Recognition and enforcement of foreign judgments between the UK and the EU: the impact of the 2019 Hague Convention

What is the aim of the 2019 Hague Convention?

The 2019 Hague Convention’s aim is to simplify the recognition and enforcement of judgments in civil and commercial matters as between contracting states. In-scope judgments from a contracting state must be recognised and enforced in other contracting states without a review on the merits provided that the case in hand falls within the convention’s scope, one of the 2019 Hague Convention’s bases for recognition and enforcement exists, and that there are no grounds for refusal.

The 2019 Hague Convention entered into force for the EU member states (excluding Denmark) on 1 September 2023. It is now in force between the EU member states (excluding Denmark), Ukraine and Uruguay. The 2019 Hague Convention is open for all states and aims to facilitate the resolution of international disputes by establishing a multilateral system for the recognition and enforcement of judgments.

The 2019 Hague Convention was ratified by the UK on 27 June 2024 and will come into force for the UK on 1 July 2025. Originally the UK declared that the 2019 Hague Convention shall extend to England and Wales only but in the end of March 2025 the UK declared that the convention shall also extend to Scotland and Northern Ireland. The 2019 Hague Convention could significantly broaden the framework for the recognition of judgments between the EU and the UK, which was once disrupted by Brexit. This development is particularly noteworthy for financing transactions wherein numerous financing arrangements (including those provided to many Swedish companies) are governed by English law.

Situation Prior to Brexit

Prior to Brexit recognition and enforcement of judgments in civil and commercial matters between two EU member states were primarily regulated based on the Council Regulation (EC) No 1215/2012 of 12 December 2012 (the “2012 Council Regulation“) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Additionally, each EU member state was a contracting party to the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, signed at Lugano on 30 October 2007 (the “Lugano Convention“), which provided a similar framework.

Due to Brexit and following the transition period provided by the Brexit withdrawal agreement, both the 2012 Council Regulation and the Lugano Convention ceased to apply between the EU member states and the UK. The UK has sought to participate in the Lugano Convention, however, joining the Lugano Convention is subject to approval of the existing parties to the treaty, and the EU has not provided its acceptance. The European Commission has concluded that the Lugano Convention is for participants which participate, at least partly, in the EU’s internal market and have a particularly close regulatory integration with the EU, whereas the UK is simply a third country without a special link to the internal market.

2005 Hague Convention

Following Brexit, the UK joined the Convention of 30 June 2005 on Choice of Court Agreements (the “2005 Hague Convention“), but the applicability of the 2005 Hague Convention is limited to judgments arising from agreements including a two-way exclusive jurisdiction clause (i.e. Financing agreements traditionally include asymmetric jurisdiction clauses that allow one party (the lender) to start proceedings in multiple jurisdictions. Therefore, the applicability of the 2005 Hague Convention to these agreements has been limited.

Accession to the 2019 Hague Convention

The 2019 Hague Convention was ratified by the UK on 27 June 2024 and will come into force for the UK on 1 July 2025. Unlike the Lugano Convention, the 2019 Hague Convention does not require approval from other contracting states for accession. However, existing contracting states have the option to opt out of recognition within 12 months following the ratification by the joining state. Thus, the opt-out period for the existing contracting states has yet to lapse concerning the UK’s accession. If an opt-out is applied, the Hague 2019 Convention will not apply between the existing contracting state using its opt-out option and the joining state when the 2019 Hague Convention enters into force in respect of the joining state.

If no existing contracting state opts out, the 2019 Hague Convention will apply to proceedings started after that 2019 Hague Convention entered into force for both the state of origin (i.e. a contracting state whose court rendered the judgment) and the requested state (i.e. a contracting state where enforcement is sought), regardless of when the jurisdiction clause was concluded or the underlying agreement entered into.

Scope of Application and Basis for Recognition and Enforcement

The 2019 Hague Convention addresses the recognition and enforcement of judgments in civil or commercial matters, excluding revenue, customs, and administrative issues. Under the 2019 Hague Convention, a judgment is defined as any court decision on the merits, including decrees and orders. However, interim measures of protection and certain procedural matters are excluded. The 2019 Hague Convention also excludes, inter alia, arbitration, insolvency, family matters, intellectual property, defamation, and certain antitrust matters. Contracting states may also declare non-application to specific matters. Notably the EU has excluded by a declaration the application of the 2019 Hague Convention to non-residential leases (tenancies) of immovable property situated in the EU.

Provided that the judgment falls within the scope of application of the 2019 Hague Convention, judgments from a contracting state shall be recognised and enforced in other contracting states without reviewing the merits, on the condition that there is a basis for recognition and enforcement, and no grounds for refusal exist.

Enforcement eligibility under the 2019 Hague Convention requires meeting at least one requirement from Article 5. Broadly, a judgment can be recognised and enforced on one of the following bases:

• Jurisdiction based on the defendant’s connection to the state of origin (e.g., defendant’s residence, business presence, or conduct in the state of origin);
• Location-based or subject-matter specific jurisdiction (e.g., grounds based on where key events or property are located such as place of performance of contractual obligation); or
• Consent or non-exclusive jurisdiction clause (e.g., express consent to the court’s jurisdiction during the proceeding or an underlying agreement containing a non-exclusive choice of court agreement).

The last ground indicates that a judgment can be enforced if issued by a court specified in an agreement between parties, excluding exclusive choice of court agreements. Thus, the 2019 Hague Convention aims to cover judgments from agreements with asymmetric jurisdiction clauses, while the 2005 Hague Convention covers those with exclusive jurisdiction clauses. This eligibility criteria is significant for financing transactions as financing agreements typically have included non-exclusive jurisdiction causes providing one party a possibility to commence proceedings in several jurisdictions.

Additionally, the 2019 Hague Convention includes exceptions, such as rights in rem in immovable property, which will only be recognised and enforced if the property is situated in the state of origin.

Article 7 of the 2019 Hague Convention outlines specific grounds on which recognition and enforcement of a judgment may be refused, even if one of the bases under Article 5 is met. These grounds closely align with those found in EU and international legal instruments governing the recognition and enforcement of judgments and arbitral awards. Examples include lack of adequate notice to the defendant, judgment obtained by fraud, recognition or enforcement that would be incompatible with the public policy of the requested state, or inconsistency with other judgments.

What happens next?

The 2019 Hague Convention is set to enter into force in respect of the UK on 1 July 2025. Provided that the EU does not opt out before the end of the 12-month deadline, the 2019 Hague Convention would apply between the UK and the EU (other than Denmark) to proceedings started after the 2019 Hague Convention entered into force in respect of the UK (provided that the case falls within the convention’s scope, the requirements for a judgment being eligible for recognition and enforcement are met and there are no grounds for refusal).