Commission staff working document - Accompanying document to the Proposal for a Council Decision on the Signing by the European Community of the Convention on Choice-of-Court Agreements - Summary of the impact assessment (COM(2008) 538 final( (SEC(2008) 2389(
Date: 2008-09-05
Institutions: European Commission
Subjects: Intergovernmental Convention (EU), exchange of information, impact study, international trade, judicial cooperation in criminal matters in the EU, signature of an agreement

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.9.2008 
SEC(2008) 2390 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying document to the 

Proposal for a Council decision 

on the Signing by the European Community of the Convention on Choice-of-Court 
Agreements 

SUMMARY OF THE IMPACT ASSESSMENT 

{COM(2008) 538 final} 
{SEC(2008) 2389} 

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1. 

PROCEDURAL ISSUES AND THE CONSULTATION OF INTERESTED PARTIES 

The  Impact  Assessment  was  prepared  on  the  basis  of  a  “Study  to  Inform  an  Impact 
Assessment on the Ratification of the Hague Convention on Choice-of-Court Agreements by 
the  European  Community”,  which  was  undertaken  for  the  Commission  by  an  external 
contractor1  with  input  from  the  Inter-Service  Steering  Group  convened  by  the  Directorate-
General for Justice, Freedom and Security. Representatives of the Legal Service, Secretariat-
General, DG ENTR, DG MARKT, DG SANCO and DG INFSO participated in the work of 
the  Inter-Service  Steering  Group.  This  Impact  Assessment  was  reviewed  by  the  Impact 
Assessment Board (IAB). The recommendations for improvements have been accommodated 
in a revised version of the report. 

The  Impact  Assessment  was  based  on  the  abovementioned  study,  a  review  of  the  literature, 
analysis of the responses to the Commission’s 2004 Consultation Paper in preparation for the 
final round of negotiations at the Hague, reviews of the results of surveys undertaken by the 
International  Chamber  of  Commerce  (ICC)2  and  the  American  Bar  Association  (ABA)3  as 
well as analysis of trade statistics (from Eurostat). 

2. 

PROBLEM DEFINITION 

Matters of international jurisdiction of courts and recognition and enforcement of judgments 
in  civil  and  commercial  matters  are  governed  within  the  European  Community  by  Council 
Regulation  (EC)  No  44/2001  of  22  December  2000  on  jurisdiction  and  the  recognition  and 
enforcement of judgments in civil and commercial matters (“the Brussels I Regulation”)4. 
According  to  the  case  law  of  the  European  Court  of  Justice5,  issues  of  international 
jurisdiction  and  recognition  and  enforcement  of  judgments  with  respect  to  third  countries 
come under exclusive external Community competence. This means that Member States are 
no  longer  in  a  position,  either  individually  or  collectively,  to  enter  into  international 
obligations in respect of third countries as regards matters governed by external Community 
competence. 

Conclusion of the Convention on Choice-of-Court Agreements under the Hague Conference 
on  Private  International  Law  in  2005  presented  an  opportunity  for  creating  a  worldwide 
judicial  alternative  for  business-to-business  dispute  resolutions  in  cases  where  the  parties 
concluded a choice-of-court agreement. 

1 

2 

3 

4 
5 

Ltd, 

study 

Survey 

business 

practices 

regarding 

Consulting 

Birmingham; 

GHK 
available 
http://ec.europa.eu/dgs/justice_home/evaluation/dg_coordination_evaluation_annexe_en.htm 
ICC 
issues 
http://www.iccwbo.org/law/jurisdiction/ 
Survey  conducted  by  the  ABA  Section  of  International  Law  (ABA  Working  Group  on  the  Hague 
Convention on Choice-of-Court Agreements) in October/November 2003. 
OJ L 12, 16.1.2001, p.1. 
Judgment of the Court of 31 March 1971, Case 22-70, Commission v Council — European Agreement 
on Road Transport, Opinion 1/03 of 7 February 2006 on the competence of the Community to conclude 
the  new  Lugano  Convention  on  Jurisdiction  and  the  Recognition  and  Enforcement  of  Judgments  in 
Civil and Commercial Matters. 

jurisdictional 

(2003) 

on 

at 

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Inside  the  Community  there  is  a  predictable  system  of  rules  on  jurisdiction  based  on  the 
choice  of  the  parties  (choice-of-court  agreements)  and  recognition  and  enforcement  of 
resulting judgments. However, once outside the EU area, this predictability for EU businesses 
ends due to the limited number of multilateral or bilateral treaties with third countries and the 
absence of a worldwide system of applicable rules. 

This  lack  of  legal  certainty  may  function  as  a  “barrier  to  trade”.  A  survey  has  shown  that 
global trade is being hampered by companies’ uncertainty about which national courts might 
hear  a  case  regarding  a  contested  contract.  41%  of  the  companies  surveyed  indicated  that  a 
significant  business  decision  of  their  company  had  at  some  point  been  determined  by 
uncertainty regarding the court that would resolve disputes or the law that would apply to the 
contract. This was more frequent amongst large businesses (47%) than small (26%). 

At the same time, any action the Community undertakes in respect of third countries should 
protect values developed within the Community which are of such importance that they must 
be protected also outside the European Union. 

2.1. 

Summary of problems 

Four main problems were identified in this policy area: 

Problem 1 

The cost of legal uncertainty for EU economic operators that: 

•  their choice-of-court  agreements  in favour  of a court  outside the EU  are respected  in the 

EU; and 

•  their  choice-of-court  agreements  in  favour  of  a  court  in  the  EU  are  respected  in  third 

countries. 

Problem 2 

The costs of insufficient foreseeability for economic operators that: 

•  a  judgment  given  by  the  court  chosen  outside  the  EU  is  eligible  for  recognition  and 

enforcement within the EU; 

•  a  judgment  given  by  the  court  chosen  within  the  EU  is  eligible  for  recognition  and 

enforcement outside the EU. 

Problem 3 

The  costs  and  damage  to  a  EU  weaker  party  in  case  of  insufficient  protection  due  to  the 
choice-of-court agreement in favour of court outside the EU (e.g. the choice of a foreign court 
could lead to deprivation of the protection provided to the weaker party by Community law). 

Problem 4 

Insufficient protection of legal relations specifically protected within the EU by way of rules 
on exclusive jurisdiction also in a wider, global context (e.g. relating to immovable property, 
intellectual property rights, etc.). 

2.2. 

The size of the problems 

It is difficult to assess the scope of the problems because there are no relevant statistics and 
the empirical data are limited. But the information obtained through the consultations shows 
that legal uncertainty linked to respect for the choice-of-court agreement and enforcement of 
judgments might indirectly influence business decisions. 

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As  for  Problem  1,  two  surveys  available  on  the  subject  showed  that  for  a  large  number  of 
businesses (about 40%) a significant business decision had at some point been determined by 
uncertainty regarding the court that would resolve disputes or the law that would apply to the 
contract. 

As  for  Problem  2,  it  is  estimated  that  about  40%  of  companies  experience  difficulties, 
sometimes  insurmountable,  in  connection  with  recognition  and  enforcement  of  judicial 
decisions. 

The existence of Problems 3 and 4 was not corroborated by the results of the consultations, 
but it does not mean that these problems do not exist. 

3. 

OBJECTIVES 

3.1. 

General objective 

The overall general objective is to address potential ‘barriers to trade’ through reducing legal 
uncertainty,  i.e.  to  promote  international  trade  (external  to  EU)  and  investment,  through 
reducing legal uncertainty in commercial contracts. 

3.2. 

Specific objectives 

The general objective is reflected in four specific objectives, each of which is closely related 
to the underlying problems identified in Section 2. These specific objectives are the basis for 
the main assessment criteria applied to the individual policy options. 

(1) 

(2) 

(3) 

(4) 

To increase EU economic operators’ legal certainty that their preference for the choice 
of court to resolve international commercial disputes will be respected; 

To  increase  the  predictability  of  the  choice  of  court  to  resolve  international 
commercial disputes involving EU economic operators; 

To safeguard EU economic operators’ rights in determining the choice of court where 
they are the weaker party; 

To promote the legal rights of EU operators protected under EU legislation in courts 
resolving international commercial disputes involving EU economic operators outside 
the EU. 

The reasoning behind the choice of the specific policy objectives is as follows. 

Specific objective 1. It would be beneficial if parties to an international contract who entered 
into a choice-of-court agreement could rely on the fact that such agreement would be upheld 
by the court chosen or by another not chosen court seized. 

Specific objective 2. It would be beneficial if parties to an international contract who entered 
into a choice-of-court agreement could rely on the fact that the judgment of the chosen court 
would be respected (eligible for recognition and enforcement) in the countries of both parties 
and/or in the country of enforcement. 

Specific  objective  3.  It  would  be  beneficial  to  the  Community  if  the  solutions  adopted 
safeguarded the rights of EU weaker parties entering choice-of-court agreements. Achieving 
the  objective  would  both  protect  the  weaker  party  and  also  ensure  competition  through 
increasing smaller companies’ confidence to enter into international contracts. 

Specific  objective  4.  It  would  be  beneficial  if  courts  outside  the  EU  protected  legal  rights 
similar to those within the EU. Such effects could come about through a process of ‘attrition’ 
whereby ‘familiarity breeds replication’ through cases involving EU companies being held in 

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courts in third countries and the arguments made on their behalf becoming embodied in the 
laws  and  practices  of  the  third  countries.  This  would  have  the  potential  consequence  of 
increasing  the  likelihood  that  EU  companies  would  choose  to  enter  into  international 
agreements and hence could lead to possible increases in trade. 

4. 

POLICY OPTIONS 

Policy Option 

Status quo options 

Description of policy option 

Policy  Option 
1 

“passive” status quo 

The Community does not conclude the Convention 
and  no  new  initiatives  are  taken  to  address  the 
policy objectives. 

Policy  Option 
2 

“active” status quo 

Non legislative options 

Policy  Option 
3 

provision  of 
insurance” 

“public 

does 

the 
The  Community 
Convention,  but  bilateral  agreements  between  the 
Community  and  selected 
third  countries  are 
negotiated that address the policy objectives. 

conclude 

not 

Support  for  the  provision  and  costs  of  insurance 
that covers the additional costs of disputes (such as 
the extra costs of trials held in third countries and 
the  financial  losses  to  EU  operators  from  rulings 
made  that  undermine  the  rights  the  EU  operators 
would have if they were operating in the EU) due 
to uncertainty in the choice of courts. 

Policy  Option 
4 

Provision of information 
to  inform  businesses  of 
current  risks  stemming 
from  uncertainty  in  the 
choice of courts. 

Support  for  the  costs  of  providing  information  to 
EU  operators  on  the  risks  stemming  from  current 
uncertainties  over  the  choice  of  court  should  they 
wish to trade with third countries, and the practical 
means available to them through which these risks 
could be reduced. 

Legislative options6 

Policy  Option  Conclusion 

of 

the  The  Convention  is  concluded  by  the  Community 

6 

The Convention allows declarations limiting jurisdiction (Article 19), declarations limiting recognition 
and enforcement (Article 20), declarations with respect to specific matters (Article 21) and reciprocal 
declarations  on  non-exclusive  choice-of-court  agreements  (Article  22).  In  view  of  the  fact  that  the 
consultations  preceding  adoption  of  the  Convention  did  not  support  the  idea  that  the  declarations 
allowed in Articles 19 and 20 should be utilised by the Community, and that there was resistance from a 
number  of  Member  States  against  including  non-exclusive  choice-of-court  agreements,  the  Impact 
Assessment policy options do not take the possibility of making declarations under Articles 19, 20 and 
22 into account. 

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Policy Option 

5 

Policy  Option 
6a 

Policy  Option 
6b 

by 

the 
Convention 
Community 
without 
making any declarations 
under its Article 21. 

of 

the 
Conclusion 
a 
Convention  with 
declaration 
under 
Article  21  excluding 
related 
copyright  and 
rights. 

of 
by 

the 
Conclusion 
Convention 
the 
Community  making  a 
declaration  under 
its 
Article  21  excluding 
insurance matters. 

Description of policy option 

without excluding additional matters from its scope 
by a declaration under its Article 21. 

The  Convention  is  concluded  by  the  Community 
making a declaration under its Article 21 excluding 
copyright  and  related  rights  from  the  scope  of  the 
Convention. 

The  Convention  is  concluded  by  the  European 
Community making a declaration under its Article 
21  excluding  insurance  matters  from  the  scope  of 
the Convention. 

Policy  Option 
7 

Combination  of  policy 
options 6a and 6b. 

The  Convention  is  concluded  by  the  Community 
making a declaration under its Article 21 excluding 
copyright  and  related  rights  and  insurance  matters 
from the scope of the Convention. 

4.1. 

Comparison of the options 

1. 
‘Passive’ 
status 
quo 

2. 
‘Active’ 
status 
quo 

3. 
Provision 
of  “public 
insurance” 

4. 
Awareness 
raising 

5. 
Conclusion 
no 
exclusions 

6a. 
Conclusion 
excluding 
copyright 

6b. 
Conclusion 
excluding 
insurance 

7. 

6a +6b 

0 

√ 

0 

0 

√√√ 

√√√ 

√√√ 

√√ 

0 

√ 

0 

0 

√√√ 

√√√ 

√√√ 

√√ 

Assessment 
Criteria(cid:200) 
Policy  Options 
(cid:198) 

To 
EU 
increase 
economic  operators’ 
legal  certainty 
that 
their  preference  for 
the choice of court to 
resolve 
international 
commercial  disputes 
will be respected. 

To 
the 
increase 
predictability  of  the 
choice  of  court 
to 
international 
resolve 
commercial  disputes 
involving 
EU 
economic operators. 

To 

safeguard  EU 

0 

√ 

√ 

√ 

√√ 

√√√ 

√√√ 

√√√ 

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economic  operators’ 
rights  in  determining 
the  choice  of  court 
where  they  are  the 
weaker party. 

promote 
of 

the 
To 
adoption 
legal 
rights protected under 
in 
EU 
legislation 
resolving 
courts 
international 
commercial  disputes 
involving 
EU 
economic  operators 
outside the EU. 

Economic  and  social 
benefits. 

Economic  and  social 
costs. 

Implementation 
costs. 

with 
Conflicts 
Community policies. 

0 

√ 

0 

0 

√√ 

√√ 

√√ 

√ 

0 

0 

0 

√√ 

√√ 

0 

Potential 
competition 
effects 

√√ 

0 

√√ 

√√√ 

√√√ 

√√√ 

Conflicts 
with 
Community 
policies 

Conflicts 
with 
Community 
policies 

Conflicts 
with 
Community 
policies0 

0 

Very low 

High 

Low 
medium 

to 

Very low 

Very low 

Very low 

 Very low 

No 

No 

No 

No 

Potential 

Potential 

Potential 

0 

Preferred option. 

No 

No 

No 

No 

No 

No  

No  

Yes 

4.2. 

The preferred option 

In  the  light  of  the  assessment  in  Table  4.1  the  preferred  option  is  policy  option  7  which 
involves the conclusion by the Community of the Convention with declarations under Article 
21 concerning copyright and related rights and insurance matters. Even though policy options 
5, 6a and 6b attain slightly better overall results in achieving the policy objectives (with the 
exception  of  the  policy  objective  of  safeguarding  EU  economic  operators’  rights),  they  all 
create  potential  conflicts  with  Community  policies.  Policy  option  7  does  not  create  such 
conflicts and is therefore preferred. This option is also expected to generate more economic 
and social benefits. 

4.3. 

The potential scale and nature of impacts of the preferred option 

The  general  objective  of  the  preferred  policy  option  is  to  reduce  legal  uncertainty  for  EU 
economic  operators.  In  doing  so,  conclusion  of  the  Convention  should  act  as  a  stimulus  to 
international trade and hence contribute to reducing the costs of goods and services in the EU. 

Legal  uncertainty  is  only  one  of  several  factors  that  constrain  international  trade.  The 
preferred option would reduce legal uncertainty, but would not eliminate it. In particular the 
preferred  option  would  increase  the  likelihood  that  choice-of-court  agreements,  and  court 
judgments made in the agreed courts, would be respected and enforced. 

4.4. 

The costs of the preferred option 

The preferred option will involve only small implementation costs associated with preparing 
the  legislative  instruments  linked  with  signing  and  conclusion  of  the  Convention  by  the 

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Community. However, given that the Convention will not generate benefits to the EU unless 
EU  trading  partners  also  ratify  it,  some  administrative  and  diplomatic  resources  will  be 
required to encourage and negotiate with the potential Contracting Parties. 

Additional  costs  will  arise  for  monitoring  implementation  (functioning)  of  the  Convention 
once it is concluded by the Community. 

The  preferred  option  does  not  generate  either  compliance  or  administrative  costs  for  EU 
businesses  trading  internationally.  Companies  would  remain  free  to  include  choice-of-court 
agreements in their contracts or to continue using alternative dispute-resolution methods. 

4.5. 

EU added value 

The preferred option would generate significant EU added value. Firstly, there would be one 
set of rules for EU operators within each of the Member States and thus, in effect, the ‘level 
playing field’ within the EU created by the Brussels I Regulation would  be extended  to the 
Contracting States of the Convention. Secondly, a series of bilateral agreements with varying 
exemptions could be counterproductive in trying to decrease legal uncertainty where the EU’s 
major trading partners are likely to wish that their goods and services can be traded within the 
EU  and  with  other  trading  partners  under  the  same  regimes  concerning  choice-of-court 
agreements. 

The  costs  of  concluding  the  Convention  are  very  low  while  the  potential  economic  benefits 
are  large.  There  are  only  a  few  potential  ‘downsides’  to  concluding  the  Convention.  These 
might, for example, include the obligation arising under the Convention to respect within the 
EU  “controversial”  judgments  given  by  third-country  courts.  However,  the  possibility  to 
refuse recognition of such judgments on the basis of public policy (under Article 9(e) of the 
Convention)  is  always  available,  and  it  can  also  be  anticipated  that  the  number  of  such 
judgments would gradually decrease due to ‘convergence’ in case law. 

5. 

MONITORING AND EVALUTION 

It is the practice of the Hague Conference on Private International Law, under whose auspices 
the  Convention  was  drawn  up,  to  organise  regular  meetings  of  special  commissions  to 
evaluate  the  practical  application  of  conventions,  in  order  to  monitor  and  evaluate  their 
success. 

In  addition  to  this  institutional  monitoring,  the  Community  as  a  Contracting  Party  should 
develop its own monitoring and evaluation mechanism. 

There are no suitable ‘ready-made’ sources of information pertinent for accurately assessing 
the  scale  and  nature  of  existing  problems,  and  hence  monitoring  in  the  future  the  extent  to 
which these problems will have been reduced. 

In these circumstances the best way to proceed would be to adopt the same procedure as for 
other legislative instruments in the area, i.e. by reviewing the functioning of the Convention at 
regular  intervals  (for  instance  once  every  four  years)  assisted  by  a  study  of  an  external 
contractor.  

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