Convention Inches Ahead
Louise Teitz. Photo by Scott Indermaur
An international agreement that would create a process to enforce judgments issued by courts in foreign countries has been idling for more than two years.
The reason for inaction on the Hague Convention on Choice of Court Agreements has been largely administrative. Even though the language of the convention itself was finalized in June 2005 by the Hague Conference on Private International Law, an explanatory report wasn’t issued until May 2007.
But now the 67 members of the Hague Conference—including the United States and the European Union, which belongs as a regional organization—are starting to fire up the ratification process. The convention would go into effect when two member states ratify it.
In late September, Mexico became the first nation to ratify the convention. The European Union also is reportedly starting to look at it. That’s significant because ratification by the EU would commit all of its 27 member states to follow the convention.
The U.S. State Department was expected to make a recommendation to President Bush regarding the convention before the end of the year, although actual ratification might have to wait months or even years until implementation issues—including how to make state laws compatible with the convention—are resolved.
“The United States has long sought a treaty basis for the recognition and enforcement of U.S. judgments abroad, and it is our understanding that this treaty continues to have broad and strong support in the international business community, as well as among transnational litigators representing clients who would benefit from such provisions,” says David P. Stewart, the State Department’s assistant legal adviser for private international law. Stewart also co-chairs the Private International Law Coordinating Committee in the ABA Section of International Law.
Essentially, the convention would allow contracting parties to designate a court of exclusive jurisdiction over their legal disputes, and any other courts in countries that are parties to the convention must decline to hear the case. A judgment issued by the chosen court would be recognized and enforced in the courts of those foreign jurisdictions.
The convention’s application is limited largely to commercial contract matters between businesses, but its impact in that area would be significant, says Louise Ellen Teitz, a member of the U.S. delegation to the drafting process and a professor at Roger Williams University School of Law in Bristol, R.I. She also serves as the liaison from the ABA Section of International Law to the Secretary of State’s Advisory Committee on Private International Law.
The Hague Convention would provide a corollary to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention), which allows parties to reach exclusive agreements on arbitration of disputes. The New York Convention was a catalyst for widespread use of international arbitration.
“The notion was that arbitration was fast and cheap, but that’s really not true anymore,” says Teitz. She also notes that arbitration often doesn’t provide for appeals, and there are times when parties prefer the transparency of litigation.
But the convention, Teitz adds, “is not merely about litigation. It needs to be thought of as transactional planning as well. It’s really about increasing certainty and predictability in cross-border agreements.”
Support for the convention is widespread but not universal. One key concern is that the convention would apply to non-negotiated agreements, which are common for information goods and services.
A STARTING POINT
The ABA has been a prime advocate for the Convention on Choice of Court Agreements. More than 98 percent of respondents to a 2003 survey of practitioners said such a convention would be useful.
In August 2006, the ABA House of Delegates adopted a recommendation by the International Law Section urging the U.S. government to ratify the convention and put it into effect.
The convention represents a much narrower regime for jurisdiction and enforcement judgments than originally anticipated when the process began in the early 1990s, says Teitz, who notes, “This might be step one, and we can add pieces.”
