Volume 42 | Number 3 Summer 2007
Page 3 of 8
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II. Scope of the Convention
Article 1 defines the Convention’s scope. It applies only to international cases, only if there is an exclusive choice of court agreement, and only in civil and commercial matters. The definition of “international” varies between the Convention’s application regarding jurisdiction and its application regarding recognition and enforcement. A case is international unless the parties are residing in the same Contracting State and all relevant elements except the location of the chosen court are connected only with that State. Thus, merely the choice of a foreign court in an otherwise totally internal case does not make it international.
The Convention’s reach is expansive, however, for the purpose of recognition and enforcement, as the mere fact that a judgment is given by a foreign court suffices to make it international. To illustrate: assume that the parties, both residents of France, a Contracting State, enter into an exclusive forum selection agreement, choosing the courts in Italy to resolve their disputes and that all elements relevant to the dispute are connected with France. For jurisdictional purposes, this is not an international case. If a court in Italy, however, renders judgment, and the judgment is taken by one of the parties to Germany or France (assuming that France, Italy, and Germany are all Contracting States), both Germany and France will be obligated to recognize and enforce the judgment. Recognizing this anomalous situation, the Convention does authorize the State, namely France in this example, to declare that it will not recognize or enforce such judgments.22
The Convention defines an entity or person other than a natural person is as a resident of a state—where it has its statutory seat, central administration, or principal place of business, or the State under whose law it was formed or incorporated.23 A judgment under the Convention follows the traditional meaning of “judgment” for recognition purposes—namely that it is given by a court on the merits and does not include interim measures of protection,24 which are not covered under the Convention.25
To provide further clarity, the Convention explicitly states that it does not govern interim measures of protection and that it “neither requires nor precludes the grant, refusal or termination of interim measures of protection by a court of a Contracting State and does not affect whether or not a party may request or a court should grant, refuse or terminate such measures.”26
The Convention uses the term “State” or “Contracting State” to include states with two or more territorial units with different legal systems, such as Canada, the United Kingdom, and the United States, as well as “Regional Economic Integration Organizations,” such as the European Union.27 As to the former, the Convention provides that the term “State” or “Contracting State” applies, where appropriate, to “the relevant territorial unit,” that is, either the larger entity (say the United Kingdom), or its sub-unit (say Scotland).28 Thus, the choice of a Scottish court would mean that Scotland would be the “Contracting State.”29
As to the Regional Economic Integration Organizations, the Convention authorizes such an entity to become a party to the Convention if the organization’s member states have granted it “competence over some or all of the matters governed by [the] Convention.”30 Such an organization may also declare that it alone and not its member states individually will be party to the Convention but that they will also be bound by virtue of the organization’s adherence.31
An exclusive choice of court agreement is defined as an agreement that “must be concluded or documented (i) in writing; or (ii) by any other means of communication which renders information accessible so as to be usable for subsequent reference.”32 Accompanying this rather limited form requirement is the provision that the agreement designate “the courts of one Contracting State or one or more specific courts of one Contracting State to the exclusion of the jurisdiction of any other courts” to resolve past and future disputes.33 Assuming that the United States ratifies the Convention to apply federally as well as to all its states, an agreement could, for example, specify the federal courts of the United States, or the Federal District Court of Colorado, or the state courts of Colorado.
The Convention validates party autonomy, presuming exclusivity for a choice of court agreement “unless the parties have expressly provided otherwise.”34 Thus, an agreement designating the courts of a non-Contracting State is excluded from the Convention’s coverage. Finally, the Convention provides severability of a choice of court agreement from the rest of a contract so that the validity of the exclusive forum selection clause “cannot be contested solely on the ground that the contract is not valid.”35
The Convention appropriately confines its scope to exclusive choice of court agreements, although it does provide for reciprocal declarations by Contracting States that their courts will recognize and enforce judgments of other Contracting States resulting from non-exclusive choice of court agreements.36 Otherwise, it would have to address the issue of parallel proceedings and consequently the rigid rule of priority, which is the practice in Europe, but on which there is no wide consensus. The United States, for example, rejects the priority concept and instead follows the forum non conveniens approach; thus, the United States courts routinely apply public and private law factors in exercise of their broad discretion to determine whether they should or should not hear the case.
The presumption of exclusivity resolves an issue fraught with difficulty in the United States courts, where generally forum selection clauses are not presumed to be exclusive absent explicit language to that effect. Furthermore, courts in the United States differ on what makes a forum selection clause mandatory and hence enforceable, or permissive and hence discretionary. A Tenth Circuit case decided in 2002, K & V Scientific Co., Inc. v. BMW, aptly makes the point: “Mandatory forum selection clauses contain clear language showing that jurisdiction is appropriate only in the designated forum.37 In contrast, permissive forum selection clauses authorize jurisdiction in a designated forum, but do not prohibit litigation elsewhere.”38 The clause in question read: “[j]urisdiction for all and any disputes arising out of or in connection with this agreement is Munich. All and any disputes arising out of or in connection with this agreement are subject to the laws of the Federal Republic of Germany.”39 The Tenth Circuit’s conclusion was that “is Munich” does not sufficiently imply “is [only] Munich.”40
The court added that “where venue is specified [in a forum selection clause] with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified [in a forum selection clause], the clause will generally not be enforced unless there is some further language indicating the parties’ intent to make venue exclusive.”41
Among the U.S. circuit courts, the Second, Fifth, Seventh, Ninth, and Eleventh Circuits have also held such clauses to be permissive, while the Sixth Circuit has concluded otherwise.
Regarding the third limit on the Convention’s scope—that it applies only in civil or commercial matters—the rapporteurs note that the use of both terms was necessary because in some legal systems “civil” and “commercial” are considered separate and mutually exclusive categories.42 However, as will be discussed next, several issues normally considered to fall within the civil and commercial categories are excluded from the scope of the Convention.
In addition to the exclusion of forum selection clauses in consumer and employment contracts, which obviously do not belong in a convention aimed at promoting “international trade and investment,”43 article 2 enumerates sixteen subject matters for exclusion.44 Several of these excluded matters are of special governmental interests or are subject to regional or international treaties or national rules.45 These include the status and legal capacity of natural persons and family law and succession matters.46 Other excluded matters include insolvency, the carriage of passengers and goods, marine pollution, anti-trust (competition) matters, torts, rights in rem in immovable property, the validity of intellectual property rights other than copyrights and related rights, limited proceedings regarding infringement of intellectual property rights, and the validity of entries in public registers.47 However, the scope of the Convention does include proceedings where one of the excluded matters “arises merely as a preliminary question and not as an object of the proceedings.”48
Also specifically excluded are arbitration and related proceedings.49 Specifically not excluded are proceedings involving a government, a government agency, or any person acting on behalf of a government.50 The Convention does not “affect privileges and immunities of States or of international organisations.”51
Also, a State is authorized to declare that it will not apply the Convention to a specific matter in which it has a strong interest.52 However, the Convention does provide adequate safeguards: first, it requires the State making such a declaration to define it “clearly and precisely” in order to ensure that the declaration is “no broader than necessary;”53 second, the State is to notify the Depositary (the government of the Netherlands) which will inform the other States;54 third, such a declaration will not take effect for at least three months if the Convention is already in force for the State making it;55 fourth, it will not apply to contracts concluded before the Convention takes effect;56 and fifth, acknowledging reciprocity, the Convention provides that where the chosen court is in the State making the declaration, other States are not required to apply the Convention regarding the matter in question.57