Documents considered by the Committee on 26 March 2014 - European Scrutiny Committee Contents


8 Hague Convention

(35776)

5445/14

+ ADD 1

COM(14) 46

Draft Council Decision on the approval of the Hague Convention of 30 June 2005 on Choice of Court Agreements
Legal baseArticle 81(2) in conjunction with the first subparagraph of Article 218(6) TFEU; consent; QMV
Document originated30 January 2014
Deposited in Parliament5 February 2014
DepartmentMinistry of Justice
Basis of considerationEM of 17 February 2014
Previous Committee Report



Discussion in Council

None; but see (32373) 18101/10: HC 86-xx (2012-13), chapter 31 (21 November 2012); HC 86-iii (2012-13), chapter 8 (23 May 2012); HC 428-xlvii (2010-12), chapter 17 (18 January 2012); HC 428-xvii (2010-11), chapter 4 (16 February 2011)

See paragraph 8.18

Committee's assessmentLegally important
Committee's decisionNot cleared; further information requested

Background and previous scrutiny

8.1 The 2005 Hague Convention on Choice of Court Agreements was signed by the EU on 1 April 2009 on the basis of the Council Decision 2009/397/EC.[34] The United States of America has also signed the 2005 Convention and Mexico has ratified it.

8.1 The Convention's main purpose is to increase legal certainty for parties involved in international "business-to-business" contracts (and thereby promote international trade) by providing uniform rules which ensure that:

·  exclusive "choice of court" agreements are respected; and

·  judgments issued by the courts designated in such agreements can be recognised and enforced in the courts of other Contracting Parties.

8.2 Although the Convention applies to both civil or commercial matters, consumer and employment contracts are expressly excluded (Article 2.1) and other excluded matters include family law and succession, insolvency, carriage of goods and person, competition and validity of intellectual property rights (other than copyright) (Article 2.2).

8.3 The Convention seeks to achieve a balance between the parties' need for legal predictability and the need to allow States, as a matter of national public policy to prevent serious unfairness and to protect, in particular circumstances, weaker parties and some exclusive jurisdiction of States.

8.4 The Convention provides three basic rules:

·  The chosen court must hear the case (Article 5);

·  Any court not chosen must decline to hear the case (Article 6); and

·  Any judgment given by the chosen court must be recognised and enforced in other Contracting States, except where a ground for refusal applies (Articles 8 and 9).

8.5 Although we have not previously scrutinised the current document, we have scrutinised the Brussels 1 Regulation (recast)[35] which governs international jurisdiction of the courts of Member States based on "choice of court" agreements.[36]

Current document

8.6 The Commission now proposes that the EU approves the Convention. The Commission's aim is to improve legal certainty for EU companies trading outside the EU by creating "a harmonised set" of EU jurisdictional rules in respect of non-EU Contracting Parties to the Convention.

RELATIONSHIP OF THE CONVENTION TO THE RECAST BRUSSELS I REGULATION

8.7 One of the purposes of the recent amendments to the Brussels I Regulation (known as the Brussels 1 Regulation (recast)) was, the Commission says, to anticipate the EU's approval of the Convention by making the internal EU approach to "choice of court" agreements consistent with that to agreements favouring courts in non-EU Contracting States under the Convention.

8.8 The Commission explains that the relationship between the rules contained in the Convention and the existing and future EU rules is set out in Article 26(6) of the Convention. The effect of this Article, the Commission says, is that the Convention reduces the scope of the application of the Brussels I Regulation if at least one of the parties is resident in a Contracting State to the Convention. The Convention takes precedence:

·  over the jurisdiction rules of Brussels I except if both parties are EU residents or come from third states who are not Contracting Parties to the Convention; and

·  over the rules on recognition and enforcement in Brussels 1 unless the court that delivered the judgment and the court in which recognition and enforcement is sought are within the EU.

8.9 The Commission considers this reduction of scope is acceptable "in the light of the increase in the respect for party autonomy at international level and increased legal certainty for EU companies engaged in trade with third State parties".

EXCLUSION OF INSURANCE CONTRACTS

8.10 Article 21 of the Convention allows contracting parties to declare that they will not apply the Convention to any particular matter. The Commission proposes to make such a declaration in relation to insurance contracts.

The Government's view

8.11 In an Explanatory Memorandum of 17 February, the Secretary of State for Justice (Chris Grayling) says that the Government supports approval of the Convention by the EU. This is because it supports the principle that parties to an agreement should be able to choose the forum for resolving their disputes. He comments:

    "As a major centre for commercial business, the UK, and UK stakeholders, will benefit from enhanced legal certainty around choice of agreements which will, most probably, in many cases choose courts in the UK as the fora for resolution of any disputes."

LEGAL ISSUES

8.12 He confirms that the Government accepts that the matter in question attracts exclusive external EU competence under the AETR principle, arising from the EU rules concerning jurisdiction set out in the Brussels I Regulation. He says that this means that once the EU has approved the Convention all Member States would be bound by it. He also says that the Government has no subsidiarity concerns.

8.13 The Minister adds that the Government will wish to explore further the proposed declaration excluding insurance contracts, both as a matter of policy and as to its legality. As to the latter, the Government will look at whether the proposed exclusion can properly be said to apply to a "specific matter" within Article 21 of the Convention. It will, in any event, consult stakeholders on the proposed exclusion.

OPT-IN ISSUES

8.14 "Notwithstanding exclusive external competence", the Minister says, the Government takes the view that the opt-in applies. He says that this is not currently reflected in Recital (8) of the proposed Decision. The deadline for the UK to notify its opt-in decision will be 2 May and the eight weeks for consideration of the question by us would expire on 31 March.

8.15 In considering whether the UK should opt in, the Minister says the Government will take into account:

    "the potential benefits for stakeholders, including those in the City of London, of legal certainty associated with more reliability being attached to choice of court agreements in civil and commercial contracts, alongside any impact on the integrity of the justice system."

8.16 If the UK decides to opt into the document, then, the Minister explains, the UK will be bound to comply with the Convention and any necessary amendments to the Civil Jurisdiction and Judgments Act 1982 and relevant court rules will need to be made by way of secondary legislation.

OTHER ISSUES

8.17 On the question of ratification of the Convention, the Minister says:

·  the Convention will come into force upon ratification by the EU in accordance with Article 31; and

·  ratification by the EU should encourage non-EU countries to also ratify and if they do, then courts in EU Member States, as State Parties to the 2005 Convention, will have to decline jurisdiction in favour of a chosen court in that third country. But if they do not, then the effect of recast Brussels I Regulation (1215/2012) would be that courts in the EU would have no obligation to decline jurisdiction in favour of courts in non-EU countries previously chose by the parties — if those latter courts do accept jurisdiction this could undermine legal certainty and speed of proceedings.

8.18 The timing of the proposal's adoption may be affected by the dissolution of the European Parliament.

Conclusion

8.19 It seems clear that with the exception of the exclusion of insurance contracts, the UK Government supports this draft Council Decision. We too recognise the benefits of increased legal certainty that EU approval of the Convention may bring, particularly in terms of consistency with the revised Brussels I Regulation. On this latter point, we would have found it helpful if the Minister's Explanatory Memorandum had explained more directly the relationship between Brussels I and the Convention.

8.20 We also think there is no doubt that the EU has exclusive external competence to act in this instance. In the past we have considered whether, as the Minister asserts, the UK's opt-in applies in this situation, or whether, as the Commission asserts, the UK is automatically bound where it has already opted into corresponding internal EU legislation.

8.21 In relation to two recent documents we have scrutinised, the proposals on the European Asylum Support Office[37] and the Luxembourg Protocol on Rolling Stock,[38] we have supported the Government's view more strongly. On those occasions we asked the Government to endeavour to protect its opt-in rights by means of appropriate wording in the recitals to the proposal.

8.22 Consistent with that approach, we ask the Government to continue in its endeavours to reserve the UK's opt-in position by an amendment to recital 8 of the current document. We ask the Minister to keep us informed of progress on this, on any change to the proposed insurance exception, and on the outcome of stakeholder consultations.

8.23 In the meantime, we retain the document under scrutiny.


34   OJ No. L 133, 29.5.2009, p.1, also available from:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:133:0001:0013:EN:PDF. Back

35   Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) as of 10 January 2015. Back

36   See headnote. Back

37   (35658) 17760/13: HC 83-xxxi (2013-14), chapter 19 (5 February 2014). Back

38   (35013) 11140/13: HC 83-xxiii (2013-14), chapter 16 (4 December 2013). Back


 
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