Finland: The New Hague Judgments Convention Entered Into Force

The Hague Judgments Convention of 2019 entered into force on 1 September 2023. The Judgment Convention is a new instrument in cross-border dispute resolution in civil and commercial matters.

The Judgment Convention's objective is to establish a unified framework for the recognition and enforcement of foreign judgments. By providing clear rules and procedures, the Judgments Convention aims to enhance legal certainty, promote predictability, and facilitate international trade and commerce.

In this blog post, we will explore the effects of the Judgments Convention, with a particular focus on its potential impact on the current situation concerning the United Kingdom in the post-Brexit era.

APPLICATION BEGINS BETWEEN THE EU AND UKRAINE

So far, the Judgments Convention has nine signatories, and three of the contracting parties – the EU, Ukraine and Uruguay – have ratified it. The Judgments Convention entered into force on 1 September 2023, when its application commenced between the EU (excluding Denmark) and Ukraine.

As the application of the Judgments Convention commences, it is essential to note that the Judgments Convention's entry into force will not affect recognition and enforcement of intra-EU judgments. The Brussels Regulation will continue to apply between the EU Member States.

It remains to be seen whether more jurisdictions will accede to and ratify the Judgments Convention, which would, at best, improve the much-needed circulation of foreign judgments in civil and commercial matters.

NON-EXCLUSIVE JURISDICTION CLAUSES INCLUDED IN THE SCOPE OF THE CONVENTION

One of the main features of the Judgments Convention is that it applies to judgments stemming from non-exclusive jurisdiction clauses.

Non-exclusive jurisdiction clauses can be defined in negative: they do not designate the courts of one state or one or more specific courts of one state to the exclusion of the jurisdiction of any other courts. Such clauses are common in finance agreements, for instance.

In this regard, the Judgments Convention avoids the overlap with the 2005 Hague Choice of Court Convention, which enables contractual parties to agree on the exclusive court that will hear a claim. If this prerequisite is satisfied, the Choice of Court Convention also provides for the recognition and enforcement of a judgment given by the court chosen by the parties.

However, if the jurisdiction clause between the parties is non-exclusive, the Choice of Court Convention does not apply. For example, international loan agreements often contain asymmetric jurisdiction clauses, under which one party is entitled to bring a claim in a court of its choice while the other party may resort exclusively to one court.

In such cases, the Judgments Convention may fill the gap and complement the Choice of Court Convention by providing a welcomed mechanism for the recognition and enforcement of judgments.

UNCERTAINTY REMAINS WITH RESPECT TO ENGLISH JUDGMENTS

After Brexit, there has been increased uncertainty regarding the recognition and enforcement of English judgments both in Finland and generally in the EU Member States. Nevertheless, the UK has not yet decided whether it will accede to the Judgments Convention.

Currently, in the post-Brexit era, the judgments rendered by English courts are recognised and enforced in Finland under the Choice of Court Convention, provided that the judgment originates from an exclusive jurisdiction clause and falls within the scope of the Choice of Court Convention. If these prerequisites are not met, parties seeking recognition and enforcement of an English judgment will have to rely on national laws of the EU Member States or on bilateral treaties. No such treaty currently exists between the UK and Finland. Thus, the Judgments Convention could prove beneficial for cross-border transactions where the English courts have jurisdiction.

If the UK becomes a signatory to the Judgments Convention, the Judgments Convention will take effect one year after the ratification, i.e. during 2024 at the earliest. Additionally, it is important to note that the Judgments Convention has no retroactive effect and would therefore only apply to judgments arising from proceedings brought after the entry into force of the Judgments Convention in the UK.

TIPS ON NEGOTIATING JURISDICTION CLAUSES IN AGREEMENTS

The jurisdiction clause usually goes hand in hand with the governing law of the agreement. Even after Brexit, courts in both the EU and the UK continue to respect agreements on the governing law applicable to contractual obligations.

In the absence of an agreement on governing law, the choice of law rules of the respective jurisdiction determine the applicable governing law. The Judgments Convention does not change any choice of law rules that are currently in force.

When dealing with British companies, it remains important to expressly agree on the competent court. If a UK court is chosen to settle disputes, we recommend ensuring that the wording of the choice of court agreement fulfils the requirements of the Choice of Court Convention and falls within its scope.

Alternatively, as the Judgments Convention still awaits more ratifications, it may be worthwhile to agree to resolve disputes through arbitration; this is because the widely adopted New York Convention provides for recognition and enforcement of arbitral awards across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.