By Ezio La Rosa and Annie Jandoli – Corporate Finance London

The UK Ratifies the 2019 Hague Convention

A Step Forward for Cross-Border Judgement Enforcement

On 12 January 2024, the UK Government took a significant step in facilitating international legal processes by signing the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgements in Civil or Commercial Matters (the “2019 Convention”). The UK ratified the 2019 Convention on 27 June 2024, meaning that it will come into effect on 1 July 2025. This international treaty aims to streamline the recognition and enforcement of judgements issued in one contracting state (i.e., Ukraine, Uruguay, and all EU member states except Denmark; hereinafter “Contracting State(s)”) within the jurisdiction of another Contracting State.

Implications for the UK

This development comes at a crucial time for the UK, following the complications posed by Brexit. Prior to leaving the EU, the UK was part of the so-called Brussels Recast Regulation, which facilitated the automatic recognition and enforcement of judgements across EU member states. Brexit, however, ended UK’s participation in this system, creating additional legal hurdles for businesses needing to enforce UK judgements in the EU and vice versa.

In an attempt to mitigate these issues, the UK sought to join the 2007 Lugano Convention, a treaty that regulates the free movement of court judgements in civil cases between the EU member states on the one hand, and Switzerland, Norway and Iceland on the other. In other words, this convention extends the regime of quasi-automatic recognition and enforcement of judgements that was applicable between EU member states at the time under the Brussels Recast. While the 2007 Lugano Convention is open to third countries, participation thereto is subject to the explicit consent of all parties to the convention. On this note, the EU Commission – acting on behalf of the EU as a party to the 2007 Lugano Convention – rejected UK’s application on the grounds that the UK is not a member of the single market (i.e., a market which ensures the free movement of goods, services, capital and persons in a single EU internal market). On this note, the EU Commission considers the 2007 Lugano Convention regime to be grounded on the notion of close economic integration and mutual trust and, therefore, considers that participation thereto should not be offered to any third country which is not part of the internal market (such as the UK).

Consequently, on 28 September 2020, the UK ratified the 2005 Hague Convention on Choice of Court Agreements (the “2005 Convention”), which partially addressed the problem by covering contracts with exclusive jurisdiction clauses. However, its scope was limited, excluding, among other things, non-exclusive jurisdiction clauses and asymmetric clauses (the latter allow one party to sue in any jurisdiction, while restricting the other party to suing in one exclusive jurisdiction). This meant that where parties were subject to a contract which provided a non-exclusive jurisdiction clause or an asymmetric clause, the 2005 Convention was not applicable.

Benefits of the 2019 Convention

The 2019 Convention promises to resolve many of these post-Brexit enforcement issues. Unlike the 2005 Convention, the 2019 Convention does not necessitate the inclusion of exclusive jurisdiction clauses in contracts for its provisions to apply. This broader applicability means that the recognition and enforcement procedures will cover a wider range of legal agreements, including non-contractual claims like torts. Additionally, the 2019 Convention is a multilateral treaty, reducing the risk of EU’s obstruction in UK’s accession.

This new framework will allow judgements made in the UK to be recognised and enforced in other Contracting States (and vice versa) without re-evaluating the merits of the case. However, it is important to note that the 2019 Convention is limited to civil and commercial judgements, explicitly excluding areas such as intellectual property, defamation, and family law.

Moreover, Article 5 of the 2019 Convention clarifies that to recognise and enforce a foreign judgement, several important criteria must be met, such as, inter alia:

• the judgement must be valid and have legal effect in the state where it was originally issued (e., it should be recognised as legitimate and binding in the state of origin);
• the judgement must be enforceable in the state where it was first issued – in other words, if it cannot be enforced in the state of origin, it cannot be enforced in other states;
• the judgement cannot be under review or appeal in the state of origin: if there is a pending review or the time allowed for appealing has not yet expired, the judgement may not be eligible for enforcement abroad;
• the judgement cannot pertain to matters involving residential leases or the registration of immovable property (such as land or buildings); and
• the person against whom the judgement is issued (the judgement debtor) must have a relevant connection to the state that issued the judgement.

Understanding Jurisdiction Clauses

A jurisdiction clause in a contract specifies which court has the authority to resolve any disputes that arise from the contract. These clauses can be either exclusive, designating a single court to have authority, asymmetric or non-exclusive, allowing multiple courts to have jurisdiction. The 2019 Convention enhances the enforceability of judgements regardless of whether the jurisdiction clause is exclusive or non-exclusive (including asymmetric clauses), thereby offering greater flexibility and certainty in international legal agreements compared to what provided for by the 2005 Convention.

Global Context

Outside the EU, countries like the US, Israel, and Russia have signed the 2019 Convention but have yet to ratify it. Should these states proceed with its ratification, the scope of the Convention’s benefits would extend further, aiding UK parties in enforcing judgements in these jurisdictions as well. Moreover, Uruguay has already ratified the Convention, with it set to take effect there in October 2024.

On a general note, there are certain safety measures in place for Contracting States to opt-out of the application of the 2019 Convention in certain relationships with other Contracting States. This ensures that countries can protect their sovereignty and legal interests, while still participating in the broader 2019 Convention framework. For instance, if Russia were to ratify the 2019 Convention, it could potentially choose to opt-out of applying the 2019 Convention in its dealings with other Contracting States (and vice versa). This safety measure may be invoked for geopolitical reasons or merely to maintain control over certain aspects of cross-border legal enforcement. Similarly, it may also be possible (theoretically) that the EU declares that the 2019 Convention should not apply between EU member states and the UK. This may be due to EU’s desire to maintain the existing legal framework established under EU law, which may differ from the standards provided by the 2019 Convention. In other words, the EU, by opting out, could ensure that its internal rules and agreements with the UK remain intact without being overridden by the provisions of the 2019 Convention.