The Hague Convention on Choice of Court Agreements (2005) will apply to Singapore from 1 October 2016, further bolstering Singapore’s position as a dispute resolution hub in Asia. Singapore signed the Convention on 25 March 2015 and the Choice of Court Agreements Act 2016 was passed by the Singapore Parliament on 14th May 2016 and assented to by the President on 28th April 2016.
Work of the Convention
The Convention aims at ensuring the effectiveness of choice of court agreements (also known as “forum selection clauses” or “jurisdiction clauses”) between parties to international commercial transactions, and to make judgments obtained under those clauses easier to enforce.
In order to manage risk, parties often seek to agree in advance on how disputes arising out of a transaction between them will be resolved. In some cases, the parties will refer the dispute to arbitration. In others, they will agree to litigate before a designated court. Choice of court agreements are not always respected under divergent national rules, particularly when cases are brought before a court other than the one designated by the parties.
The Choice of Court Convention seeks to rectify this situation, thereby promoting greater legal certainty for cross-border business and creating a climate more favourable to international trade and investment.
Three basic rules
The Convention contains three basic rules that give effect to choice of court agreements:
- The chosen court must in principle hear the case (Art. 5);
- Any court not chosen must in principle decline to hear the case (Art. 6); and
- Any judgment rendered by the chosen court must be recognised and enforced in other Contracting States, except where a ground for refusal applies (Arts 8 and 9)
Scope of the Convention
The Convention applies to choice of court agreements “concluded in civil or commercial matters” (Art. 1). The Convention excludes consumer and employment contracts and certain specified subject matters (Art. 2). This is because, in most cases, the existence of more specific international instruments, and national, regional or international rules that claim exclusive jurisdiction for some of these matters.
The Convention applies to “exclusive” choice of court agreements (Art. 1). An agreement designating one or more specific courts in a Contracting State is deemed to be exclusive unless the parties have expressly provided otherwise (Art. 3). In addition, a Contracting State may declare that it will recognise and enforce judgments given by courts designated in a non-exclusive choice of court agreement (Art. 22).
Consequences for Singapore
If a Singapore court is the chosen court of an exclusive choice of court agreement covered by the Convention, the dispute must be heard in Singapore only. This strengthens the enforcement of agreements which specify Singapore courts as the exclusive dispute resolution forum.
The courts of other Contracting States will be obliged to recognise and enforce the Singapore court judgment on that dispute. This enhances the international enforceability of Singapore court judgments, including those of the Singapore International Commercial Court (SICC). This is expected to therefore make the SICC a more attractive dispute settlement option as a neutral litigation venue.
The current list of Contracting States reveals that currently the Convention applies only as between Mexico and the EU member states (other than Denmark), so the addition of Singapore from 1 October 2016 is significant. The USA and Ukraine have signed the Convention but have not yet ratified it.
30 September 2016