Current Uniform Acts

Hague Convention Choice of Court Agreement and the Common Law 2007

IV. Other Substantive Features of the Convention

[63] Thus far this report has concentrated on the three principal obligations in the Convention and the ways in which they differ from the regimes currently in place in common-law Canada. As noted in para. 19, this was done in the interest of clarity of explication. The three chief obligations are the most important. However, there are other ways in which the rules of the Convention differ from those currently in place in common law Canada, and they deserve mentioning too. That is the burden of this section.

Formation: The Writing Requirement

[64] The Convention’s rules for formation of an exclusive choice-of-court clause differ slightly from those in the common law. While neither the Convention nor the common law require that such a clause appear in a contract that is signed, the Convention does require either that it appear in a contract that is concluded or documented in writing, or, failing that, in one that is documented by some “other means of communication which renders information accessible so as to be usable for subsequent reference”.[63] The common law has no such requirement; subject, of course, to issues of proof, the common law would treat a choice-of-court clause in an oral contract the same way it would treat such a clause in a written agreement.

[65] Not a lot would seem to turn on this. Presumably there are not many international business-to-business contracts that are not documented in writing in a fashion that would meet the requirement of the Convention’s formation provision. Where such contracts would be made, they would simply be governed by the common law rather than the Convention. The only point to note here, it would seem, is that contracting parties would have to be educated to appreciate that, if they want to gain the benefits of the Convention they would have to make certain to document their agreements in writing.

Formation: Non-Exclusive Choice-of-Court Clauses

[66] The Convention applies only to exclusive choice-of-court agreements. An agreement otherwise covered by the Convention but in which the parties simply say that the courts of, say, Prince Edward Island have non-exclusive jurisdiction over disputes arising from it will not be affected by the Convention. (Art. 22 provides the option for reciprocal agreements that the Convention will apply to non-exclusive choice-of-court clauses. That is not relevant here but is discussed below at paras. 84-85.) The issue addressed here is that which arises from art. 3 b), which stipulates that choice-of-court agreements will be viewed as being exclusive unless they expressly say they are non-exclusive:

a choice of court agreement which designates the courts of one Contracting State or one or more specific courts of one Contracting State shall be deemed to be exclusive unless the parties have expressly provided otherwise . . . .

That differs from the position at common law. Under the common law (which is not modified on this point by any relevant statutes) the question of whether a choice of law clause is exclusive or non-exclusive is simply a matter of contractual interpretation. Thus if parties to a contract simply say, “the courts of New Brunswick have jurisdiction over disputes arising from this agreement” the question of whether they intended to accord the New Brunswick courts exclusive jurisdiction is one of interpretation. There is no space here for a complete exposition of principles of contractual interpretation, but it could involve looking at the entire wording of the contract, the context (including previous dealings between the parties and general practice in the relevant industry), negotiations between the parties, and so on. Most commonly, if the parties have not used the word “exclusive” or some synonym the clause in question will not be viewed as an exclusive one, but this result has not been reached uniformly.[64]

[67] Art. 3 b) thus has the potential to take Canadian lawyers and their clients by surprise. They might draft and execute a contract that contains the words “the courts of France have jurisdiction over disputes arising from this agreement”. They might do so believing that the contractual context makes it clear that this is a non-exclusive jurisdiction clause and thus that the Convention does not apply, so that, for instance, they might still sue before a Canadian court since there were other bases on which a court in Canada would take jurisdiction (for instance, because the contract was to be performed here). A dispute might then arise and a party might try to bring an action before court in Canada. Assuming that Canada had adopted the Convention and had implemented it through legislation which replicated the Convention, that Canadian court would have to decline jurisdiction. It would have to do so because (1) art. 3 b) would require that the clause be interpreted as an exclusive one (since it did not expressly state that it was not), and (2) art. 6 thus required it to suspend or dismiss proceedings.

[68] Although this could pose a problem it hardly seems insurmountable, or a reason for not adopting the Convention. First, the Convention only applies prospectively, so contractual provisions pre-dating the Convention’s entry into force in Canada would not be effective. Second, the point is a fairly simple one and there does not seem any reason to think that contract drafters, alerted to the change by, for instance, a CLE session, could not easily change their behaviour here.

Damages

[69] Art. 11 of the Convention accords enforcing courts a power that they do not have at common law. The common law does not generally permit a judge enforcing a foreign judgment to decline to enforce it (or part of it) simply on the ground that it is non-compensatory.[65] This is simply a specific instance of the general rule that it is no bar to enforcement of a foreign judgment that the foreign court reached a different decision than the enforcing court would have. Of course, it is a bar to enforcement of a foreign judgment that it is penal in nature, and moreover in Beals v. Saldanha the Supreme Court of Canada acknowledged that in extreme cases it might be possible to deploy the public policy defence to block the enforcement of arbitrarily large foreign punitive damages awards.[66] But neither of those bars to enforcement permit common law courts to refuse to enforce a foreign judgment simply on the ground that it is not compensatory.

[70] However, art. 11(1) would permit an enforcing court to do exactly that. It would allow (though not require) an enforcing court to refuse to enforce a judgment under the Convention to the extent that the foreign judgment does “not compensate a party for actual loss or harm suffered.” This would include punitive damages (even, it would seem, if the enforcing court might have awarded punitive damages in a case of that sort) and possibly also damages measured by the benefit to the defendant. It would also apply to many instances of (usually statutorily prescribed) multiple damages. Such damages awards should only be denied enforcement to the extent that they are deemed or found to be non-compensatory. Thus art 11 of the Convention paves the way for something not generally practiced in the common law – viz., enforcement of part but not all of a foreign damages award.

[71] Although art. 11 provides for an approach that is different from the one that prevails at common law, it is not clear that it would create any special difficulties. The notion of partial enforcement may be new, but it is hardly repugnant to Canadian legal traditions. Not does it seem particularly difficult to adapt to.

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