Overview
This year brings with it two eagerly-anticipated developments that are expected to further enhance the UK's standing as a leading destination for resolving international disputes. First, with the signing of the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (Hague 19 Convention), individuals and businesses will benefit from greater certainty and efficiency when recognising and enforcing judgments internationally. Second, amendments to the UK Arbitration Act 1996 bring with them clarity and efficiency, but serve as an important reminder that parties should think ahead when agreeing their arbitration clauses – bespoke is better than off the shelf. We delve into both developments in more detail below.
UK’s signing of the Hague 19 Convention – Enhancing Certainty and Efficiency in the Treatment of Foreign Judgments
On November 23, 2023, the UK announced that it would take steps to accede to the Hague 19 Convention "as soon as practicable".[1] On January 12, 2024, the UK duly signed the Convention, which will enter into force 12 months after being ratified by Parliament.[2]
The Hague 19 Convention is the product of a long-standing project by the Hague Conference on Private International Law (HCCH) to create a uniform treaty framework for the mutual recognition and enforcement of judgments on a multilateral scale. It is currently in effect among EU Member States (except Denmark) and Ukraine, and will enter into force with respect to Uruguay in October 2024. Signatories which are yet to ratify it include Costa Rica, Montenegro, North Macedonia and the United States.
Like the analogous rules concerning civil and commercial judgments under the Brussels Recast Regime, the Hague 19 Convention provides that its Contracting Parties shall presumptively recognise and enforce a qualifying judgment from another Contracting Party (Art. 4). This obligation is engaged provided that the relevant judgment: (i) concerns a civil or commercial matter not excluded by the treaty (Art. 2); (ii) renders a decision "on the merits" (including on costs, but not interim measures) (Art. 3); and (iii) satisfies at least one of thirteen "bases" for recognition and enforcement (Art. 5). A qualifying judgment may be refused recognition or enforcement under the Convention's framework, but only on limited grounds, such as fraud (Art. 7).
The UK anticipates that the Hague 19 Convention will provide "clear and effective mechanisms … to recognise and enforce UK judgments in other jurisdictions and vice versa".[3] Such a move is complementary to the UK's participation in the HCCH 2005 Choice of Court Convention, and is expected to enhance the mutual recognition and enforcement of judgments with EU/EFTA countries while the UK continues to negotiate its (re)accession to the Brussels Recast Regime. As recently stated by Justice Minister, Lord Bellamy KC, "[j]oining the Hague [19] Convention marks a significant step forward for the UK within private international law and strengthens our appeal to businesses as a centre for dispute resolution."[4]
Reform of the UK Arbitration Act 1996 – An Important Reminder to Think Ahead and Agree Bespoke Arbitration Clauses
2024 marks the year we can expect the UK Parliament to introduce a number of changes to the Arbitration Act 1996. This follows a review process which has taken almost two years, resulting in the UK Law Commission recommending only limited amendments to the arbitration laws which have operated for more than 27 years and counting.
Here we highlight three amendments on topics that provide an important reminder of a critical point – namely, that arbitration is a process born from agreement, and the outcome of an arbitration can rely heavily upon, and oftentimes be altered by, what has been agreed in the arbitration clause.
- Tribunals are to be given new and express powers to dismiss any claim, defence or issue which has no real prospect of succeeding. Tribunals cannot apply the power of their own volition; instead, parties must apply for it and they will then have a reasonable opportunity to make representations. However, party agreement rules the day. If the parties have agreed to opt out of the provision, it will not apply. And for some, there may be very good reasons to do so. Concerns about bullish counterparties or tribunals who may reach decisions in haste and fail to appreciate the nuances of arguments are just some examples that may justify agreeing in advance that this power does not apply.
- Under the proposed amendments, the law which governs the arbitration clause will be the same as the law of the seat, unless the parties agree otherwise. This is a much simpler approach than applying current English case law to this often hotly-contested issue. However, simplicity is not always key. In some situations - many of which can be anticipated well before a dispute even emerges - having a different system of law applicable to the arbitration clause will provide considerable tactical advantages to certain parties and their situations.
- Finally, the expected amendments will prevent those who are challenging jurisdiction from getting a second bite at the cherry. At present, a party who challenges the jurisdiction of the tribunal can typically do so twice - once before the tribunal, and thereafter before the courts. The process allows a challenging party who is unsuccessful to review the tribunal’s reasons and then deploy new arguments and evidence in the challenge before the court. The proposed amendments ought to prevent this; they provide for court rules that would prohibit hearing new objections and evidence which were known and could have been discovered with reasonable diligence previously. The rules would also prevent the courts from re-hearing evidence heard by the tribunal unless in the interests of justice. On one view, these changes might avoid increased costs, delay and unfairness, and therefore should be welcomed. Conversely, they also pay significant deference to a tribunal’s own determination of its jurisdiction. For the party concerned about this, and wanting to ensure the courts retain supervision, the answer is to include bespoke provisions in the arbitration clause.
The proposed reforms reinforce the age-old saying that we should "hope for the best and plan for the worst". Disagreements may be far out of mind at the time of agreeing to an arbitration clause, but time spent then considering issues like those highlighted above is time well-spent.
Parties have considerable power to shape a dispute by what they have, and have not, agreed in their arbitration clause and the consequences of those early choices can change the outcome of a dispute.
All too often parties agree to generic, off-the-shelf arbitration clauses which do not properly fit their circumstances, even at the time of contracting. Bespoke arbitration clauses should always be preferred and negotiated for.
[1] https://www.gov.uk/government/consultations/hague-convention-of-2-july-2019-on-the-recognition-and-enforcement-of-foreign-judgments-in-civil-or-commercial-matters-hague-2019/outcome/government-response-to-the-hague-convention-of-july-2019-on-the-recognition-and-enforcement-of-foreign-judgements-in-civil-or-commercial-matters-hagu#:~:text=As%20set%20out%20in%20the,UK%20and%20in%20another%20Contracting (para. 77).
[2] https://www.gov.uk/government/news/uk-citizens-and-businesses-to-be-spared-time-and-money-on-cross-border-legal-disputes
[3] https://www.gov.uk/government/consultations/hague-convention-of-2-july-2019-on-the-recognition-and-enforcement-of-foreign-judgments-in-civil-or-commercial-matters-hague-2019/outcome/government-response-to-the-hague-convention-of-july-2019-on-the-recognition-and-enforcement-of-foreign-judgements-in-civil-or-commercial-matters-hagu#:~:text=As%20set%20out%20in%20the,UK%20and%20in%20another%20Contracting (para. 78).
[4] https://www.gov.uk/government/news/uk-citizens-and-businesses-to-be-spared-time-and-money-on-cross-border-legal-disputes.
