By: Carolyn A. Dubay, Associate Editor, International Judicial Monitor

In 2009, the United States ended more than a decade of negotiations and became a signatory to its first international convention mandating the recognition and enforcement of foreign judgments issued by courts resolving certain international business disputes.  The Convention on Choice of Court Agreements (COCCA) was drafted under the auspices of the Hague Conference on Private International Law, and was opened for signature on June 30, 2005.  Although COCCA has not yet come into force, a number of nations are in various stages of ratifying the convention, making its entry into force likely in the near future. 

As provided in its preamble, the stated objective of the Convention is to "promote international trade and investment through enhanced judicial co-operation."  Even so, COCCA is narrowly drawn to apply only to international business-to-business commercial disputes subject to an exclusive choice of court agreement (more frequently referred to as a forum selection clause in the United States).  Consumer contracts and contracts of employment, as well as a number of other types of claims, are specifically excluded from its provisions.  COCCA’s limited scope reflects a changing strategy towards achieving the broader goal of enforcement of foreign judgments in business disputes.  Rather than focus on the bigger problem of enforcement of commercial judgments generally, COCCA carves out a narrow category of cases in which enforcement of judgments will be easier to realize.  The Convention also addresses the continuing existence of forum non conveniens in American jurisprudence to defeat enforcement of otherwise valid forum selection clauses, an area of significant doctrinal divergence from many European countries. 

With respect to forum selection clauses in international business-to-business contracts, COCCA’s provisions rest on three pillars.  Under the first pillar, COCCA dictates the obligations and procedures to be used in courts designated in choice of court agreements, referred to in the Convention as chosen courts.  The second pillar of COCCA dictates the obligations of non-chosen courts when a party to a dispute falling under the Convention files an action in that court notwithstanding an exclusive choice of court agreement dictating a different forum.  The third pillar concentrates on procedures to enforce judgments of chosen courts. 

As to the obligations of chosen courts under the first pillar, COCCA mandates that such courts exercise personal jurisdiction over the parties to the choice of court agreement, unless the court determines that the agreement is null and void under applicable law in that court.  Specifically, Article 5(1) states that a chosen court in a Contracting State to the Convention “shall have jurisdiction to decide a dispute to which the [exclusive choice of court] agreement applies, unless the agreement is null and void under the law of that [Contracting] State.”  Not to be confused with subject matter jurisdiction, Article 5(1) is directed exclusively at creating in personam jurisdiction over the parties.  Indeed, Article 5(3)(a) provides that subject matter jurisdiction is not affected by the Convention.
  
Under COCCA’s second pillar relating to obligations of a non-chosen court, Article 6 requires that the court where the action is filed “shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies.”  Article 6 identifies only five defenses to enforcement of the forum selection clause that would allow proceedings in the non-chosen court to go forward:  (1) the agreement is null and void under the law of chosen court; (2) a party lacked capacity to form a contract under the law of court where the action was filed; (3) giving effect to agreement would be “manifestly contrary to the public policy” of the state where the action was filed; (4) for exceptional reasons beyond the control of the parties, the choice of forum agreement cannot reasonably be performed; and (5) the chosen court decided not to hear the case.   Under Article 7, a non-chosen court is not precluded from granting “interim measures of protection” (such as injunctions) as such procedures fall outside of COCCA. 

Under the third pillar of COCCA, courts asked to enforce judgments of chosen courts are required to do so.  Under Article 8(1), a judgment entered by a chosen court “shall be recognised and enforced in other Contracting States.” This requires a basic reciprocity rule:  if a judgment is valid and enforceable in the chosen state, then it is valid and enforceable in the state where the judgment is to be enforced.  To avoid the common problem of objections to the validity of foreign judgments based on jurisdictional issues, under COCCA, conclusions of the chosen court as to its jurisdiction may not be challenged under Article 8(2). Rather, defenses to enforcement are limited to those provided in Article 8 and Article 9 of COCCA.

Importantly, COCCA is also designed to promote the enforcement of forum selection clauses that choose a neutral forum for the resolution of future contract disputes, even where that chosen forum has no geographic connection to the underlying dispute or the parties.   As such, COCCA mandates that a chosen court refrain from dismissing the case on forum non conveniens grounds. COCCA Article 5(2) provides that designated court “shall not decline to exercise jurisdiction on the ground that the dispute should be decided in a court of another State.”   As to venue, while Article 5(3)(b) provides that non-discretionary venue rules are not affected, in cases of discretionary transfer of venue, “due consideration should be given to the choice of the parties.”  Because the issue of the geographic nexus between the chosen court and the dispute is not uncontroversial, COCCA Article 19 does allow Contracting States to declare that its courts may “refuse to determine disputes to which an exclusive choice of court agreement applies if, except for the location of the chosen court, there is no connection between that State and the parties or the dispute.”  Whether the United States opts to make an Article 19 declaration remains to be seen, although the political and policy downside of such a declaration would be to encourage countries in the EU to make similar declarations and restrict access to their courts as chosen courts with no geographic nexus to the dispute. 

Implementing COCCA in the United States may prove to be a thornier issue that one might expect on a procedurally-based federal legislative initiative.  While existing state law will continue to dictate the substantive rules of decision to be supplied in most international business disputes, the procedural rules will be supplied by federal or state law depending on where the case is filed.  Unfortunately, the federal and state courts are split on the issue of whether the enforcement of a forum selection clause is a procedural or substantive rule.  Moreover, the current political environment, with rising anger at growing federal entanglement in state affairs, may yield significant barriers to a comprehensive federal framework to implement COCCA.  As such, proposals have been put forward to implement COCCA through state-by-state adoption of a uniform law on choice of court agreements subject to COCCA, subject to certain conditions imposed in a federal implementing law.  One example of this approach is offered in the Uniform International Choice of Court Agreement Act, prepared by the National Conference of Commissioners on Uniform State Laws, Drafting Committee on the Hague Convention on Choice of Court Agreements.
 
While state-by-state implementation may be a politically attractive choice, there are numerous reasons why the adoption of a federal scheme makes the most sense in the context of private international law obligations affecting commercial matters.  First, unlike private international law affecting domestic and family law matters, international business disputes are routinely handled in the federal courts and the regulation of international commerce is squarely within Congress’ Article I powers.  Second, given COCCA’s preeminent goal of uniformity in the law applicable to international choice of court agreements in international commercial contracts, a national implementing law makes the most sense.  Such uniformity will also enhance the ability of American corporations to access foreign courts for the enforcement of commercial judgments and thereby compete in the global market place.  Third, by untangling the enforceability of international choice of court agreements from complicated procedural/substantive legal analyses dictated as a result of the federal system, federal law implementing COCCA can bring a modicum of certainty to an otherwise uncertain legal landscape.
 
The inherent difficulty with a federal implementing scheme, however, is that it will necessitate preemption of state law as to personal jurisdiction and forum non conveniens, and other state statutes designed to limit access to their courts for international disputes with no geographic nexus to the state.  Any implementing legislation to be applied in federal and state courts, therefore, must recognize and yield to the fact that choice of court agreements are not “alternate dispute resolution” procedures that can be dictated entirely by private parties considering private interests.  When parties choose to have their disputes resolved in formal court systems rather than through private means, they must accept the risk and responsibility of participating in the public sphere.  Private parties and Congress alike must therefore acknowledge that courts have a fundamental institutional obligation to ensure that proceedings before them are fair, regardless of what private arrangements the parties have made.  An implementation scheme for COCCA that would deprive American courts from considering the overall fairness of litigating in their forum would thus run contrary to the demands of an open and democratic society that depends on competent and impartial courts of justice.   Congress can solve this problem through a comprehensive set of legal standards to apply under COCCA that enforce choice of court agreements in international commercial transactions, while at the same time preserving the inherent authority of judges to ensure that the public interest in ensuring fair trials is vindicated.