New convention to enforce foreign judgments

The 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the Judgments Convention) is an exciting achievement, paving the way for the free circulation of judgments in certain civil or commercial matters across borders.   

Currently, parties are often put in a difficult situation with cross-border disputes when a judgment obtained in one jurisdiction needs to be enforced in another. This is because different countries have different rules relating to the enforcement of judgments from foreign states. 

For many years, it has been widely accepted that the solution to this problem would be to agree global rules for registering judgments. New Zealand applies such rules, for instance, with bilateral mutual recognition treaties and the Trans-Tasman Proceedings Act 2010. The most prominent regional example is the EU, which has the Brussels Regime.

To date, however, the most successful global solution has been found in the arena of international arbitration, by which parties resolve disputes not before a judge in a court, but in a private proceeding before an arbitrator chosen by the parties. Arbitral awards are enforceable in 159 foreign states, including New Zealand, through a simple registration process. This was achieved through the 1958 New York Convention. This goes some way to explaining the popularity of arbitration in resolving international commercial disputes.

Providing a similar registration process for foreign judgments and international mediation has been a key goal for both the United Nations Commission on International Trade Law (UNCITRAL) and the Hague Conference on Private International Law (the HCCH), as part of the HCCH's “Judgments Project". We have seen slow but steady progress in recent years:

• In 2005, the HCCH produced a Convention on Choice of Court Agreements, which does for exclusive jurisdiction clauses (and judgments resulting from them) what the New York Convention does for arbitration clauses (and arbitral awards resulting from them). But that 2005 Convention does not address judgments not resulting from exclusive jurisdiction clauses. 
• In December 2018 UNCITRAL produced the Singapore Mediation Convention, which provides a registration process for the enforcement of settlement agreements from international mediation. States may sign the Singapore Convention from 7 August 2019. 

Now the HCCH has, perhaps surprisingly given its long gestation period, produced the Judgments Convention. This is not as comprehensive as the New York Convention, in that it does not address ‘forum allocation’ issues (identifying when and on what basis a court will exercise jurisdiction over disputes). Such issues are addressed for international arbitration through a rule requiring state parties to the New York Convention to grant a mandatory stay of court proceedings in breach of an arbitration agreement. Even state parties that sign the Judgments Convention will retain freedom to exercise jurisdiction according to their domestic principles. 

The Judgments Convention regulates the enforcement of foreign judgments by state parties. Perhaps the three most interesting aspects are:

• its scope, which excludes administrative, customs and revenue matters, and matrimonial, insolvency, defamation, competition law and intellectual property disputes
• the required jurisdictional connection: for a foreign judgment to be registered, there must be a minimum level of contact between the defendant and the state issuing the judgment. This can include habitual residence at the relevant time, express consent, submission to jurisdiction through appearances in the foreign court and connections arising from the relationship of the subject-matter of the judgment and the state of origin. Overall, these grounds are broad and potentially broader than the rules New Zealand courts currently apply, and
• grounds for refusal: registration of a foreign judgment may be successfully opposed by the defendant if certain grounds are established, for example if the foreign judgment was obtained by fraud or is inconsistent with New Zealand's fundamental public policy. These exceptions are likely to give rise to some significant debate if New Zealand does sign and ratify the convention.

The first, and at present only, state party to the Judgments Convention is Uruguay. It remains to be seen if New Zealand will sign up. New Zealand has a cautious record when it comes to private international law harmonisation. We have, for example, not yet signed up to the 1965 and 1970 Hague Service or Evidence Conventions or the 2005 Convention on Choice of Court Agreements and our position on the Singapore Convention is not yet known. 

If the Judgments Convention is taken up by New Zealand and its major trading partners, it has the potential to reinvigorate international litigation and influence how international commercial disputes are resolved. Watch this space.

Our thanks to David Neild for drafting this Brief Counsel.