foreign judgments, thus reducing legal deadlines, costs, and risks in cross-border circumstances.
It is probable the Convention will change the rules regarding the enforcement and recognition of judgments and subsequently assist to unravel the complexity and uncertainty caused by Brexit. However, this does not mean we are back to the “free pass” pre-Brexit regime (Brussels Recast and Lugano Convention), and businesses need to be aware that they may still encounter issues, such as:
- Parallel proceedings and conflicting judgments from different jurisdictions, as the Convention does not assist with the determination of the correct jurisdiction in which a dispute should be heard.
- The Convention’s lack of assistance in the international recognition and enforcement of interim measures (such as injunctions or interim payment orders), unlike Brussels Recast and the Lugano Convention.
- The allowance for a Contracting State to make exceptions to enforcement on public policy grounds.
Overall, whilst the Convention promotes a positive national and international environment for multilateral trade, investment and mobility, businesses should still carefully consider cross-border enforcement issues, both when agreeing dispute resolution provisions in contracts, and when a dispute arises.