Choice of court agreements after Brexit

EU frameworks no longer apply to the UK, except for proceedings that commenced before the end of the Brexit transition period. This includes the Brussels Regulations.

Hague Choice of Court Agreements Convention 2005

The Hague Choice of Court Agreements Convention 2005 is the key legal framework for disputes where the parties have concluded an exclusive choice of court agreement.

The convention ensures the effectiveness of choice of court agreements made between parties to international commercial contracts. 

The EU is party to the 2005 Convention, along with the following countries:

• Albania
• Bahrain
• Denmark
• Mexico
• Moldova
• Montenegro
• North Macedonia
• Singapore
• Ukraine

China and the United States signed the 2005 Convention but have not yet ratified it.

The UK previously participated in the 2005 Convention by virtue of EU membership.

The EU ratified the 2005 Convention in 2015. It entered into force from 1 October 2015.

The UK acceded in its own right from 1 January 2021.

Issues with the 2005 Convention

There are two issues regarding the scope of the 2005 Convention.

Firstly, the 2005 Convention applies only to exclusive choice of court agreements.

Secondly, there is disagreement between the UK and the EU as to when the 2005 Convention entered into force for the UK.

These two issues are likely to provoke a degree of uncertainty and litigation in the future.

Exclusive choice of court agreements

Article 3(a) of the 2005 Convention states an agreement will be exclusive if it appoints only one court with jurisdiction.

Article 3(b) of the 2005 Convention deems an agreement to be exclusive “unless the parties have expressly provided otherwise”.

Asymmetric or unilateral choice of court agreements are commonplace in international financial agreements.

These agreements will generally provide that the lender has a range of courts in which to sue, while limiting the borrower to the courts of a single state.

There is some uncertainty about whether they are exclusive choice of court agreements for the purposes of the 2005 Convention.

The explanatory report to the 2005 Convention suggests that asymmetric clauses fall outside its scope.

The UK Court of Appeal in Etihad v Flother referred in obiter comments to the explanatory report as “a strong indication” that asymmetric clauses fall outside the Hague Convention.

The effective date of entry into force for the UK

The 2005 Convention applies only to choice of court agreements concluded after its entry into force. 

The position of the EU Commission in August 2020 was that the 2005 Convention would enter into force between the EU and UK only upon the UK becoming a party in its own right to the 2005 Convention (in effect from 1 January 2021).

The UK considers that the 2005 Convention has continued to apply without interruption from its original entry into force date (1 October 2015).

This has been stipulated by the UK in Ministry of Justice guidance and in its declaration accompanying its deposit of the instrument of accession.

Notably, the Hague Conference on Private International Law (the depositary of the convention) lists 1 October 2015 as the entry into force date for the 2005 Convention.

Advice for firms and lawyers

To work out whether the 2005 Convention applies, it is crucial to determine the nature of a choice of court agreement clause.

It is particularly important to determine whether there is an exclusive jurisdiction clause or an asymmetric or non-exclusive clause.

The date the choice of court agreement was concluded is also crucial.

You should consider the most appropriate choice of court clause for the agreement when drafting new client contracts.

Consider:

• where the parties are based
• where proceedings should be brought
• where any judgment would need to be enforced