Foreign enforcement: the new Hague Convention may fill a gap in the international legal landscape

An exponentially increasing number of disputes cross national borders. For parties entering into transnational commercial transactions, certainty that any judgment between them will be practically enforceable is an important factor in minimising risk.

The 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters was adopted on 2 July, and marks the close of decades of work on the subject of foreign enforcement. The Convention streamlines the process, creating an internationally-recognised base standard for the treatment of incoming judgments to a requested State. Whether many countries will accede to it any time soon, however, is another question.

Current system for recognition and enforcement of foreign judgments

At present, enforcing Australian judgments abroad is dependent on a handful of bilateral treaties, and otherwise on the national law of other States. Certain judgments can be recognised and enforced in New Zealand under the Trans-Tasman Proceedings Act 2010, and the treaty for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters 1994 allows for certain Australian judgments to be recognised in the United Kingdom and vice versa.

Incoming judgments are governed primarily by common law. The statutory framework set out in the Foreign Judgments Act 1991 and the Foreign Judgments Regulations 1992 is limited; it applies only to certain matters, only monetary judgments, and to a prescribed list of jurisdictions. Notably, major trading partners such as China, the United States or the European Union are not covered by the statutory framework.

The Hague Judgments Project

The new Convention is the culmination of part two of the Hague Conference on Private International Law "Judgments Project", initiated by the United States in 1992. The Judgments Project is the work undertaken by the Hague Conference on two key aspects of cross-border litigation in civil and commercial matters: the international jurisdiction of courts, and the recognition and enforcement of their judgments abroad. The general objectives of the Project are to enhance access to practical justice and to facilitate cross-border trade and investment by reducing the costs and risks associated with such dealings.

Early drafts of a composite convention which would have covered the area comprehensively failed. The issue of international jurisdiction proved particularly problematic, given the conflicting interests of the United States and the European Union with respect to the extent of jurisdiction claimed by the former. As a result of this impasse, the project was broken into discrete issues under a suite of complementary conventions, the first of which is the 2005 Hague Convention on Choice of Court Agreements (Choice of Court Convention). The separation of the new Convention from the contentious issue grounds of jurisdiction is promising for the potential accession of these major players.

What judgments will be recognised and enforced under the new Convention?

The Convention defines a judgment as "any decision on the merits given by a court", including money and non-money judgments. It generally does not allow for any review on the merits (unless expressly provided for in the text).

Judgments that will be recognised and enforced include those where:

• the person against whom the judgment will be enforced or recognised:
  • was habitually resident in the State where the judgment originated;
  • had their principal place of business in the State where the judgment originated;
  • maintained a branch or agency in the State where the judgment originated and the claim relates to actions of that branch;
  • brought the claim on which the judgment was made: or expressly consented to jurisdiction, or argued on the merits without contesting jurisdiction; or


• the judgment ruled:
  • on a contractual obligation which was (or should have been) performed in the State where the judgment originated;
  • on a lease of immoveable property located in the State where the judgment originated;
  • on a counterclaim (under certain conditions); or
  • in relation to the validity, construction, effects, administration or variation of a trust (under certain conditions).

An anomaly in the new Convention is that judgments from a court nominated in a non-exclusive choice of court agreement will be recognised, but those arising from courts chosen under exclusive agreements will not. This distinction prevents overlap with the already in force Choice of Court Convention, but arguably creates an absurd gap in the new Convention.

Some more controversial issues (where States have disparate approaches) have been excluded from the scope of the new Convention in the hope that this would improve the prospect of broad recognition. As a result, judgments relating to intellectual property and anti-trust (competition) matters will not be dealt with under the Convention. Matters pertaining to privacy, insolvency, the status of legal persons, military and law enforcement actions, succession and family law matters, and certain maritime matters are also excluded.

Importantly, the Convention will not apply to any judgment relating to parties that have agreed to arbitration proceedings.

Grounds to refuse recognition of judgments

The grounds on which a court may refuse to recognise a judgment that otherwise meets the Convention standards are relatively narrow. The provisions allow for refusal: 

• where there was not effective notice and service in the State where the judgment originated; 
• in instance of fraud;
• where the judgment was rendered in contravention of a choice of court agreement; or
• where the judgment is inconsistent with an earlier judgment in the requested State, or from any State that is eligible for recognition in the requested State.

The general protection for requested States is the grounds to refuse recognition or enforcement where it would be manifestly incompatible with the public policy of that State.

How could Australia benefit if it acceded to the Convention?

The Convention creates a relatively simple and reliable system for the recognition and enforcement of judgments between Contracting States, improving the efficiency of Australian international commerce. If the Convention is widely ratified, it will save time and money, and reduce risk of duplicative proceedings; it also provides for the enforcement of non-monetary remedies.

The Convention presents an opportunity for Australia to create reciprocal relationships with those trading partners that are not covered by any current instruments. In response to an ALRC inquiry, Australian businesses reported that their position on enforcement of foreign judgments varied depending on "the general legal framework in [the relevant] country – in particular the level of confidence they had in that country's courts" and on the role held by the business in that country. There is interest in improving the extraterritorial effect of Australian judgments in the Asia Pacific region, particularly as a result of ever-increasing trade and interaction with China.

Likelihood of a widely operating Convention

Uruguay has already signed the new Convention, however, it is unclear when the Convention will enter into force. In addition to the need for two Contracting Parties, the Convention provides for an opt-out "bilateralisation" mechanism, which allows States to declare that the Convention will not be in force between them and any other Contracting Party. This may promote accession, as a lack of mutual confidence in the legal institutions of some States could have raised a significant obstacle. However, such a mechanism could undermine the broad operation of the Convention.

The project was initiated by the United States, as they had, and still have, no bilateral or multilateral agreements for reciprocal recognition and enforcement of judgments. Experts and diplomats from the United States, China, Japan and the European Union were extensively involved (and as such have invested considerable time and effort) in the development of the Convention, suggesting an interest in accession.

Notwithstanding the enthusiasm of those involved in the project, if the Choice of Court Convention is any guide uptake may be slow. That 2005 convention only came into force in October 2015 and now has 32 Contracting Parties, mostly made up by those bound by the accession of the European Union. Australia has expressed its intention to join on a number of occasions in recent years, and a Joint Standing Committee on Treaties in 2016 recommended to the Government that Australia accede.

Given this, and Australia's delay in acceding to other Hague conventions (it took over 40 years to join the Hague Service Convention), it is unlikely that the impact of the new Convention on Recognition and Enforcement of Foreign Judgments will be felt here in the foreseeable future. However, the full coverage offered by the interaction of the new Convention and the Choice of Court Convention may encourage interest both in Australia and in other States.