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And Enforcement of Foreign Judgments
Since 1893, the Hague Conference on Private International Law has spearheaded the development and has serviced Conventions which respond to global needs in a number of areas within the field of private international law. One of the main projects is in the area of recognition and enforcement of judgment. It is admitted that a multilateral instrument available on the worldwide scale for recognition and enforcement of judicial decisions would negate the legal uncertainty, delays and costs that are interfering increasingly with the needs of trade and business. Inspired by the success of the 1958 New York Arbitration Convention in providing a worldwide legal framework in commercial area, the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (the Hague Convention) was drafted and finally concluded February 1st, 1971. However, its global attraction was minimal with only three signatories. The contents of the Convention left much to be desired. As a single convention, which concerns with only recognition and enforcement of judgment, it left the issue of jurisdiction unresolved. This is a fatal weakness as the different grounds for jurisdiction in different states are the main obstacles to the recognition and enforcement of foreign judgment. The subsequent success of the Brussels Convention, the Lugano Convention and the Brussels Regulation, which harmonized the jurisdictional rules as a basis for the recognition and enforcement rules, is a living proof.
In 1993, the seventeenth session of the Hague Conference once again included the question of the recognition and enforcement of foreign judgments in civil and commercial matters in the agenda and established a Special Commission to work on the proposals which later became known as the original judgment project.
The original judgment project aimed to achieve comprehensive and unified rules on jurisdiction, which would result in near automatic recognition and enforcement of judgments amongst the party states. In 1999 the Special Commission adopted the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters. The 1999 Draft Convention took form of a "mixed" convention, which combined the characteristics of a double and a single convention. The double convention refers to the model of the Brussels and Lugano Conventions, the Brussels Regulation where jurisdictional rules regarding commercial matters of the European member states are harmonized. This in turn results in mutual recognition and enforcement of judgments with minimum limitation and formalities. The single convention, on the other hand, refers to the model of the Hague Convention (1971), which addresses the recognition and enforcement of foreign decisions; it does not affect the assumption of jurisdiction by the original court. Hence, the jurisdictional grounds were divided into three categories; namely, the 'white list', the 'black list', and the 'gray area'. The white list refers to the list of grounds upon which the court of origin would in principle, be required to assume jurisdiction while the grounds contained in the black list are exorbitant, i.e. the grounds on which states parties would be required not to assume jurisdiction. The above-mentioned are therefore the areas where the double convention model is followed. However, as a mixed convention, the 1999 Draft also allows for the 'gray area'. The court of origin may assume jurisdiction on grounds neither approved by the convention in the 'white list' nor disapproved in the 'black list'.
However, there is consensus amongst the State Parties that the original project was too ambitious due to the diversity of national rules and the rapid technological development. Even the provision of the 'gray area' did not appease everyone. It would not be possible to draw up a satisfactory text within a reasonable period of time. Therefore the project is scaled down. In 2004, the Hague Special Commission has published the Preliminary Draft Convention on Exclusive Choice of Court Agreement and the Draft Report. The present Draft Convention concerns mainly with only one of many core jurisdictional grounds mentioned in the 1999 Draft Convention, i.e. the exclusive choice of court agreement between businesses.
This article will make a detailed analysis of the 1999 Draft Convention, which has become a framework for future conventions within the Hague Conference Judgment Project including the Preliminary Draft Convention on Exclusive Choice of Court Agreement 2004. The nature, the scope, and the grounds for jurisdiction of the draft will be compared with the Brussels convention (as endorsed into the EU system as the Brussels regulation). The 2004 Draft will be scrutinized as one of the possible grounds of jurisdiction. Finally the compatibility of the proposed Hague conventions with Thai law will be examined.
The nature of the 1999 Draft Convention and its compatibility with the Brussels Convention, the Lugano Convention, and the Brussels Regulation.As stated previously, the 1999 Draft Convention is a mixed convention. Therefore the main difference between the 1999 Draft and the Brussels Convention is that while the Brussels Convention does not allow the enforcing courts to reexamine the ground of jurisdiction, the 1999 Draft includes a rule obliging the judge in the requested state to examine jurisdiction of the court of origin. This is due to the concept of a mixed as opposed to a double convention.
These have consequences on the states that would be members of both instruments. However, as Schulz argued, the application of either convention would lead to results, which were different but not incompatible because these states may use treaty rules, whereby the rules under the Brussels Convention or the Lugano Convention would prevail in cases involving the Conventions' members in their mutual relations. This is because of the lex specialis derogat legi generali rule of public international law [note that if all treaties are construed as general, article 30 of the Vienna Convention on the Law of Treaties will apply so that the later treaty prevails. However, it is argued that these treaties do not fall under the scope of art 30. This is because the phrase 'relate to the same subject matter must be narrowly construed to cover the cases where a general treaty impinges indirectly on the content of a particular provision of an earlier, more specific treaty.] However, it is likely that the relationship between the Draft Convention and the European instruments would be clarified in the final convention to the similar effects.
ScopeThe scope of the Draft Convention is defined as 'civil and commercial matters'. Hence matters relating to revenue, customs and administrative are specifically excluded [draft article 1(1)]. This is because these are matters within states' sovereignty. However, the mere fact that one of the parties is a government will not take the dispute outside the scope of the convention [DA 1(3)]. Where one of the parties is a government or a government agency, a general rule of the thumb is that if a public authority is doing something that an ordinary citizen could do, and is not exercising any special rights or privileges, the case is likely to involves a civil or commercial matter rather than a matter of public law.
The 1999 Draft Convention also excludes status and legal capacity of natural persons, maintenance obligations, matrimonial property, will and succession, insolvency, social security, arbitration and admiralty from its substantive scope. This is similar to the scope of the Brussels Regulation.
There are various reasons why these matters are excluded from the scope of the Draft Convention. With regards to matters of capacity, family law and succession, the public interest is very much an issue, for different states give different levels of protections varied with culture, age and sex. Furthermore, there might be the interests of third parties involved. This is especially true with respect to insolvency, composition or analogous proceedings. For other matters, there have already been international governing regimes. For example, arbitration is governed mainly by the New York Convention of 1958 and carriage of goods by sea is governed by the 'Hague-Visby Rules'.
However, in the new Interim Text 2001, there is the exclusion of matters relating to anti-trust or competition claims, nuclear liability, provisional and protective measures, rights in rem in immovable property, validity, nullity, or dissolution of a legal person.
Additional to the substantive scope, the Draft Convention contains the territorial scope of the convention rules within article 2. Under article 2, the convention rules would apply in the courts of a contracting state unless all parties are habitually resident in that state, there is no agreement to the contrary, and the exclusive jurisdiction rule does not apply.
Jurisdiction, The White ListThe White List refers to the grounds of jurisdiction upon which the court of origin would, in principle, be required to assume jurisdiction. As a general rule under the 1999 Draft Convention, a defendant may be sued in the country where he has his habitual residence. With regard to other entities, the 'habitual residence' is defined in article 3(2)
In contrast, the connecting factor chosen in the Brussels Convention, the Lugano Convention, and the Brussels Regulation is the defendant's domicile. Although the chosen term was much influenced by English law, the word 'domicile' did not take the traditional English meaning where both residence and intention to remain permanently are needed. Rather, it is taken to mean normal residence, the meaning under the civil law tradition.
Other special grounds for jurisdiction are set out in articles 4 (choice of court), 5 (appearance by defendant), 6 (contracts), 7 (consumer contracts), 8 (individual contracts of employment), 9 (branches), 10 (torts or delicts), 11 (trusts), 12 (exclusive jurisdiction), 13 (provisional and protective measures), 14 (multiple defendants), 15 (counter-claims), and 16 (third party claims).
Under article 4, where parties have expressly agreed on the forum, that forum of a contracting state will have exclusive jurisdiction over any dispute arisen from that legal relationship. The choice of court agreement must comply with the formal validity requirement of the draft article 4(2)
With regards to contracts, the court of the contracting state of the place of performance of the principle obligation has the jurisdiction to hear the dispute. However, where a contract is concluded with a consumer (defined as the party who concluded the contract for a purpose which is outside its trades or profession.) The issues arisen from that contract must be brought to the court of the state where the customer is habitually resident. As for employment contracts, The employee may sue his employer in the courts of the state in which he habitually carries out his work. The employee, on the other hand, may only be sued in the courts of the state of his habitual residence or his usual place of work.
In the case of torts, it is the courts of the state in which the act or omission that caused injury occurred. The courts of the state have jurisdiction over all consequent harms. The plaintiff may sue in the courts of the state there the injury arose or may occur, but those courts will have jurisdiction only in respect of the particular injury. The draft article also excludes anti-trust from its definition of torts or delicts.
Other exclusive jurisdictions are given in relation to trusts and immovable properties. The courts of a contracting state designated in the trust instrument will have exclusive jurisdiction under article 11. In matters relating to the rights in rem or the tenancies of immovable property, the courts of the contracting state in which the property is situated have exclusive jurisdiction. Additionally, in relation to registered patents, trade marks, and designs, the courts of the state in which the deposit or registration has taken place, have exclusive jurisdiction.
Articles 13 to16 allow for extended jurisdiction in relation to provisional and protective measures, multiple defendants, counter-claims, and third party claims. Once the court has established jurisdiction under articles 3 to 12, it will have jurisdiction to order any provisional or protective measures, to hear the case against a defendant who is not habitually resident in the same country where the claim against that defendant is 'so closely connected' to the claim giving rise to the original jurisdiction, to hear the counter-claim to the original claim, and to determine a claim against a third party for indemnity or contribution.
Jurisdiction, The Gray AreaArticle 17 permits the application by contracting states of rules of jurisdiction under national law. This is subjected to article 18, which contains a list of prohibited grounds of jurisdiction. This means to include the residual grounds of jurisdiction, which are not explicitly included in articles 4-16 but also not explicitly forbidden by article 18. The gray area in article 17 and the black list under article 18 are unique to the Draft Convention.
Jurisdiction, The Black ListAs a general rule under article 18(1), where a defendant is habitually resident in a contracting state, the application of a national rule of jurisdiction of another contracting state is prohibited if there is no substantial connection between that state and the dispute. As under the principles of private international law, for a court to extend its jurisdiction over the matter, which has no connection with the forum, would be considered exorbitant. This would in turn result in the refusal of recognition and enforcement of the judgment by the court addressed.
Article 18(2) provides a list of specifically prohibited grounds. The state may not extend jurisdiction on the basis of the presence of property belonging to the defendant; on the nationality, the domicile, the habitual or temporary the residence, or presence of the plaintiff in that state; on the nationality of the defendant, on the carrying on of the commercial or other activities unrelated to the dispute in question by the defendant; on the service of a writ on the defendant by the state; on the unilateral designation of the forum by the plaintiff; on the proceeding for the enforcement of a judgment; on the temporary residence or the presence of the defendant: on the signing of the contract in that state.
It should be noted that article 18 specifically recognizes the power of contracting states to exercise universal jurisdiction over serious crimes under international law. However, the definition of such a crime has not yet been agreed upon.
Application Mechanism, the relationship of the three listsThe "white list" contains the grounds of jurisdictions, which each Contracting State will make available, and which are the basis for recognition and enforcement of judgments in other Contracting States.
The "black list" contains the grounds of jurisdiction, which must not be exercised by Contracting States against defendants from other Contracting States.
The gray zone, where Contracting States may exercise jurisdiction under national law: judgments founded on gray zone heads of jurisdiction are not entitled to recognition and enforcement under the Convention, but may be recognized and enforced under national law.
Therefore, firstly, article 19 requires that the court seised must verify whether article 18 prohibits it from exercising jurisdiction. However, with regard to the jurisdiction under the white list, the court seised may decline jurisdiction in two circumstances. Article 20 demands that court seised must decline jurisdiction where there is no sufficient notice given to the defendant. Furthermore, the Draft Convention allows for 'forum non conveniens' in relation to non-exclusive grounds of jurisdiction (the grounds of jurisdiction other than those provided in articles 4, 7,8, and 12.) It is widely accepted that Forum non conveniens is no longer allowed under the Brussels Convention, the Lugano Convention, and the Brussels Regulation even in disputes involving non-contracting states following the cases such as Re Harrods and Group Josi Reinsurance Company SA v Universal General Insurance Company.
Another issue of importance is 'lis pendens' where two courts or more are seised on the same dispute between the same parties. Under article 21, the court second seised must suspend the proceeding in favour of the court first seised unless the former has exclusive jurisdiction under article 4 (choice of court agreement) or 12 (immovable property situs). The Draft Convention also has the built-in safeguard for fair trial as there is the requirement that the court first seised must decide on the merit within a reasonable time. This is to cure the defect of the Brussels Regulation with regard to the so-called 'Italian torpedo' where a plaintiff lodges the proceeding at the courts reputable for exceptional delay in order to prevent the case from being tried in the appropriate court with jurisdiction.
Recognition and EnforcementThe noticeable difference between the Draft Convention and the European instruments is that the court addressed to recognize and enforce the judgment made under the Draft Convention must verify the jurisdiction of the court of origin (art 26). A judgment based on a ground, which conflicts with articles 4, 5, 7, 8 or 12, or whose application is prohibited by article 18 will not be recognized by the virtue of article 26. In contrast, the Brussels Convention, the Lugano Convention, and the Brussels Regulation are all based on the principle of mutual trust. Therefore, the receiving court may not examine the jurisdiction of the court of origin and neither can the merits of such foreign judgments be reviewed.
Preliminary Draft Convention on Exclusive Choice of Court Agreement, Draft ReportIn 2004, the Special Commission on Jurisdiction, Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters published a Draft on Exclusive Choice of Court Agreements. After it had been decided that the starting point of the judgment project should be the core areas such as jurisdiction based on choice of court agreements in business-to-business cases, submission, defendant's forum, counterclaims, physical torts and certain other possible grounds. It can be seen that these are the grounds on the White List in the 1999 Draft Convention.
The Preliminary Draft Convention on Exclusive Choice of Court Agreements sets out three key obligations. Firstly, the chosen court will be obliged to hear the dispute (art 4). Secondly, All the other courts will be obliged to decline jurisdiction (art 5). And lastly, the judgment given by the chosen court must be recognized and enforced by courts in others party states (art 7). Hence the exclusive choice of court agreements is recognized as the exclusive ground of jurisdiction. Therefore, the 2004 Draft Convention prohibits the use of forum non conveniens in the same way as the 1999 Draft Convention.
For a matter to fall within the scope of the 2004 Draft Convention, it must be civil or commercial in nature. It is possible for an issue to be within the scope where one of the parties to the agreement is a government if the government acts in its private capacity. Also there must be an agreement which complies with the requisite formalities as set out under article 2(3). The choice of court must be exclusive in the sense that the parties must choose the courts of one particular country (art. 2(2)). Furthermore, the agreement in question must be between businesses. Hence the Convention does not cover agreement between consumers, businesses and consumers, employers and employees (art 1(2)(a), 1(2)(b)). 'Consumer' is defined as a natural person acting primarily for personal, family or household purposes.
The 2004 Draft Convention is similar to the European instruments in term of its near automatic recognition and enforcement. The judgment given by the court, which assumed jurisdiction on the ground provided under Chapter II of the 2004 Draft Convention, must be recognized. There are limited grounds for refusal under article 7(1). These are where the agreement was null and void under the law of the state of the chosen court, where a party lacked the capacity, where the defendant was not given sufficient notice as to the proceedings, where the judgment was obtained by fraud, and where the recognition and enforcement would be incompatible with the public policy.
The 2004 Draft Convention on the Exclusive Choice of Court Agreements, if it came into force, would very much benefit cross-border trades and businesses. Unlike the 1999 Draft, this Draft Convention is based on the principle of reciprocity. The judgment given by the court, which assumed jurisdiction by the virtue of the exclusive choice of court agreement, would be recognized and enforced by the courts of the Contracting States. This allows for freedom of contracts between businesses that would be able to choose with certainty which courts would hear the disputes between them, with the assurance that the judgment given would be enforced. This in turn would facilitate international trades as businesses may manage legal risk arising from a potential economical loss deriving from the infringement of a legal norm. The loss can derive from a sanction or the deprival of possible advantages, which may cause pecuniary penalties or tort claims. The infringement of norms regarding contracting may lead to unenforceable claims, damages or performance obligations. By allowing businesses to agree on the exclusive choice of forum amongst themselves, they may estimate the actual legal action, litigation costs, and the magnitude of possible judgments and reputation consequences.
Bibliography
Preliminary Draft Convention on Exclusive Choice of Court Agreements, Work Document no. 49 E, http://hcch.e-vision.nl/upload/wop/jdgm_wd110_e.pdf
Masato Dogauchi and Trevor C. Hartley, Draft Report, Preliminary Document no. 25 of March 2004, http://hcch.e-vision.nl/upload/wop/jdgm_pd25e.pdf
Andrea Schulz, The Relationship between the Judgments Project and Other International Instrument, Preliminary Document no. 24 of December 2003, http://hcch.e-vision.nl/upload/wop/jdgm_pd24e.pdf
Annotated Checklist of Issues to be discussed at the Meeting of the Special Commission on Jurisdiction and Enforcement of Judgements, drawn up by the Permanent Bureau, Preliminary Document no. 1 of May 1994, http://hcch.e-vision.nl/upload/wop/jdgm_pd01(1994).pdf
Andrea Schulz, Reflection Paper to assist in the Preparation of a Convention on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, Preliminary Document no. 19 of August 2002, http://hcch.e-vision.nl/upload/wop/jdgm_pd19e.pdf
Brussels Regulation, Council Regulation (EC) no. 44/2001 of 22 December 2000 on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters
Preliminary Draft Convention on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, http://hcch.e-vision.nl/upload/wop/draft36e.html
Dicey & Morris, The Conflict of Laws, 13th Edition, 2000 by Lawrence Collins and Specialist Editors, Sweet and Maxwell, London
[ Posted Nov 16, 2004 ]
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