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Web alert - China signs The Hague Choice of Court Convention - A step towards international judicial cooperation

31 January 2018

On 12 September 2017, the Chinese Ambassador to The Netherlands signed The Hague Convention on Choice of Court Agreements (the “Convention”) on behalf of the government of the People’s Republic of China. Drafting of the Convention was concluded at the Hague Conference on Private International Law on 30 June 2005 and it entered into force on 1 October 2015. To date it has 33 contracting states, including all member states of the EU (with the exception of Denmark), Singapore and Mexico. The US, Ukraine and Montenegro have signed but have not yet ratified the Convention. The Convention will become effective in China three months after being ratified by The National People’s Congress Standing Committee. 
 
The Convention aims to ensure the effectiveness of choice of court agreements (also known as “forum selection clauses” or “jurisdiction clauses”) between parties to international commercial transactions. Compared with the wide recognition of arbitration agreements and enforcement of foreign arbitral awards based on rules established by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), agreements between parties that refer disputes to litigation in front of a designated court are not always recognised, partly on account of concerns over judicial sovereignty.  The Convention, which attempts to replicate for choice of court agreements and foreign court judgments what has been achieved by the New York Convention in relation to arbitration agreements and awards, provides that exclusive choice of court agreements concluded between parties in civil or commercial matters shall be given effect based on the following three basic rules:
 
(1)   The chosen court must in principle hear the case (Art. 5);
(2)   Courts other than the chosen court are required to stay or dismiss proceedings brought before them (Art. 6); and
(3)   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). 
 
China’s joining as a contracting state to the Convention is expected to result in enhanced certainty in the resolution of disputes arising under commercial transactions between Chinese and other contracting parties. 
 
From a shipping perspective, although the carriage of passengers and goods (Article 2(2)(f)), marine pollution, limitation of liability for maritime claims, general average, and emergency towage and salvage (Article 2(2)(g)) are expressly excluded from the application of the Convention, other disputes in the maritime sector such as marine insurance, shipbuilding and repair, charterparty, ship financing, etc, are still subject to the application of the Convention. The Convention will play an important role in relation to these matters and will facilitate alternative dispute resolution apart from arbitration.  
 
Should members have any enquiries regarding the above or the recognition and enforcement of foreign court judgments and arbitral awards in China, please do not hesitate to approach your usual club contact.