Documents considered by the Committee on 15 October 2014 - European Scrutiny Committee Contents

25 Hague Convention (Choice of Court Agreements)

Committee's assessment Legally important
Committee's decisionNot cleared from scrutiny; further information requested

Document detailsDraft Council Decision on EU approval of the Hague Convention on Choice of Court Agreements
Legal baseArticle 81(2) in conjunction with the first subparagraph of Article 218(6) TFEU; consent; QMV
DepartmentMinistry of Justice
Document number(35776), 5445/14 + ADD 1, COM(14) 46

Summary and Committee's conclusions

25.1 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.[128] Its 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 that judgments issued by designated courts can be recognised and enforced in the courts of other Contracting Parties.

25.2 The Convention takes precedence over the jurisdiction rules of Brussels I[129] (which govern choice of court agreements and recognition and enforcement of judgments within the EU) except if both parties are EU residents or come from third states, not Contracting Parties to the Convention. So, should an American company and German company choose an Italian court, the Hague Convention prevails. However, if a UK company and German company choose an Italian court, Brussels 1 prevails. The Convention also overrides Brussels I rules on recognition and enforcement unless the court that delivered the judgment and the court in which recognition and enforcement is sought are within the EU. The Commission considers that this reduced scope of Brussels 1 is an acceptable trade-off for the increased legal certainty and autonomy that will benefit EU companies engaged in trade with third country parties.

25.3 The current document provides for EU approval of the Convention which would then bind all EU Member States. The Government is largely content with the proposed Decision and we have welcomed this overall position given the benefits of increased legal certainty to UK business. However, in line with the views of the UK insurance industry, the Government has sought the inclusion in the Decision of all insurance contracts (and not just reinsurance contracts, as conceded by the Commission). In our last Report we therefore asked the Government to confirm the outcome of negotiations on the inclusion of insurance contracts as reflected in the final text and to explain whether that final outcome was consistent with the position in the Brussels 1 rules.

25.4 The Government has also sought to assert the UK's right to opt into the Decision "notwithstanding exclusive external competence on the part of the European Union"; a position which we have found more persuasive on further consideration, having initially questioned whether the opt-in could apply where exclusive external competence is being exercised. In our last Report we noted that the Government had decided to opt into the proposal and had notified the EU of this on 30 April. We asked the Government to continue with its efforts to ensure the transparency of UK opt-in rights by means of appropriate wording in recitals. The Government now responds on progress as the text is currently being finalised for agreement by the European Parliament and final adoption by the Council.

25.5 We thank the Minister for his letter and recognise the efforts of his officials to achieve a text that is in UK's best interests. We regret that, despite the Government's efforts, the applicability of the opt-in has not been clarified in the recitals of the Decision and that there is still an exclusion of insurance contracts, albeit limited, from the Decision's scope.

25.6 Although we recognise the overall benefits to the UK that adoption of the Decision will bring, including legal certainty and consistency with Brussels 1 rules, we think it premature to clear the document from scrutiny at this stage. We may prepared to consider clearance (to enable the Government to support the proposal on adoption) after the Government has updated us on the outcome of first reading negotiations.

25.7 More immediately, we would like to hear from the Minister as to whether, at the 9-10 October JHA Council, he voted to support the decision to send the text to the European Parliament for its consent and, if so, why scrutiny was overridden. In doing so, we recognise that officials have made a conscientious effort to keep the Committee up-to-date on the substantive issues in relation to this document.

Full details of the documents: Proposal for a Council Decision on the approval on behalf of the European Union of the Hague Convention of 30 June 2005 on Choice of Court Agreements: (35776), 5445/14 + ADD 1, COM(14) 46.

Background and previous scrutiny

25.8 Our previous scrutiny of the current document is set out in our Forty-fourth Report of 2013-14 and our First Report of 2014-15.

Minister's letter of 18 September 2014

25.9 The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara) updates us on developments in the negotiation of the current document and attaches the Government's impact checklist which, he says, indicates that the document is "of overall benefit to the UK, even if some of the benefits are difficult to quantify".

25.10 Turning to the Commission's proposal to exclude insurance contracts from the decision, the Minister says that this has been the Government's "principal concern". But the Minister explains how the Government has been able to secure some concessions on this issue:

    "the latest text makes clear that the Convention would cover contracts for reinsurance — a key concern of our stakeholders, who were keen for us to secure this confirmation. Beyond that, in effect, the exclusion covers insurance contracts which are not considered to relate to 'large risks' as defined in the Annex — and the definitions are set out more clearly in the latest text. The Convention itself already excludes contracts in which one of the parties is acting as a consumer."

25.11 The Minister then adds:

    "The Commission, supported by a number of Member States, argue that the exclusion is necessary in order to be consistent with the terms of Section 3 of the Brussels I (recast) Regulation (1215/2012).

    "A new annex has been added to the text, the effect of which is to make explicit that the European Union might reassess the need for such an exclusion at some stage in the future.

    "The Government would have preferred that there should be no such exclusion. However we are clear that adoption of the Convention overall will be in the UK's interests. This is a view that is supported strongly by leaders in the insurance industry and members of the Lord Chancellor's Advisory Committee on Private International Law.

    "I take the view that we are unlikely to secure further concessions on this point and that we should compromise by accepting the new text."

25.12 Addressing the question of the application of the opt-in, the Minister says that although the Government has continued to press the point:

    "there is at present no support for an amendment to recital 8. In similar cases we have sought to protect our position by placing a minute statement on the record at Council, to the effect that we consider that the UK's participation is secured by the fact that we have opted in. We would propose to do the same here if it does not prove possible to amend the text."

25.13 In terms of the steps towards adoption of the proposal, the Minister informs us that:

    "The text will now go to Coreper and to the Council, as an 'A' point, to invite the European Parliament to agree to the new text. I hope, therefore, that the Committee will now be in a position to clear the text from scrutiny so that the Government can ultimately agree to its adoption."

Previous Committee Reports

First Report HC 219-i (2014-15), chapter 18 (4 June 2014); Forty-fourth Report HC 83-xxxix (2013-14), chapter 8 (26 March 2014).

128   OJ No. L 133, 29.5.09, p 1, also available from: Back

129   Council Regulation No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. This was recast by Regulation No. 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Back

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