International commercial contracts: dispute resolution
On 1 October 2015 there was an important development in the field of international commercial litigation. With effect from said date, the Hague Convention on Choice of Court Agreements (the “Choice of Courts Convention”) came into force in 28 states, namely Mexico and the member states of the European Union (with the exception of Denmark). The United States and Singapore have signed the convention and will, upon ratification, also accede to the convention. Singapore is expected to ratify the Choice of Courts Convention in the near future. The US appears to be willing to put the convention into force. As part of the debate on ratification, the US needs to agree on how to implement the Choice of Courts Convention internally: at federal or at state level.
Scope of the Choice of Courts Convention
The convention governs the jurisdiction in case of a choice of court in international business-to-business relationships. In addition, the Choice of Courts Convention regulates the recognition and enforcement of judgments of the chosen court.
The convention is applicable in the event the parties to an international commercial contract have agreed to the exclusive jurisdiction of a court of a member state of the Choice of Courts Convention. Certain contracts and legal relationships are specifically excluded from the scope of the convention, including but not limited to consumers, maintenance obligations, tortious acts and employment contracts
Aim of the Choice of Courts Convention
The Choice of Courts Convention is intended to become a serious counterpart to the New York Convention. The latter convention deals with the recognition and enforcement of foreign arbitral awards. Presently 156 countries are a party to New York Convention. The Choice of Courts Convention is to become an equal to the New York Convention, where it concerns judgments of ‘regular’ courts. If that goal is achieved, such would be good news, especially for smaller companies that operate on an international scale, for whom the constantly rising costs of international arbitration may be an obstacle.
(Sources: Press release of the European Commission of 11 June 2015, “Hague Convention on Choice of Court Agreements: approval on behalf of the EU”; News report of the Hague Conference on Private International Law of 1 October 2015, “The 2005 Choice of Court Convention enters into force”; Text of the Hague Convention on Choice of Court Agreements; Ovidius Law, “Hague Convention on Choice of Court Agreements effective 1 October 2015”)