The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“Convention”) entered into force on 1st September 2023 in all EU countries (except Denmark). What impact will the Convention have in relation to the enforcement of third country judgments in Hungary and the enforcement of Hungarian judgments in third countries?
The Convention in general
The Convention was concluded in 2009 in the framework of the Hague Conference on Private International Law (HCCH), with a view to set minimum standards for the circulation of foreign judgments.
By providing predictable rules for the recognition and enforcement of foreign judgments, the Convention promotes effective access to justice and facilitate international trade and investment, and mobility.
It is noted that the Convention is complementary to the Hague Convention of 30 June 2005 on Choice of Court Agreements.
Scope of the Convention
The Convention shall apply to the recognition and enforcement of judgments in civil or commercial matters.
The Convention expressly excludes several matters from its scope, for instance, revenue, customs, or administrative matters. Moreover, the Convention shall not apply to, among others, the status and legal capacity of natural persons, family law matters, intellectual property etc. The Convention shall not apply to arbitration and related proceedings.
Conditions for recognition and enforcement
The Convention establishes a common framework under which judgments from one Contracting Party (State of origin) will be recognised and enforced in another contracting state (requested State) if they are eligible for circulation in accordance with the provisions of the Convention and there are no grounds for refusal.
A judgment is eligible for circulation under the Convention if there is a minimum connection between the case and the State of origin under Article 5 (1) of the Convention (e.g. habitual residence or place of business of defendant was in the State of origin, etc.).
An important feature of the Convention is that there shall be no review of the merits of the judgment in the requested State and there may only be such consideration as is necessary for the application of this Convention.
Moreover, a Convention establishes an exclusive basis for recognition and enforcement in case of judgments that ruled on rights in rem in immovable property. These judgments shall be recognised and enforced if and only if the property is situated in the State of origin.
Grounds for refusal
The recognition or enforcement may be refused only on the grounds specified in the Article 7 of the Convention.
However, the grounds for refusal listed in the Convention are not mandatory, consequently, the acting court can exercise discretion on whether to refuse the foreign judgment.
The grounds listed are commonly accepted grounds for refusal, such as breach of due process, public order, risk of inconsistent judgments etc.
Relationship with other instruments
The Convention does not prevent or limit the recognition and enforcement of judgments under national law, bilateral, regional or other international instruments, with the exception of the immovable property.
Possible impacts
Considering that recognition and enforcement of judgments between EU member states is regulated by the Brussels Ia Regulation, from the point of view of Hungary, this Convention may be relevant for countries that are not EU member and with whom Hungary does not have a bilateral agreement on the mutual recognition and enforcement of judgments.
However, as the Convention entered in force only in the EU and Ukraine on the 1st September 2023, and it will be in force in Uruguay from 2024, in a short-term, it is unlikely to have a major impact on Hungary and on the Hungarian judgments to be enforced in third countries.
It is noted that more countries signed the Convention, for instance, USA, Russia, Israel, Montenegro, North Macedonia, however, they have not ratified it yet. If, for example, the Convention enters into force in a major trading state, like the USA, it may persuade many more countries to ratify it, or to join the Convention.
For this reason, it is not easy to predict whether the Convention will have significant effect in the near future.
By Richard Schmidt, Partner, and Peter Korozs, Junior Associate, SmartLegal Schmidt & Partners