Introduction
In our increasingly interconnected world, where international trade, cross-border transactions and global mobility are the norm, establishing an efficient and co-ordinated system for recognising and enforcing foreign judgments has become of paramount importance. However, the diversity of legal systems and lack of a unified framework often pose considerable challenges when it comes to enforcing judgments across national borders. That means that introducing a global system to facilitate the recognition and enforcement of foreign judgments is a pressing matter that could provide greater certainty in relation to legal outcomes, as well as facilitating international commerce and promoting improved access to justice.
The end of August 2023, therefore, could mark the end of an era in private international law as the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“2019 Hague Convention”) comes into force on 1 September 2023. This should provide the long-waited global legal framework for the recognition and enforcement of foreign judgments. It isn’t that solutions have not been proposed before – on the contrary there have been several concerted efforts to put in place an appropriate recognition and enforcement system. Two of these are of particular note: one resulted in the successful 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which established a now aging but reliable system for the recognition and enforcement of foreign arbitral awards; the other was the unsuccessful Convention of 1 February 1971 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (“1971 Hague Convention”).
Previous global initiatives
The recognition and enforcement of foreign judgments were formerly governed by a patchwork of international conventions, bilateral treaties, and national laws. The abovementioned 1971 Hague Convention was an ambitious effort to harmonise global systems but failed to adequately address the disparities in national laws. The Convention applied to judgments in civil and commercial matters, excluding a number of specific areas such as revenue and customs, and administrative matters, as well as family law matters, the status of legal entities, inheritance, insolvency, social security, and damage or injury related to nuclear technology. It seems that this legal framework was ultimately too ambitious and therefore failed to bridge the gap between retaining national sovereignty and achieving international uniformity. In the end only five parties signed and ratified the 1971 Hague Convention (Albania, Cyprus, Kuwait, Netherlands, and Portugal). It thus failed to make any significant global impact and remained an international instrument for a few countries only.
In the meantime, the Hague Conference on Private International Law also made steps to achieve a basis for international recognition and enforcement via its Convention of 30 June 2005 on the Choice of Court Agreements, which sought to harmonise the law relating to dispute resolution clauses. This also attempted to regulate the recognition and enforcement of judgments resulting from disputes. However, quite a large proportion of legal matters were excluded from the Convention’s provisions. Again, this did not secure wide global recognition and, 18 years later, had been signed by just 36 countries (ratified by 32), most of which are in Europe. Apart from a number of EU member states, the Convention was ratified by Mexico, Montenegro, Singapore, Ukraine, and the UK, while it was also signed by China, Israel, North Macedonia, and the US.
It is notable that on a wider level, the EU has successfully managed to harmonise recognition and enforcement matters internationally. The latest EU legislation in this matter, for example, was EU Regulation No. 1215/2012 of the European Parliament and the Council of 12 December 2012 on the Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial matters, commonly referred to as the Brussels Ia Regulation. This replaced the previous Brussels I Regulation and aims to provide a more comprehensive and up-to-date framework for cross-border civil and commercial litigation within the EU.
The 2019 Hague Convention as a step towards uniform cross-border justice
To say that the 2019 Hague Convention has successfully created a global system for the recognition and enforcement of foreign judgments would be an exaggeration. However, in the constantly evolving area of private international law, it has emerged as a significant milestone. The Convention will come into force on 1 September 2023, and, even before this, it has shown promising signs of being embraced by a diverse range of countries globally. To date, and four years after its emergence, the Convention has already been signed by 34 countries, and ratified by 28. In addition to EU member states (except Denmark, which is exempt), it has been ratified by Ukraine, and signed by Costa Rica, Israel, Montenegro, North Macedonia, the Russian Federation, the US and Uruguay.
The convention applies to civil or commercial matters. However, a wide range of legal areas have, once again, been excluded such as insolvency; the carriage of passengers and goods; transboundary marine pollution; liability for nuclear damage; the validity, nullity, or dissolution of legal entities or associations; public registry matters; intellectual property; and most anti-trust (competition) matters. This is the main reason why the 2019 Hague Convention won’t become a definitive global instrument, as it still suffers from significant limitations, although it does cover a wide range of legal transactions and could go some way to improving international commerce in the coming years.
The 2019 Hague Convention sets out some formal criteria for the recognition of foreign judgments, such as the ones related to the parties, quality of the underlying proceedings, and subject of the dispute. It also sets out the grounds for a refusal of recognition or enforcement of foreign judgments. For example, a judgement recognition can be rejected in cases where there has been a breach of the right to defence through a failure to duly perform service of process or serve other notices; where a judgment was obtained by fraud; where enforcement and recognition would result in a breach of public order; where the original court proceedings were contrary to an agreement made by the parties; where a case has already been decided in the domestic jurisdiction; or in certain other circumstances. The 2019 Hague Convention also regulates international lis pendence within the scope of its application.
The states that are party to the Convention can also put in place additional limitations covering certain matters under the application of the 2019 Hague Convention or its individual provisions.
SEE Perspective
While it is clear that countries in South East Europe that are members of the EU will be bound by the 2019 Hague Convention from 1 September (Bulgaria, Croatia, Greece, and Romania), only two other Balkan countries have so far signed – Montenero and North Macedonia, and these are yet to ratify. The remaining countries in the region are still to decide on the matter.
That said, signing and ratifying the 2019 Hague Convention could be a very important step forward for international trade in the Balkans, as the current system in several Balkan countries and some member states of the EU has not kept up with the pace of trade expansion. Most ex-Yugoslavian countries, for example, still continue to apply ex-Yugoslav legislation that requires factual reciprocity in the matter of recognition and enforcement, which, in fact, does not exist in the case of some EU member states and other countries that in practice have a substantial involvement in trade and investments in the Balkans. One of these countries is Austria – an EU member state that has considerable investments and strong trade ties with the SEE region. But Austrian judgments can’t officially be recognised in most of the West Balkans as Austrian law requires diplomatic reciprocity, nor can judgments rendered by the courts in Bosnia and Herzegovina, Montenegro, North Macedonia, or Serbia be recognised in Austria. Therefore, successful litigants in Serbia holding final and enforceable judgment of a Serbian court have hitherto had to commence new litigation proceedings against debtors in Austria if they want to initiate enforcement proceedings there and obtain a final and binding Austrian judgment. This has been a significant issue for countries doing business with parties in Austria, as well as for Austrian enterprises doing business in the SEE region.
Things are now about to change, at least for Montenegro and North Macedonia, as, following the ratification of the 2019 Hague Convention, there will now be a substantially larger number of countries where judgments given in these two countries will be recognised, and vice versa. Despite the limited scope of matters that are covered by the 2019 Hague Convention, it is expected to bring about substantial improvements in the commercial environment. If Bosnia and Herzegovina and Serbia similarly want to improve their business environments, they should not hesitate to follow the same path as their neighbours – Montenegro and North Macedonia.
Conclusion
The 2019 Hague Convention undoubtedly marks a really significant milestone in harmonisation efforts relating to the recognition and enforcement of foreign judgments. However, the Convention is limited in scope, unlike its unsuccessful predecessor – the 1971 Hague Convention. But without any doubt, it is likely to make a significant contribution to improving the international commercial environment. Of course, further steps will be required in the future to cover other important commercial areas such as intellectual property, and the transport of goods and persons.
The fact that many major countries and groups of countries have already expressed their support for this Convention, including the US, EU states, and the Russian Federation, is likely to present a significant opportunity for smaller countries to attract new investments, as the adoption of the 2019 Hague Convention should also bring about improvements in national legal systems in countries that currently lag behind the times, as well as providing better prospects for cross-border enforcements of judgments and less adverse forum shopping. This opportunity should be particularly embraced by those SEE countries that are not currently part of the EU, since it should help overcome a number of historic impediments that have hampered business activities with certain EU member states that have significant investments in the region.