The Dutch Juno caseAsymmetric jurisdiction clauses continue to cause problems for enforcement under Hague 2005
A decision recently published by the Dutch court has raised further questions over the ability to enforce English judgments based on asymmetric jurisdiction clauses in EU member states. In this judgment, the Dutch court at first instance ruled that asymmetric clauses do not fall under the material scope of the 2005 Hague Convention on Choice of Court Agreements (Hague 2005).
A key part of cross-border commercial dealings is recourse to the courts to remedy any problems that arise. This means not just the ability to bring a claim but also the ability to enforce a court judgment against the other party. When the parties and their assets are each in different countries, enforcement can be a costly and uncertain process unless those countries have a reciprocal agreement in place.
As between the EU and the UK, there is a streamlined process for enforcing commercial judgments, providing those judgments meet certain criteria. That streamlined process is set out in Hague 2005, to which both the EU and the UK are contracting states. To rely on Hague 2005, the main requirement (aside from the need for the contract to have been made after Hague 2005 came into force in the relevant states) is that the court that issued the judgment must have taken jurisdiction based on an exclusive jurisdiction clause. However, for some time there has been a question as to whether judgments based on asymmetric clauses would satisfy this requirement.
Asymmetric clauses seek to tie one party exclusively to a single jurisdiction (i.e. its claims can only be brought before the specified court) but allow the other party (typically the dominant party, such as a financial institution in a facility agreement) a choice of jurisdictions. Some EU member state jurisdictions (such as France and, more recently, the Netherlands) have concluded that asymmetric jurisdiction clauses are non-exclusive, with the consequence that Hague 2005 does not apply to judgments obtained under them. The English Court of Appeal has also commented that it is likely to reach the same conclusion.
What does this mean for commercial parties? It means that asymmetric clauses, and any judgment based on them, can potentially fall outside the protections and enforcement process set out in Hague 2005. This makes it more difficult (and more costly) to enforce the judgment overseas.
OVERVIEW OF JUDGMENT
On 20 May 2021, proceedings were brought before the English Commercial Court. The claimant claimed an amount on account of three contracts entered into in 2020 and 2021. The contracts contained an asymmetric jurisdiction clause. In 2021, the English court found for the claimant and awarded the amount claimed.
In the Dutch proceedings, the claimant Juno Holdings et al. sought to enforce the English judgment. The Dutch court, however, held that an asymmetric clause is not an exclusive jurisdiction clause for the purposes of Hague 2005. It came to this judgment on the basis of the explanatory report of Hartley and Dogauchi to Article 3 of Hague 2005 (dealing with the meaning of exclusivity). Based on that report the court held Hague 2005 did not apply and the jurisdiction of the English courts could not be recognised on that basis.
The judgment may yet be overturned on appeal and is not binding on other courts (stare decisis is not applicable in the Netherlands). However, given that the judgment appears to be well reasoned, it is probable that other courts will agree with the findings and that it will be more widely followed.
IMPACT OF THE DECISION
The good news is that, notwithstanding the judgment of the Dutch court, English judgments based on asymmetric jurisdiction clauses should still be enforceable in the Netherlands (albeit not under Hague 2005). This is because there is established Dutch Supreme Court precedent that enables the Dutch courts to adopt a foreign court’s reasoning when considering a case.
The less good news is that this alternative enforcement process will involve issuing a fresh claim in the Dutch courts.
Issuing an entirely fresh claim in another jurisdiction is more cumbersome than simply obtaining an exequatur under Hague 2005. Even though the Dutch court may then adopt the English court’s reasoning as its own, thereby shortening the proceedings, there is still an increased risk of challenge to the English judgment by the other party and therefore less certainty that the judgment will be enforced. The process will also take longer and therefore be more expensive.
Pre-Brexit, the picture would have been different. As between the UK and the EU, judgments (even arising from asymmetric clauses) were usually automatically enforceable using the Brussels regime (particularly the Brussels Regulation (Recast) 1215/2012). Post-Brexit, the options for enforcing UK judgments in the EU (and vice versa) are more limited. In particular, as the judgment in the Juno-case of the court of Amsterdam of November 2022 underlines, asymmetric clauses are likely to be excluded from Hague 2005. In addition, the Dutch courts did not consider that the historic Anglo-Dutch treaty that preceded the Brussels regime could be resurrected to streamline enforcement (which has been an open question ever since the UK’s departure from the EU).
As the third anniversary of Brexit approaches, the dust is still settling on its impact on cross-border commercial disputes, and that gives rise to considerable uncertainty. Is there a solution to this uncertainty? If parties agree an exclusive jurisdiction clause (as opposed to an asymmetric one), that clause is more likely to fall within the remit of Hague 2005 and enforcement will be a simpler process. That said, many commercial parties, particularly finance institutions, will continue to require the luxury of choice that comes with an asymmetric clause. As those clauses are still ultimately enforceable in the Netherlands, that luxury remains an option – albeit one with potentially more expense and uncertain consequences.
Help may also be available in the future from another international Convention. The 2019 Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (Hague 2019) is not yet in force but could eventually provide commercial parties with a streamlined way to enforce certain judgments across the EU and UK. This should be the case even if those judgments arise from asymmetric jurisdiction clauses. Hague 2019 will come into force in the EU in September this year and is under consultation in the UK. It will only apply, however, to proceedings that start after the date it comes into force in both relevant contracting states. It looks like help is coming – but it won’t arrive any time soon.