Commission staff working document - Accompanying the proposal for a Council Decision on the signing by the European Community of the Convention on Choice-of-Court Agreements - Impact assessment {COM(2008) 538 final} {SEC(2008) 2390}
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) 2389 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the  

Proposal for a Council Decision 

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

IMPACT ASSESSMENT 

{COM(2008) 538 final} 
{SEC(2008) 2390} 

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1. 

PROCEDURAL ISSUES AND THE CONSULTATION OF INTERESTED PARTIES 

Agenda planning reference number: 2008/JLS/196 

1.1 

Procedural issues 

This  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. In particular, the following changes were made: 

The baseline scenario has been assessed in more detail end provides an overview of existing 
dispute resolution procedures relevant in the field (court settlements, ADR and international 
arbitration)  which  set  out  their  advantages  and  shortcomings.  Regrettably,  there  exist  no 
comprehensive  and  reliable  data  on  the  costs  and  length  of  dispute  settlement  procedure 
available.  

Point  5.2  has  also  been  expanded  also  to  inform  on  the  status  of  ratification  process  of  the 
Convention. 

The report explains further the reasons for exempting the copyrights and related rights (option 
6 a) and insurance sectors (option 6 b) (additions made to points 5.7 and 5.8). 

1.2 

Consultations of interested parties 

This  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 Hague2, reviews of the results of surveys undertaken by the 
International  Chamber  of  Commerce  (ICC)3  and  the  American  Bar  Association  (ABA)4  as 
well  as  analysis  of  trade  statistics  (from  Eurostat).  The  choice  of  American  surveys  was 
motivated  by  the  fact  that  poor  information  exists  on  the  practice  of  choice-of-court 
agreements  at  European  level.  The  agreements  which  are  the  subject  of  the  Convention  are 
international and so the opinions and (potential) behaviour of non-EU economic partners may 
contain valuable information. 

1 

2 
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Ltd, 

Consulting 

Birmingham; 

available 
GHK 
http://ec.europa.eu/dgs/justice_home/evaluation/dg_coordination_evaluation_annexe_en.htm 
For overview of responses see Annex 1. 
ICC 
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. 

jurisdictional 

regarding 

practices 

business 

Survey 

(2003) 

issues 

study 

on 

at 

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As  a  complement  to  the  review  of  existing  information,  consultations  with  companies, 
insurance companies, business organisation and law firms on the various elements involved in 
current  choices  of  court  agreements  and  the  implementation  of  these  agreements  were 
undertaken by the external contractor for the study. 

In  total  more  than  500  companies,  eight  insurance  companies,  seven  business  organisations 
and  nine  law  firms  were  contacted  during  the  study.  However,  only  27  interviews  were 
carried out as difficulties were encountered with identifying companies trading with extra-EU 
markets and who, within these companies, was able to comment on the use of choice-of-court 
agreements.  Also,  companies  were  often  reluctant  to  provide  this  kind  of  information  or  to 
take part in the interview. 

Consequently,  a  total  of  21  companies  were  interviewed  on  the  use  of  choice-of-court 
agreements  and  the  problems  linked  to  them.  The  initial  sample  of  companies  to  be 
interviewed reflected a geographical and sectoral spread. However, due to the low response 
rate  and  engagement  of  companies,  more  interviews  were  undertaken  with  French  and 
Belgian companies (19 interviews were undertaken in both countries), which showed a greater 
interest in participating in the survey. Moreover, two insurance companies were interviewed 
and  two  questionnaires,  filled  in  by  the  Agency  of  Lithuanian  Copyright  Protection 
Association and the British affiliate of the ICC, were forwarded respectively by GESAC (the 
European Grouping of Societies of Authors and Composers) and the ICC. Moreover, two law 
firms (based in Portugal and Finland) contributed to the study through interviews. 

2. 

PROBLEM DEFINITION 

2.1. 

Policy context 

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  (referred  to  as  the  “Brussels  I 
Regulation”)5 which replaced the 1968 Brussels Convention of the same name as of 1 March 
2002. The provisions of that Regulation are currently applicable in all 27 Member States6. 

The  Regulation  covers  issues  concerning  the  jurisdiction  of  the  courts  of  European 
Community  Member  States,  and  the  mutual  recognition  and  enforcement  of  judgments 
between  Member  States  for  the  whole  area  of  civil  and  commercial  law7,  with  the  specific 

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OJ L 12, 16.1.2001, p. 1. 
Even though Denmark, in accordance with Articles 1 and 2 of the Protocol on the position of Denmark 
annexed to the Treaty on European Union and to the Treaty establishing the European Community, did 
not adopt the Regulation and the Regulation does not apply to it, Denmark is bound by the provisions of 
the  Regulation  by  virtue  of  the  Agreement  between  the  European  Community  and  the  Kingdom  of 
Denmark  on  jurisdiction  and  the  recognition  and  enforcement  of  judgments  in  civil  and  commercial 
matters (OJ L 299, 16.11.2005, p. 62). 
Community instruments adopted in certain specialised areas of civil and commercial law which contain 
specific  rules  on  international  jurisdiction  and/or  mutual  recognition  and  enforcement  of  judgments 
make  reference  to  the  general  applicability  of  the  Brussels  I  Regulation.  For  instance,  Council 
Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark and Council Regulation 
(EC) No 6/2002 of 12 December 2001 on Community designs. 

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exclusion  of  family  law  (except  for  maintenance  obligations),  bankruptcy  and  insolvency, 
social security and arbitration. 

The Regulation also specifically deals with the issues of jurisdiction based on choice-of-court 
agreements  and  subjects  the  resulting  judgments  to  the  benefits  of  mutual  recognition  and 
enforcement under the Regulation. 

According  to  the  case  law  of  the  European  Court  of  Justice8,  issues  related  to  international 
jurisdiction  and  recognition  and  enforcement  of  judgments  with  respect  to  third  countries 
come under exclusive external Community competence. 

2.1.1.  Current legal situation in respect of third countries 

The current legal situation with respect to third countries in the field in question is, however, 
very  variable.  The  only  international  agreement  concluded  in  this  field  so  far  between  the 
Community  and  third  countries  is  the  new  Lugano  Convention  on  Jurisdiction  and  the 
Recognition  and  Enforcement  of  Judgments  in  Civil  and  Commercial  Matters9  which  was 
signed by the Community but has yet to be ratified. It introduces provisions virtually identical 
to  the  Brussels  I  Regulation  and  thus  extends  the  system  of  harmonised  rules  also  to 
Switzerland, Norway and Iceland. 

As regards the other third countries, only a small number of bilateral agreements covering the 
issues in question exist between some Member States and a limited number of third countries. 
Virtually no treaty relationships exist in this area between the individual Member States and 
the  EC’s  main  trading  partners  (such  as  the  USA,  China,  Russia)10,  mainly  because 
negotiation  of  such  treaties  would  be  difficult,  if  not  impossible,  due  to  different  legal 
traditions and those countries having no tradition of negotiating such agreements11. 

Previous international efforts were not crowned with success12, with the sole exception of the 
now worldwide system of recognition and enforcement of arbitral awards established by the 
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 
of 10 June 1958.13 

2.1.2.  Consequences of the current legal situation 

The absence of a worldwide (or at least widely accepted) system of jurisdiction and mutual 
recognition  and  enforcement  of  judgments  creates  uncertainty  for  European  companies  and 

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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. 
OJ L 339, 21.12.2007, p. 3. 
An exception is Russia in that it has a long-standing tradition of concluding bilateral agreements in the 
area of jurisdiction and recognition and enforcement of judgments in civil matters and has such bilateral 
agreements with certain Member States. 
Conclusion of such agreements is, however, difficult even between countries sharing legal traditions, as 
demonstrated by the example of a bilateral UK-US Treaty on recognition and enforcement of judgments 
in civil and commercial matters which was negotiated in the 1970s, but was subsequently never ratified. 
The  latest  attempt  at  negotiating  a  worldwide  convention  on  jurisdiction  and  recognition  and 
enforcement  of  judgments  in  civil  and  commercial  matters  within  the  Hague  Conference  on  Private 
International Law failed in 2001. 
Although this convention had a very difficult start, it now has 142 Contracting Parties. 

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entrepreneurs  as  to  which  court  will  have  jurisdiction  in  a  potential  dispute  arising  from  a 
contractual  relationship  with  a  party  in  a  third  country.  This  uncertainty  may  have  a 
dampening effect on international trade14. 

The lack of certainty as to the applicable jurisdictional rules, depending on the national rules 
of  individual  countries,  can  be  overcome  by  the  parties  to  the  dispute  by  their  agreeing  to 
designate  a  court  which  will  have  jurisdiction  to  adjudicate  their  dispute.  Such  party 
autonomy is, however, undermined by the lack of worldwide rules which would guarantee to 
the parties that: 

•  their  choice  of  a  court  in  a  certain  country  will  be  respected  by  the  courts  in  other 

countries, and that 

•  the  resulting  judgment  given  by  the  chosen  court  will  be  eligible  for  recognition  and 

enforcement in a country other than the country of the chosen court. 

As  a  result  of  this  situation,  businesses  today  usually  opt  for  alternative  methods  of  dispute 
resolution  (mainly  arbitration)  to  try  to  solve  their  international  disputes,  since  the 
abovementioned existing worldwide system of recognition and enforcement of arbitral awards 
offers relatively high predictability. 

2.1.3.  The Convention on Choice-of-Court Agreements 

The Convention on Choice-of-Court Agreements concluded on 30 June 2005 at the Twentieth 
Session  of  the  Hague  Conference  on  Private  International  Law  (referred  to  below  as  ‘the 
Convention’)  is  designed  to  offer  greater  certainty  and  predictability  for  parties  involved  in 
business-to-business contracts and international litigation by creating an optional worldwide 
judicial alternative to the existing arbitration system. 

The European Commission negotiated this Convention on behalf of the European Community 
on the basis of a Council Decision. 

Due  to  the  active  participation  of  the  USA,  Canada,  Japan,  China,  Russia,  among  a  great 
number  of  other  countries,  in  drawing  up  the  final  text,  the  Convention  has  a  chance  to 
become a viable option for creating a basis for the recognition and enforcement of judgments 
resulting  from  a  choice-of-court  agreement  between  the  EC  and  these  States,  provided  it  is 
widely ratified. 

In  view  of  the  general  trend  in  international  negotiations,  where  States  prefer  to  consider 
ratification  of  existing  multilateral  international  agreements  before  entering  into  the 
commitment  of  negotiating  bilateral  treaties  in  the  same  field,  it  is  to  be  expected  that  the 
Convention  will  be  the  basic  instrument  of  reference  when  it  comes  to  choice-of-court 
agreements  in  civil  and  commercial  matters.  The  signing  and  subsequent  conclusion  of  the 
Convention  by  the  European  Community  and  other  economically  strong  States  would 
certainly  improve  the  chances  of  the  Convention  becoming  a  truly  worldwide  instrument. 
Conclusion  of  the  Convention  by  the  Community  would  also  avoid  the  need  to  negotiate 
individual  bilateral  treaties  between  the  EC  and  individual  third  countries,  which  in  itself 

14 

A  worldwide  survey  conducted  by  the  International  Chamber  of  Commerce  (see  footnote  3  for 
reference)  states  that  of  100  leading  companies  that  took  part  in  the  survey,  40  said  there  had  been 
occasions when a significant business decision had been determined by jurisdictional uncertainty. 

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could lead to an additional level of uncertainty and complexity since the individual bilateral 
treaties could contain different rules applicable to the same kind of legal relations. 

Most international contracts do not lead to disputes. Where disputes arise there are methods 
for  resolving  them  that  avoid  going  to  court  (mediation,  arbitration,  etc.).  Going  to  court  is 
often seen as a last resort because of its perceived relative high cost, publicity and finality in 
terms of the prospects for future business relations between the parties. 

2.2. 

Identification of the problem 

International trade is growing and more companies are taking part in international business. 
As  global  business  expands,  the  number  of  business  disputes  is  also  on  the  rise.  It  can  be 
assumed15 that: 

•  between  92%  and  96%  of  companies  set  up  international  contracts  including  provisions 

addressing dispute resolution; and 

•  between  17%  and  50%  only  of  companies’  international  contracts  include  an  exclusive 

choice-of-court clause. 

2.2.1.  Lack of legal certainty 

As  specified  in  points  2.1.1  and  2.1.2  above,  Community  operators  have  no  legal  certainty 
that a judgment given by a court within the EU, which they chose to deal with their dispute, 
will be recognised and enforced outside the EU, nor that a judgment given by the chosen court 
outside the EU will be recognised and enforced within an EU Member State. 

In addition, where the parties to the dispute agreed to choose a court (or courts) of a country 
to have jurisdiction to resolve their dispute, the existing legal situation does not guarantee that 
their choice of a non-EU court will always be respected by the EU courts, nor that a non-EU 
court will respect their choice of EU courts. This means that one of the parties of the contract 
may seize a court other than the one chosen by both parties and thus disadvantage the other 
party that relied on the agreement. The court seized but not chosen may adjudicate the matter 
differently  than  the  court  chosen,  because  it  may  apply  different  substantive  law. 
Consequently, the outcome of the dispute may be different than what was the expectation of 
the parties when they agreed on the choice of court. 

This lack of legal certainty may function as a “barrier to trade”. The ICC survey16 showed that 
global trade is indeed being hampered by companies’ uncertainty about which national courts 
might  hear  a  case  involving  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%). 

The  conclusion  from  this  is  that  a  company  may  prefer  not  to  enter  into  a  contract  with  a 
third-country  partner  if  the  issue  of  which  court  that  will  have  jurisdiction  to  decide  a 
potential dispute arising from that contract is not sufficiently clear and predictable. As regards 

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16 

Based on results of the ICC survey (footnote 3), ABA survey (footnote 4) and the interview conducted 
for the study. 
See footnote 3. 

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any choice-of-court agreement included in a contract, this lack of certainty relates to the factor 
that  the  court  chosen  by  the  parties  will  indeed  be  able  to  exercise  its  jurisdiction  and  the 
dispute will not be taken away from that court by the fact that a court seized, but not chosen, 
will disregard such choice. 

As the above numbers suggest, small and medium enterprises may have bigger problems in 
accessing  information  on  risks  stemming  from  trade  with  third  countries.  Bigger  companies 
usually  have  qualified  staff  or  lawyers  providing  legal  advice,  while  SMEs  have  smaller 
human and limited financial resources to hire specialised staff. They might therefore enter a 
business  relation  without  full  knowledge  of  risks  associated  with  a  business  relation  with  a 
third-country  partner  (including  consequences of  any  choice-of-court  agreement  included  in 
the contract), as well as without the means available to reduce these risks. This situation may, 
however,  also  lead  to  the  consequence  that  a  small  company  may  prefer  not  to  enter  into  a 
contract  with  a  larger  company  in  a  third  country  for  fear  of  the  unknown  risks  associated 
with such a contract. 

In the circumstances described, it may seem sufficient that a global arbitration solution exists, 
when trading partners prefer to solve their disputes by arbitration anyway. This, however, is 
only  partially  true.  It  depends  very  much  on  a  series  of  variables,  such  as  the  legal  culture 
(trust  in  arbitration  as  opposed  to  courts),  contractual  bargaining  power  and  perception  of 
costs  (court  costs  versus  costs  of  arbitration).  While  it  is  true  that  large  international 
companies  will  usually  not  choose  a  court  to  settle  their  dispute  because  it  would  be  more 
costly  for  them,  small  and  smaller  companies  might  take  a  different  attitude.  This  is  true 
especially for situations where the balance of bargaining powers in the contract relationship is 
unequal. For a small company with a grievance against a stronger trading partner, the option 
of  going  to  the  court  in  its  own  country,  as  opposed  to  conducting  international  arbitration 
abroad,  is  a  much  better  option.  Not  only  from  the  point  of  view  of  costs  (hiring  a  local 
lawyer  rather  than  paying  for  the  costs  of  a  lawyer  abroad  specialised  in  international 
arbitration), but also as regards equality of position (courts are perceived to be more neutral in 
decision taking, whereas arbitration is “forcing” them to compromise). 

2.2.2.  Protection of Community legal values 

Through its legislation and case law the Community has developed a certain set of values in 
the field of civil and commercial matters, and any activities undertaken by the Community in 
respect  of  third  countries  should  reasonably  respect  these  values,  in  particular  values  which 
are  of  such  importance  that  they  must  be  protected  also  outside  the  European  Union.  Even 
though  there  is  ultimately  a  political  choice  to  be  made  whether  certain  values  must  be 
protected in relation to third countries, there are certain legal values (standards) which by their 
nature demand such protection. 

In  the  area  relevant  for  this  exercise,  these  values  are  reflected  in  provisions  creating 
exclusive  jurisdiction  for  courts  within  the  EU  Member  States  as  well  as  in  the  provisions 
prohibiting  or  limiting  party  autonomy  (choice  of  court)  in  certain  cases,  in  certain  sets  of 
legal relations (so called “protective jurisdiction”). 

In addition to the jurisdictional rules mentioned, there might be other areas where the interest 
of the Community to protect certain legal relations beyond the borders of the European Union 
might arise. In connection with negotiation of the Convention one particular area was singled 
out as creating difficulties, i.e. the validity of copyright and related rights. 

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2.2.2.1.  Protective jurisdiction 

Chapter  II  of  the  Brussels  I  Regulation  contains  rules  on  “protective  jurisdiction”  in  three 
areas:  insurance  (Section  3),  consumer  contracts  (Section  4)  and  individual  contracts  of 
employment (Section 5). The protective nature of these jurisdictional rules lies in the fact that 
they do not allow the perceived “weaker” party in the legal relation (such as the policyholder, 
consumer or employee) to be forced into a choice of court which might be disadvantageous to 
that party. 

2.2.2.2.  Exclusive jurisdiction 

The areas of jurisdiction which fall under the exclusive jurisdiction of courts in the European 
Union  are  set  out  in  Article  22  of  the  Brussels  I  Regulation.  Their  relevance  for  party 
autonomy (choice-of-court agreements) lies in the fact that where a court within the EU has 
exclusive jurisdiction, the parties to a dispute should not be able to bypass this jurisdiction by 
their choice of another court, be it a court within the EU or in a third country. 

Community instruments containing rules on special venues were analysed in order to assess 
whether they involve a similar need of protection as do the rules of the Brussels I Regulation. 
These were: 

Council  Regulation  (EC)  No  40/94  of  20  December  1993  on  the  Community  trade 

a) 
mark; 

b) 

Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs; 

Council  Regulation  (EC)  No  585/93  of  12  March  1993  on  the  implementation  of 

c) 
promotional and publicity measures in respect of milk and milk products; 

d) 

Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings; 

Regulation (EC) No 874/2004 of 28 April 2004 laying down policy rules concerning 
e) 
the implementation and function of the .eu Top Level Domain and the principles governing 
registration. 

Only Regulations mentioned under (a) and (b) above contain rules referred to as “exclusive 
jurisdiction”.  However,  both  these  Community  instruments  also  expressly  allow  choice-of-
court agreements with reference to the Brussels I Regulation. Accordingly, the provisions in 
these  Community  instruments  need  to  be  construed  as  designating  or  delimiting  the  court 
within each Member State rather than in general. If a court in a Member State is designated by 
choice-of-court agreement, it must be that special court only. These Community instruments 
were,  however,  not  designed  to  limit  the  possibility  of  choice  of  court  by  the  parties  in 
general. 

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2.2.2.3.  Copyright and related rights 

Although neither the Brussels I Regulation17 nor other Community instruments adopted in the 
area of copyright and related rights18 establish either exclusive jurisdiction of a court within 
the EU or protective jurisdiction for the holders of such rights, in view of the attention paid to 
the  issue  during  negotiation  of  the  Convention  and  by  the  Community  legislator,  these 
intellectual property rights deserve to be taken into special consideration for the purposes of 
this exercise. 

The  term  intellectual  property  refers  broadly  to  creations  of  the  human  mind.  Intellectual 
property rights (“IPR”) protect the interests of the creators/inventors by giving them property 
rights over their creations/inventions — patents, trademarks, industrial designs, copyright, etc. 
With the exception of ‘copyright and related rights’, which cover not only literary and artistic 
works but also computer programs, all other intellectual property rights are excluded from the 
scope of the Convention19. 

Like all intellectual property rights, copyright is also territorial in nature, i.e. protection of the 
authors’  rights  is  restricted  to  the  State  where  the  right  has  been  created  or  registered. 
However,  the  question  about  the  validity  and  the  scope  of  copyright  not  only  affects  the 
rightsholder  and  his  contract  partners,  but  also  the  users  and  the  whole  of  society.  This  is 
because issues such as public interest and freedom of expression are involved. In this context, 
decisions about the validity and scope of copyright rendered by non-EU courts may directly 
affect Community rightsholders’ and users’ interests. 

A recent Intellectual Property Enforcement Survey20 indicated that infringements of IPR are 
very frequent in many third countries. These infringements are especially frequent in China, 
the  second  largest  EU  trading  partner,  where  the  second  most  common  type  of  IPR 
infringement (after the counterfeiting of trademarks) is piracy. 

The  situation  is  further  worsened  by  the  digitalisation  of  cultural  products  and  the 
development of the World Wide Web which made piracy easier, in particular due to reduced 
costs  and  the  global  presence  of  the  Internet.  The  Internet  environment  has  also  made  it 
problematic to identify the countries in which the infringement took place, due to the lack of 
physical references such as “borders” and “physical person” in cyberspace. 

At  European  level,  certain  aspects  of  copyright  and  related  rights21,  as  well  as  of 
enforcement22 of these rights, are harmonised. 

17 

18 

19 
20 

21 

Under  the  Brussels  I  Regulation,  the  general  principle  of  jurisdiction  based  on  the  domicile  of  the 
defendant or jurisdiction based on the place where the harmful event occurred apply to copyright and 
related rights. 
For instance Directive 2006/116/EC of 12 December 2006 on the term of protection of copyright and 
certain  related  rights,  and  Directive  2004/48/EC  of  29  April  2004  on  the  enforcement  of  intellectual 
property rights. 
Article 2(2)(n) and (o) of the Convention, “Exclusions from scope”. 
Review 
Gowers 
http://www.britishcopyright.org/ 
Directive  2001/29/EC  of  the  European  Parliament  and  of  the  Council  of  22  May  2001  on  the 
harmonisation  of  certain  aspects  of  copyright  and  related  rights  in  the  information  society;  Directive 
2006/116/EC  of  12  December  2006  on  the  term  of  protection  of  copyright  and  certain  related  rights; 
Directive  96/9/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  1996  on  the  legal 
protection of databases, etc. 

Intellectual 

Copyright 

Property, 

Council, 

British 

The 

of 

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At international level, apart from several international conventions in the IPR field23, the most 
comprehensive  and  effective  instrument  for  addressing  IPR  infringements  is  the  WTO 
Agreement on Trade-Related  Aspects of Intellectual  Property  Rights (TRIPS)24. The TRIPS 
Agreement is an attempt to narrow the gaps in the way IPRs are protected around the world, 
and  to  bring  them  under  common  international  rules.  The  Agreement  establishes  minimum 
levels  of  protection  that  each  State  has  to  give  to  the  intellectual  property  of  other  WTO 
members by respecting national treatment and most-favoured-nation principles. Despite that, 
many differences remain on the scope and measures for enforcing those rights. 

The  stakeholders’  replies  to  the  Commission  Consultation  Paper  during  preparation  of  the 
Convention, the conduct of negotiations at The Hague and ultimately the study undertaken by 
the  external  contractor  confirmed  the  problematic  status  of  these  relations  under  the 
Convention. 

2.2.2.4.  Situation under the Convention 

As  regards  protective  jurisdiction  (2.2.2.1),  Article  2  of  the  Convention  excludes  consumer 
contracts  and  employment  contracts  from  its  scope,  so  the  only  area  covered  in  terms  of 
protective  jurisdiction  by  the  Brussels  I  Regulation  and  not  excluded  from  the  scope  of  the 
Convention are insurance contracts. 

As regards exclusive jurisdiction (2.2.2.2.), all fields of exclusive jurisdiction recognised by 
the Brussels I Regulation are excluded from the scope of the Convention25. 

As  regards  copyright  and  related  rights  (2.2.2.3.),  the  Convention  applies  to  both  regarding 
the question of validity of copyright and related rights as well as infringements of such rights. 

Article  21  of  the  Convention  allows  a  State  with  a  strong  interest  in  not  applying  the 
Convention to a specific matter to make a declaration that it will not apply the Convention to 
that matter. 

Consequently, the Community could make a declaration under Article 21 to exclude copyright 
and related rights as well as insurance contracts from the Convention’s scope of application. 

Were  the  Convention  to  be  concluded  by  the  Community  without  such  exclusion,  the 
copyright holders from the EU could enter into choice-of-court agreements that could lead to 
cases being heard in the chosen court in a non-EU country and the resulting foreign judgment 
would  be  eligible  for  recognition  and  enforcement  in  the  EU  as  a  Contracting  Party  to  the 
Convention. On the other hand, the exclusion of copyright from the scope of the Convention 
would make it possible to refuse recognition of such a foreign judgment as there would be no 
international  obligation  to  recognise  and  enforce  it.  The  special  jurisdiction  provided  in 

22 
23 

24 
25 

Directive 91/250/EEC, Directive 2001/29/EC. 
Berne Convention for the Protection of Literary and Artistic Works 1886; International Convention for 
the  Protection  of  Performers,  Producers  of  Phonograms  and  Broadcasting  Organisations  1961;  WIPO 
Copyright  Treaty  1966;  WIPO  Performances  and  Phonograms  Treaty  1996,  Paris  Convention 
for the Protection of Industrial Property 1883, etc. 
http://www.wto.org/english/docs_e/legal_e/27-trips.pdf 
Strictly  speaking,  the  Convention  does  not  exclude  expressis  verbis  exclusive  jurisdiction  for 
enforcement proceedings (Article 22(5) of the Brussels I Regulation), but there is no doubt about the 
fact  that  choice-of-court  agreements  on  enforcement  jurisdiction  are  not  covered  (allowed)  by  the 
Convention (see definition of a choice-of-court agreement in Article 3(a) of the Convention). 

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matters of insurance by Chapter II, Section 3 of the Brussels I Regulation aims to protect the 
weaker  party  and  the  economic  interests  of  the  general  public  of  the  place  where  the 
policyholder  is  located.  An  exclusive  choice-of-court  agreement  under  the  Convention  in 
favour  of  a  court  in  a  country  which  is  not  the  policyholder’s  country  would,  therefore, 
contradict the Brussels I Regulation and the special provisions covering insurance. Although 
this  would  not  necessarily  create  a  direct  legal  contradiction  between  the  Brussels  I 
Regulation  and  the  Convention,  there  might  be  conflicts  in  policy  aims  if  the  Convention 
were to be concluded without any exemption on insurance. 

2.3. 

Summary of problems 

Taking the above analysis into account, four main problems can be identified in this 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 will be respected in 

the EU; and 

•  their choice-of-court agreements in favour of a court in the EU will be 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  an  EU  weaker  party  in  case  of  insufficient  protection  due  to  the 
choice-of-court  agreement  in  favour  of  a  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). 

Small  businesses  or  individuals  in  the  EU  dealing  with  enforcement  of  intellectual  property 
rights and insurance contracts are particularly vulnerable. 

Specific barriers for small businesses or individuals are: 

•  difficulties in enforcing rights; 

•  costs of proceedings; 

•  lack of easily accessible and readily understood specialist knowledge; 

•  high level of uncertainty of success in pursuing a case. 

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This may lead to a small business being unwilling to enter into a contract with a larger third-
country company, because it cannot well assess the risks associated with such a contract or it 
may enter into such contract unaware of the risks and thus face adverse effects. 

Problem 4 

Insufficient protection of legal relations specifically protected within the EU also in a wider, 
global  context  The  protection  of  these  relations  could  be  undermined  by  choice-of-court 
agreements in favour of a court in a third country. Problems could  arise  for certain specific 
areas  in  which  the  EU  and  its  Member  States  wish  or  might  wish  to  exercise  exclusive 
control. 

The  problem  associated  with  this  is  that  a  court  in  a  third  country  is  not  bound  by  the 
Community rules of exclusive jurisdiction or protective jurisdiction or the rules of substantive 
Community  law,  and  thus  may  adjudicate  cases  which  are  of  a  sensitive  nature  for  EU 
Member States and this possibly in different ways, and potentially produce a different result 
than a court in the EU would arrive at that is potentially of detriment to an EU party. 

2.4. 

Scale of the problems identified 

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

As  for  problem  1,  useful  information  on  the  frequency  of  the  problem  was  provided  by  a 
survey carried out by the ABA26. 26.2% of respondents stated that enforcing a choice-of-court 
agreement  designating  a  court  or  courts  in  an  international  transaction  had  been  difficult, 
while 12.3% of respondents said it had been extremely difficult. Moreover, 3.1% stated that 
the  problems  linked  to  enforcement  had  been  insurmountable.  Difficulties  linked  to 
enforcement of choice-of-court agreements seem, however, to affect a minority of economic 
operators,  as  almost  50%  of  respondents  indicated  that  they  had  not  experienced  such 
problems. 

On  the  other  hand,  problems  linked  to  the  recognition  or  enforcement  of  judgments  in 
countries  other  than  the  country  in  which  such  a  judgment  was  rendered  (problem  2)  often 
arise.  Whilst  32%  of  respondents  to  the  ICC  survey27  stated  that  they  had  not  experienced 
such problems, almost 40% stated that obtaining recognition or enforcement of judgments had 
been difficult. Moreover, 7.4% declared that this had been extremely difficult and practically 
insurmountable. 

The  results  of  the  ABA  survey  also  show  that,  when  asked  if  economic  operators  had  ever 
successfully  enforced  a  foreign  judgment  in  the  USA,  70%  of  respondents  answered 
negatively. Similarly, 62% of respondents answered in a negative way when asked if they had 
ever successfully enforced a US judgment abroad. 

As  for  problems  3  and  4,  consultations  undertaken  have  not  corroborated  that  stakeholders 
widely experience such problems. Only one stakeholder reported such problems. Admittedly, 

26 
27 

See footnote 4. 
See footnote 3. 

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the results of consultations do not reveal the full scope of the problems, or problems bound to 
be  experienced  regularly  to  a  smaller  or  larger  degree,  given  that  rules  of  jurisdiction, 
applicable  law  and  relevant  substantive  law  vary  from  country  to  country  and  are  not 
harmonised with the rules existing within the EU. 

3. 

POLICY OBJECTIVES 

The  following  general,  specific  and  operational  policy  objectives  reflecting  the  problems 
analysed in Section 2 have been identified. 

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 the EU) and investment, and this 
by 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  highlighted  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 and by another court seized, but not chosen. 

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. 

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Specific objective  4. It would  be  beneficial if  courts in third countries were to protect legal 
rights  similar  to  those  protected  within  the  EU.  Such  effects  could  come  about  through  the 
fact  that,  in  cases  involving  EU  companies  in  courts  of  third  countries,  arguments  made  on 
behalf  of  the  EU  companies  could  become  anchored  in  the  case  law  and,  consequently,  the 
laws of the third countries. Thus even third countries would “protect” the interests which are 
being protected within the EU. This would have the potential consequence of increasing the 
extent to which EU companies choose to enter into international contracts with parties from 
third countries and hence could lead to possible increases in trade. 

3.3. 

Operational objectives: 

There  are  a  number  of  operational  objectives  that  can  be  linked  to  each  of  the  specific 
objectives: 

Operational objectives linked to Specific objective 1: 

•  to  increase  the  number  and  value  of  contracts  (between  EU  operators  and  those  in  third 

countries) containing a choice-of-court agreement; 

•  to  reduce  (preferably  eliminate)  the  instances  of  choice-of-court  agreements  not  being 

respected. 

Operational objectives linked to Specific objective 2: 

•  to reduce the uncertainty of outcome of court judgments dependent on the law applied by 

the court adjudicating the matter; 

•  to reduce the uncertainty that court judgments might not be respected in other countries; 

•  to reduce the uncertainty that court judgments would not be enforced. 

Operational objectives linked to Specific objective 3: 

•  to reduce the time and costs of resolving disputes in court; 

•  to increase smaller companies’ willingness to enter into international contracts with larger 

companies; 

•  to increase the likelihood of smaller companies challenging larger companies with whom 

they are in dispute. 

Operational objectives linked to Specific objective 4: 

•  to reduce differences in the outcome of disputes dependent upon the country in which the 

case is heard; 

•  to  reduce  variation  between  the  judgments  made  in  EU  courts  and  those  made  in  third 

countries. 

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4. 

THE POLICY OPTIONS 

4.1. 

Introduction 

The  list  of  policy  options  incorporates  both  legislative  and  non-legislative  proposals  and  a 
‘status quo’ option where no new proposals would be put forward. 

4.2. 

The policy options 

Policy option 1 — “passive” status quo 

Under  this  policy  option  the  Community  would  not  conclude  the  Convention  and  no  new 
initiatives would be taken to address the policy objectives. 

Policy option 2 — “active” status quo 

Under  this  policy  option  the  Community  would  not  conclude  the  Convention,  but  bilateral 
agreements would be negotiated between the Community and selected third countries which 
would address the policy objectives. 

For  the  purpose  of  illustration  it  is  assumed  that  bilateral  agreements  would  be  negotiated, 
containing  provisions  equivalent  to  the  substantive  provisions  of  the  Convention  (without 
declarations  under  its  Article  21),  between  the  Community  and  the  USA,  China  and  the 
Russian Federation, the EU’s three main trading partners28. 

Policy option 3 — provision of “public insurance” 

This policy option would involve support for the provision and costs of insurance to cover the 
costs  of  proceedings  arising  from  suing  or  being  sued  in  third  countries  and  the  financial 
losses to EU operators from rulings made in third countries that undermine the rights the EU 
operators would have if they were operating in the EU. 

Such  public  insurance,  established  at  EU  level,  would  function  as  a  sort  of  “export  credit 
guarantee”.  This  insurance  would  be  suitable  for  companies  trading  with  third  countries.  It 
would  provide  companies  with  insurance  against  the  risk  of  not  being  paid  under  their 
international contracts. It would cover against buyer risks and political risks in third countries. 

the  current  situation,  export  credits 

In 
in  Member  States  can  be  backed  by 
official/governmental support. Official support can take the form of direct credits/financing, 
refinancing, interest-rate support (where the government supports a fixed interest rate for the 
life of the credit), aid financing (credits and grants), export credit insurance and guarantees. 
Export credits are generally divided into short-term (usually under two years), medium-term 
(usually two to five years) and long-term (usually over five years). 

28 

The value of merchandise trade (extra-imports + extra-exports) of EU25 with the USA amounted to 446 
billion euro, i.e. 18% of the total value of merchandise trade for 2006. The value of merchandise trade 
(extra-imports + extra-exports) of EU25 with China amounted to 257 billion euro, i.e. 10% of the total 
value  of  merchandise  trade  for  2006.  The  Russian  Federation  is  the  EU’s  third  biggest  economic 
partner.  The  value  of  merchandise  trade  (extra-imports  +  extra-exports)  of  EU25  with  the  Russian 
Federation amounted to 213 billion euro, i.e. 8% of the total value of merchandise trade for 2006. 

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As  indicated  in  a  report  by  the  Export  Credits  Guarantee  Department  (ECGD,  the  UK’s 
official export credit agency)29, there are seven main national agencies providing export credit 
guarantees:  CESCE  Spain,  COFACE  France;  ECGD  UK;  EKN  Sweden;  ATRADIUS 
Netherlands; EULER HERMES Germany; and SACE Italy. Their annual returns range from 
10 billion dollars (EKN) to 2 billion dollars (SACE). They provide export credit guarantees 
for  exports  to  the  majority  of  third  countries  (with  the  exception  of  Nigeria,  Argentina  and 
Pakistan). 

Policy  option  4  —  provision  of  information  to  businesses  on  current  risks  stemming  from 
uncertainty in the choice of court 

This  policy  option  would  involve  support  for  the  costs  of  providing  information  to  EU 
operators on: 

•  the risks stemming from current uncertainties over the choice-of-court agreements, should 

they wish to trade with third countries; and 

•  the practical means available to reduce these risks. 

Information could be provided on the website of the national ministries (Trade or Justice) or 
chambers  of  commerce.  Some  Ministries  and  chambers  of  commerce  (for  example  the 
Chamber  of  Commerce  and  Industry  of  Paris)  already  provide  such  information  on 
international  trade  and  choice-of-court  agreements.  However,  there  is  no  consistency  in  the 
information provided by the organisations and “information packs” are not available. 

In  addition  to  information  provided  on  the  Internet  on  the  sites  of  the  main  sectoral  and 
business organisations, brochures or posters containing the main messages to be provided to 
economic  operators  might  also  be  distributed.  This  information  campaign  should  be  as 
decentralised as possible, and local authorities and stakeholders should be involved in order to 
reach a large number of companies.  

The  provision  of  information  to  business  on  current  risks  stemming  from  uncertainty  in  the 
choice  of  court  could  also  be  implemented  further  by  developing  information  campaigns 
towards companies in the EU through the Specific Financing Programme Civil Justice.  

Such  provisions  of  information  would  reduce  the  legal  uncertainty  because  the  business 
would  be  consciously  aware  of  the  legal  consequences  of  their  actions  (e.g.  that  it  is  not 
certain whether the court in the chosen country will respect such choice). This would lead the 
business  to  verify  the  private  international  law  rules  of  the  country  in  question  concerning 
jurisdiction, in order to clarify, if such clauses are respected or not. If the result is negative, 
the business might prefer to choose another court (of the country of the legal order they know 
for sure). 

Policy  option  5  —  conclusion  of  the  Convention  by  the  Community  without  making  any 
declaration under its Article 21. 

Article  21  of  the  Convention  allows  a  State  with  a  strong  interest  in  not  applying  the 
Convention  to  a  specific  matter  to  make  a  declaration  and  thereby  exclude  such  matter(s) 
from the scope of application of the Convention. 

29 

Report on the Comparison of Export Credit Agencies, http://www.ecgd.gov.uk/intcompfinal2004.pdf 

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Under this policy option, the Community would conclude the Convention without indicating 
specific exemptions where the Convention would not be applied under Article 21. 

Policy option 6a — conclusion of the Convention by the Community with a declaration under 
its Article 21 excluding copyright and related rights. 

When making a declaration under Article 21 to exclude copyright and related rights, it would 
be  important  not  to  limit  this  exclusion  to  copyright  holders  within  the  EU  only,  as  EU 
citizens  may  not  be  only  holders  but  also  users  (and  potential  infringers)  of  copyright.  The 
objective  of  this  policy  option  is  to  protect  the  EU  and  its  Member  States  against  third 
countries’ court decisions with an impact on copyright and related rights within the EU. 

Policy option 6b — conclusion of the Convention by the Community with a declaration under 
its Article 21 excluding insurance matters. 

The insurance exemption in this policy option should only go as far as is necessary to address 
this  particular  conflict  with  Community  policy.  This  policy  option  would  therefore  involve 
the  conclusion  of  the  Convention  with  a  declaration  under  Article  21  excluding  insurance 
matters  only  if  and  when  the  policyholder  is  domiciled  in  the  EU  and  the  risk  or  insured 
event, item or property is related exclusively to the EU. 

Policy option 7 — combination of policy options 6a and 6b. 

This policy option would involve the conclusion of the Convention by the Community with a 
declaration  under  Article  21  excluding  copyright  and  related  rights  as  well  as  insurance 
matters form the scope of the Convention. 

5. 

THE IMPACTS OF THE POLICY OPTIONS 

5.1. 

Introduction 

This Section outlines the main advantages and disadvantages of each policy option in terms of 
their social and economic impacts30 on different target groups, risks and trade-offs. 

A common grid has been used for systematic comparison of the policy options. Each of the 
policy options outlined in Section 4 and their component actions has been assessed against the 
following criteria: 

•  The  impacts  with  respect  to  the  four  specific  policy  objectives  —  i.e.  how  far  does  the 

action contribute to making progress in achieving each objective? 

•  What are the potential economic benefits to the EU? 

•  What are the preconditions and essential accompanying measures? 

•  Is there complementarity with existing (and forthcoming) acquis? 

30 

Environmental impacts have not been considered. However, achieving the general objective would have 
repercussions through increasing the volume of international trade. 

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•  What are the main economic and social impacts in the EU and third countries? 

•  What are the costs for the Community? 

For each policy option, the anticipated impact with respect to the assessment criteria related to 
the four specific policy objectives has been assessed on an ‘intuitive’ scale of positive impact 
from  √  to  √√√√√  (√√√√√  being  the  best  possible  score).  Also,  the  views  expressed  by  the 
stakeholders have been included in the assessment of each policy option. 

5.2. 

Policy option 1 — ‘passive’ status quo 

As indicated in Section 2, the absence of a worldwide system of jurisdictional rules and rules 
on  recognition  and  enforcement  in  civil  and  commercial  matters  causes  a  number  of 
problems. 

The  existing  legal  disputes  settlement  procedures  in  international  commercial  relations  are 
court  settlement,  alternative  dispute  resolution  (so-called  "ADR"),  such  as  mediation  and 
recourse to international commercial arbitration. 

Recourse to national courts to regulate commercial disputes is the most traditional method in 
use in all judicial systems. Its main advantage is that it confers the certainty of enforcement of 
the  decision  given  in  the  forum.  But  this  advantage  varies  considerably  from  one  State  to 
another in terms of periods of time and procedure costs, depending on the effectiveness of the 
judicial  system.  On  the  other  hand,  in  international  sphere,  recourse  to  courts  comprises 
certain disadvantages which enabled international commercial arbitration to develop: with the 
exception  of  international  recognition  agreement,  the  effectiveness  of  the  judicial  decisions 
given  in  a  state  is  limited  to  its  territory.  This  is  why  States  have  developed  bilateral  then 
multilateral conventions, in particular under the auspices of The Hague Conference of Private 
International Law for the recognition and enforcement of judicial decisions. In the European 
context, since 1968, Member States adopted the Brussels Convention on the recognition and 
enforcement of judicial decisions which facilitates free movement of commercial judgments 
among  themselves  and  which  were  replaced  in  2000  by  Regulation  n°  44/2001  having  the 
same  object  and  which  even  more  reduces  the  intermediate  measures  for  enforcement  of 
decisions. This regulation contains a provision which guarantees the exclusivity of choice of 
court  clauses  for  commercial  contracts  and  ensures  the  recognition  of  the  decisions  given 
within this framework in the Union. However, this regulation applies only if the clause was 
concluded between parties one of which at least has its residence in the Union. The Member 
States and the States of EFTA concluded on 16 September 1988 the Lugano Convention on 
the  recognition  and  enforcement  of  decisions  in  civil  and  commercial  matters,  which  is  a 
parallel agreement to the Brussels Convention of 1968.  

On  the  other  hand,  there  exists  no  agreement  on  the  recognition  and  enforcement  of  court 
decisions  in  commercial  matters  at  worldwide  level.  The  Hague  convention  of  1  February 
1971  on  the  Recognition  and  Enforcement  of  Foreign  Judgments  in  Civil  and  Commercial 
Matters  never  entered  into  force.  The  negotiation  of  a  global  instrument  on  international 
jurisdiction  and  the  recognition  and  enforcement  of  judicial  decisions,  which  comprised  a 
provision on choice of court clauses, failed after a diplomatic conference in 2001. It is from 
this failure that the  more limited project on a  global Hague Convention on Choice-of-Court 
Agreements of 2005 arose.  

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Recourse to the friendly methods of resolution of settlement of the disputes is relatively recent 
and is still developing. Certain contracts envisage indeed optional or mandatory preliminary 
recourse  to  mediation  before  referring  to  national  or  arbitral  courts.  The  main  advantage  of 
mediation  is  that  it  makes  it  possible  to  maintain  business  relationships  between  economic 
partners  and  that  it  is  more  flexible  than  judicial  proceedings.  It  allows  recourse  to  more 
imaginative and less legal solutions. It is not a without any costs procedure since the mediator 
has often to be remunerated. The general costs of mediation, according to CMAP (Centre de 
Mediation et d'Arbitrage de Paris), are in the range of 1,000 to 4,000 Euro which is affordable 
for  SMEs.  It  comprises  nevertheless  also  important  disadvantages  in  international  trade:  the 
quality of the mediators is not always guaranteed. Secondly, its development is restricted by 
legal uncertainty which surrounds it at three levels: non recognition of confidentiality of the 
mediation elsewhere, risk of exhaustion of legal prescription periods in courts in the event of 
recourse  to  mediation  and  non  recognition  of  the  mediation  agreements  at  global  level.  A 
Recommendation on Civil Mediation has been adopted under the auspices of the Council of 
Europe  which  has  no  prescriptive  value.  Upon  initiative  of  the  Commission,  the  European 
Parliament  has  adopted  a  Directive  on  Civil  Mediation  in  April  2008,  the  rules  of  which 
intend to remedy these three disadvantages, but its scope is limited to procedures within the 
EU. Therefore, it appears that mediation is surrounded by legal uncertainty for companies in 
international trade, as, in particular, the full enforcement of mediation agreements, although 
by recourse to courts themselves, cannot be guaranteed.  

International  commercial  arbitration  is  currently,  by  default,  the  most  widespread  dispute 
settlement  method  for  international  commercial  disputes.  International  arbitration  clause 
contracts have to be respected and the arbitral award can be enforced by virtue primarily of 
the Convention on the Recognition and Enforcement of Foreign Arbitral Awards - the "New 
York"  Convention  in  the  States  having  ratified  it31.  But,  arbitration  is  nevertheless  also  a 
rather  expensive  commercial  dispute  resolution  to  which  large  companies  have  recourse 
because  the  fees  charged  by  specialized  lawyers  or  arbitrators  might  be  high  or  sometimes 
excessive32.  

But, it is precisely why these advantages have to be mitigated with regard to effectiveness of 
court settlement systems with which it is in competition, since arbitration also borrows some 
of  its  procedural  mechanisms  from  judicial  proceedings  (e.g.:  designation  of  the  arbitration 
court, preparation of the cases and hearings with specialized lawyers, form of the awards of 
the arbitrators..).  

In  this  regard,  since  2000,  the  United  Nations  Commission  on  International  Trade  Law 
(UNCITRAL)  has  examined  a  number  of  questions  concerning  arbitration  considering  it 
likely to be the subject of future work, including questions not dealt with by the New York 
Convention  and  problems  encountered  in  practice  but  not  treated  in  the  existing  texts  on 
arbitration  (for  example:  the  questions  of  the  arbitrability  of  the  dispute,  the  possibility  of 
enforceability  of  an  award  that  has  been  se  aside  in  the  State  of  origin,  the  provisional  and 

31 
32 

142 States are Parties to this Convention, including all Member States of the EU 
See  point  20  of  Document  n°  A/CN.9/646  of  the  Report  of  the  Working  Group  on  Arbitration  and 
Conciliation  on  the  work  of  its  forty-eighth  session  (New  York,  4-8  February  2008)  United  Nations 
Commission on International Trade Law 

http://www.uncitral.org/uncitral/en/commission/working_groups/2Arbitration.html 

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19 

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conservative measures, the electronic clauses, whether the arbitration agreement was null and 
void or could not be performed etc…33). 

For most of these questions, the dispute settlement system of the Choice-of-Court Convention 
presents many advantages. For example, the uncertainties as to whether the subject matter of 
some dispute was capable of arbitration (the arbitrability of the dispute), has caused problems 
in  international  commercial  arbitration.  On  the  contrary,  the  Choice-of-Court  Convention 
provides the parties a clear delimitation of the matters that could be subject to a valid choice. 
In particular, the proceedings are not excluded from the scope of the Convention by the mere 
fact that a State, including a governmental agency or any person acting for a State, is a party 
thereto.  

Moreover, the court settlement system of the Convention has the advantage of render possible 
the  concentration  of  the  procedures  in  a  single  court.  Arbitration,  which  is  private  justice, 
cannot  totally  perform  without  recourse  to  State  courts  for  important  remedies  such  as  for 
example the nomination of the arbitrator in case of a dispute between the parties, for solving 
differences  on  the  validity  of  the  arbitration  convention,  for  court-enforceability  of  interim 
measures of protection in support of arbitration, for carrying out provisional and conservative 
measures, in case of exaggerated fees and the possibility of having a sentence cancelled in the 
State of origin carried out,  

The  Convention  also  takes  into  account  the  growing  use  of  electronic  commerce  as  the 
agreement  could  be  concluded  or  documented  by  any  electronic  means  of  communication 
which render the information accessible. In international arbitration concerns were raised as 
whether  electronic  communications  complied  with  formal  requirements  for  arbitration 
agreements.  

Conflicts arose on one hand between foreign court judgments, presented for their recognition 
in  violation  of  arbitration  agreements  by  one  of  the  parties,  and,  on  the  other  hand  the 
arbitration  agreement  between  itself  them  invoked  by  the  defendant  or  a  pending  arbitral 
proceeding  or  even  an  arbitral  award,  which  are  not  solved  in  international  law  an  legal 
practice.  The  Convention  has  the  advantage  firstly  to  give  court  chosen  by  the  agreement 
exclusive jurisdiction to deal with the dispute and this exclusivity should be respected by the 
other  States  ratifying  the  Convention  and  the  parties.  Nevertheless,  the  Convention  has  the 
important  advantage  of  giving  certain  flexibility  for  EU  companies  in  a  twofold  system: 
Firstly, the court designated in the agreement has the possibility to consider it null and void. 
More  importantly,  it  allows  the  defendant  to  seize  a  court  not  chosen  by  the  parties  in  the 
agreement but nevertheless it organizes in its articles 5 and 6 a sound and clear procedure to 
deal  with  such  a  conflict  of  jurisdiction.  It  also  provides  a  clear  rule  on  the  possibility  to 
obtain  interim  measures  of  protection  in  its  article  7.  Lastly,  the  Convention  contains  a 
simplified and uniform procedure for recognition and enforcement of decisions. 

In the absence of a global instrument on the recognition and enforcement of judicial decisions 
similar  to  the  New  York  Convention  referred  to  above,  arbitration  is  naturally  perceived  as 
providing  advantages  in  terms  of  speediness  and  confidentiality.  Nevertheless,  arbitration  is 
not  a  method  of  disputes  resolution  that  would  be  in  all  circumstances  more  effective  than 
courts dispute settlements in terms of effectiveness (implementation of the decision).  

33 

http://www.uncitral.org/uncitral/fr/index.html  

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A  global  court  settlement  procedure  would  have  the  first  advantage  to  benefit  for  these 
companies that already have recourse to choice-of-court clauses34. Moreover, it will represent 
an  incentive  for  other  companies  to  use  court  settlements.  Consequently,  majority  of  the 
interested  parties  considers  that  the  existence  of  a  global  convention  that  would  provide  for 
the recognition and enforcement of choice of court decisions, largely ratified, would be likely 
to bring them tangible profits in relation to the current situation, especially for companies that 
cannot currently afford international arbitration, but not only.  

Companies  that  could  not  afford  arbitration  today  would  certainly  have  more  recourse  to 
choice of court clauses as indeed demonstrated in an ABA survey35. It is estimated that  the 
typical  cost  of  arbitration  is  20,000  Euro.  For  many  small,  and  may  be  also  for  medium, 
business companies, it appears already as a significant amount to afford although the average 
cost  of  international  civil  litigation  could  be  higher  depending  of  the  court  system  and  the 
amount of the dispute.  

There are unfortunately no reliable data available on the costs and length of dispute settlement 
under the different procedures. It appears that the costs of judicial proceedings considerably 
vary from State to State. In particular, the cost of court proceedings can vary to a great extent 
between  third  States,  like  the  United  States  and  European  Member  States  and  between  the 
European countries themselves and that it will depend on the monetary value of the dispute. 
In addition, there is a need to take into consideration the European rule of "the looser pays all" 
or the American rule of "each side bears its own cost of litigation".  

The  companies  contacted  by  ABA  replied  that  the  mere  existence  of  the  Convention  would 
have an effect on their willingness to go to court instead of using arbitration. The majority of 
stakeholders consulted declared that, substantial problems are generated by the absence of a 
world-wide system of jurisdictional rules and rules of recognition and enforcement. These are 
mainly: 

•  Delays and costs caused in enforcing judgments of courts of EU Member States; 

•  Uncertainty as to enforceability of international contracts. 

International  trade  involves  risk  some  of  them  derives  from  legal  uncertainty.  Legal 
uncertainty arises in part from at the same time: uncertainty as to within which court a dispute 
may be heard; and, uncertainty as to whether the judgement of the court will be upheld in the 
countries of both parties in dispute; but also uncertainty as to whether the arbitral award or the 
mediation agreement will be upheld in the countries of both parties. Legal uncertainly has also 
a cost for companies.  

These  risks  has  been  successfully  reduced  by  the  Brussels  Regime  for  companies  trading 
within the EU and EFTA countries, which prove the advantages of having a comprehensive 
and  modern  system  of  court  settlement  for  trade  disputes.  But  in  spite  of  the  alternative 
dispute  settlement  systems,  the  risk  remains  high  for  EU  companies  trading  with  parties 
elsewhere in the world. 

34 

35 

Almost  75%  of  the  companies  specified  courts  in  more  than  half  of  their  international  contracts 
according to an overview of choice of court practices of companies engaged in international business 
(Survey undertaken by the ICC in 2003 –see foot-note 3) 
see foot note 4 

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Therefore,  the  ratification  of  the  Hague  Convention  by  the  Community  would,  should  the 
Convention  also  be  ratified  by  other  trading  partners,  reduce,  like  it  happened  in  the  EU 
framework,  legal  uncertainty  by:  ensuring  that  choice  of  court  agreements  in  international 
trading  contracts  are  respected;  and  ensuring  that  the  judgements  of  the  courts  would  be 
recognised  by  the  courts  within  the  EU  and  other  countries  that  are  Parties  to  The  Hague 
Convention.  

In this regard, it should be noted that if the Convention enter into force without the European 
Community  being  Party  to  it,  EU  companies  could  not  benefit  from  its  advantages  and  EU 
companies may suffer drawbacks: 

-  Only  agreements  designating  a  court  of  a  Contracting  Party  could  benefit  from  the 
exclusivity rule of its Article 4 and could be respected by other courts; 

-  Only  judgments  given  by  courts  of  a  Contracting  Party  could  be  recognised  and  enforced 
according to its simplified procedure. 

This  would  be  particularly  detrimental  to  EU  companies  if  several  of  our  major  trading 
partners  were  to  be  Parties  to  the  Convention  and  not  the  EC.  Indeed,  in  case  where  the 
agreement designates EU courts to settle any dispute, it will not be enforceable in any of the 
Contracting Parties according to the Convention. The defendant could easily raise any defence 
in another court than the chosen court in the EU to refuse to comply with the agreement and 
any foreign court could refuse to uphold it. On the contrary, a judgement given on the basis of 
an agreement with a party domiciled in a State applying the Convention, and designating the 
court  of  that  foreign  State,  could  be  enforced  easily  against  an  EU  defendant  in  any  of  the 
other  State  Parties  and  without  any  possibility  to  raise  the  defences  of  article  5  of  the 
Convention. 

Therefore  a  need  exist  for  a  coordination  between  the  Member  Hague  Conference  on 
ratification  process  of  the  Convention.  The  perspectives  for  this  ratification  were  discussed 
during the Council on General Affairs and Policy of The Hague Conference that took place in 
April 2008. The EU's largest trading partner, the USA, indicated during that meeting that its 
intends  to  sign  the  Convention  already  this  year  after  a  consultation  process.  Mexico  has 
already acceded to the Convention and Canada has started the consultation process with the 
provinces in order to sign it. Russia told the Commission that it is exploring the possibility to 
ratify it. The signature of the Convention on Choice-of-Court Agreements by the two major 
economies of the world (EU and USA) in 2008 would increase considerably the willingness 
of other important trading partners like China and Japan to proceed towards its signature and 
ratification swiftly. 

This policy option would therefore not contribute to achieving any of the defined objectives 
although EU economic actors interviewed observed that in the current situation international 
arbitration is used to resolve disputes in the absence of a worldwide system of jurisdictional 
rules and rules on recognition and enforcement. It must be noted that the possibility of parties 
to a contract or to a dispute to choose international arbitration to solve their dispute will not 
be  affected  by  any  of  the  policy  options.  However,  as  explained  above  the  availability  of 
arbitration does not give sufficient breadth of options to all parties involved in international 
business transactions and, as pointed out by some stakeholders, the only reason arbitration is 
chosen  today  is  the  relatively  high  foreseeability  of  the  enforcement  of  arbitral  awards  as 
opposed to enforcement of judicial decisions. 

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5.3. 

Policy option 2 — “active” status quo 

The  conclusion  of  bilateral  agreements  with  the  USA,  China  and  the  Russian  Federation 
would increase the legal certainty of EU economic operators trading with these countries that 
their preference for the choice of court will be respected and that judgments made in relation 
to the disputes will be recognised and enforced in these countries. Safeguarding the right of 
EU weaker economic operators in determining the choice of court would be ensured for the 
matters falling within the scope of such an agreement. Also, there would be slightly increased 
familiarity  with  EU  law  in  American,  Chinese  and  Russian  courts  because  of  a  greater 
willingness to use courts to resolve disputes. In the longer term, and as a consequence of the 
improved  legal  certainty,  the  value  of  trade  between  the  EU  and  the  three  trading  partners 
could increase. 

The  assessment  is  illustrated  in  Table  5.1.  The  effects  of  the  policy  option  on  the  policy 
objectives  would  be  small  even  though  the  total  value  of  trade  with  these  three  countries  is 
very  high.  Legal  certainty  would  be  achieved  only  to  a  very  limited  degree,  solely  with  the 
countries bound by the  agreement.  It would not protect  against the possibility  of one of the 
contracting partners seizing a court in a third country that will not respect the choice-of-court 
agreement  in  favour  of  a  court  in  the  Contracting  Party.  The  same  applies  for  all  the  other 
objectives:  while  the  other  Contracting  Party  to  the  bilateral  agreement  would  be  bound  to 
honour the solutions agreed, no other third country would be bound to do so if the dispute is 
brought before a court of that country. 

Depending on the willingness of the other Contracting Party to arrive at a solution different 
from the Convention, some (or the same) problems related to copyright and insurance might 
exist and additional inconsistencies with the Brussels I Regulation might arise. 

This  policy  option  involving  bilateral  agreements  with  selected  trading  partners  would  be 
inconsistent with the Convention’s overall aim,  which  is  to  promote  a  worldwide  system  of 
jurisdictional rules and rules on recognition and enforcement in civil and commercial matters. 
It would also depend on third countries’ willingness to negotiate such bilateral agreements in 
parallel  to  the  exiting  multilateral  Convention,  in  whose  negotiation  they  invested  time  and 
resources in order to create a harmonised system with more than just one contracting partner 
(see point 2.1.3. above). 

Such  approach  would  also  have  administrative  and  budgetary  repercussions  on  the 
Commission who would have to negotiate these individual agreements (such as allocations of 
staff, hosting part of negotiations and missions to the respective third countries). 

Table 5.1 — Summary assessment of policy option 2 

Policy option 2: ‘active’ status quo 

Objective 
addressed 

to  be  achieved/problem 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

To  increase  EU  economic  operators’ 
legal certainty that their preference for 
resolve 
the  choice  of  court 

to 

√ 

Small  effect:  EU  economic  operators 
would be sure that their agreed preference 
of  court  would  be  respected  vis-à-vis  the 

EN 

23 

   EN 

 
 
Policy option 2: ‘active’ status quo 

Objective 
addressed 

to  be  achieved/problem 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

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

courts 

√ 

other  Contracting  Party  to  the  individual 
bilateral  agreement,  but  not  in  any  other 
country. 

Small  effect:  EU  economic  operators 
would  be  sure  that  the  judgment  made  by 
the chosen court would be respected on the 
territory of the other Contracting Party, but 
not in any other country. 

Small effect: the stronger partner (based in 
the  other  Contracting  Party)  would  be 
limited in its attempts to seize a court other 
than  that  agreed  in  the  contract  with  the 
weaker  party.  This 
limitation  would, 
however, exist only in respect of the courts 
of the respective Contracting Parties. 

Small  effect:  the  policy  option  would  lead 
indirectly to increased familiarity with EU 
law in the other Contracting Parties’ courts 
because  of  a  greater  willingness  to  use 
courts  to  resolve  disputes.  This  would  not 
extend to any other country. 

Potential economic benefits to the EU 

Reduced  transaction  costs  associated 
with legal uncertainty 

Reduce  time  and  costs  of  resolving 
disputes 

Increases in international trade 

The reduction would be proportionate to: the contribution 
of choice-of-court issues to overall legal uncertainty; and 
the  additional  number  of  choice-of-court  agreements 
entered  into  between  companies  from  the  EU  and  the 
impact 
other  Contracting  Party;  potential  positive 
expected. 

The  reduction  would  be  proportionate  to  the  number  of 
disputes  that  would  be  resolved  in  court  and  the  relative 
costs  of  courts  versus  other  means  of  resolving  disputes; 
potential positive impact expected. 

As a consequence of increased legal certainty, an increase 
in  EU  trade  with  the  other  Contracting  Parties  would  be 
possible. 

Perceptions  of  advantages  and  Advantages 

Disadvantages 

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24 

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Policy option 2: ‘active’ status quo 

Objective 
addressed 

to  be  achieved/problem 

disadvantages 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Existing  EU 
(including their representatives) 

economic 

actors 

International lawyers 

No  direct  evidence  of 
views,  but 
to  be 
perceived as beneficial. 

likely 

No  direct  evidence  of 
views,  but 
to  be 
perceived as beneficial. 

likely 

Preconditions 
accompanying measures 

and 

essential 

A  precondition  would  be  the  willingness  of  the  other 
Contracting Party to negotiate such an individual bilateral 
agreement. 

Complementarity with existing (and 
forthcoming) acquis 

Complementarity 
negotiations. 

can 

be 

achieved 

in 

bilateral 

Economic  and  social  impacts  in  EU 
and third countries 

Problems  with 
(unless 
intellectual  property 
excluded  from  the  scope  of  the  bilateral  agreement) 
because they could be tried in courts where such rights are 
less  protected  (although  the  rightsholder  would  have  had 
to agree). Especially China offers a low level of protection 
of such rights. 

rights 

Problem with insurance (unless excluded from the scope) 
because they could be tried in courts without a close link 
with the action (this would be unfavourable to the weaker 
party). 

The existence of a bilateral agreement with a certain third 
country might raise the EU operator’s willingness to enter 
into  choice-of-court  agreements  with  an  operator  from 
that country and vice versa. 

It  would  guarantee  the  possibility  of  recognition  and 
enforcement of judgments given by the chosen court in a 
third  country,  Contracting  Party 
the  bilateral 
agreement, in the EU and vice versa. 

to 

Implementation costs 

Costs  would  be  incurred  by  the  Commission  in  the 
process of negotiation and conclusion of bilateral treaties. 

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5.4. 

Policy option 3 — provision of ‘public insurance’ 

This  policy  option  could  give  advantage  to  EU  companies  involved  in  disputes  through 
offsetting  the  costs  of  legal  insurance.  Some  positive  effects  could  be  expected  as  far  as 
increased  international  commerce  is  concerned,  as  companies  would  be  more  willing  to 
establish business relations with international partners knowing that, in the event of a dispute, 
their costs of proceedings might be covered by the insurance. 

The creation of such a system at EU level would be problematic, since significant financial 
resources  would  be  required  at  EU  and/or  Member  State  level  to  implement  this  policy 
option. 

The policy option would in no way increase the legal certainty of EU economic operators that 
their  preference  for  the  choice  of  court  to  resolve  international  commercial  disputes  will  be 
respected,  nor  increase  the  predictability  of  the  choice  of  court  to  resolve  international 
commercial disputes. 

An  indirect  consequence  of  implementing  such  an  option  would  be  an  overall  increase  in 
court  cases.  As  indicated  in  a  report  published  by  the  British  Copyright  Council36,  such 
insurances can unreasonably raise the expectations of those insured and encourage litigation 
where this is unnecessary and where negotiated settlement would be better. 

Table 5.2 — Summary assessment of policy option 3 

Policy option 3 — provision of ‘public insurance’ 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

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

to 

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. 

0 

0 

√ 

No  effect:  the  insurance  would  cover  the 
costs  of  disputes, 
the 
companies,  but  not  reduce  the  ‘economic’ 
legal uncertainty. 

it  would  help 

No  effect:  the  insurance  would  cover  the 
the 
costs  of  disputes, 
companies,  but  not  reduce  the  ‘economic’ 
legal uncertainty. 

it  would  help 

Small  effect:  it  would  help  the  weaker 
party  to  accept the inclusion  of  choice-of-
court  agreements  in  contracts,  as  their 
potential  costs  would  be  offset  by  the 
insurance. 

36 

The British Copyright Council, http://www.britishcopyright.org/ 

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26 

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Policy option 3 — provision of ‘public insurance’ 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

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

courts 

0 

Potential economic benefits to the EU 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

No  direct  effect:  it  is  possible  that  more 
cases  might  be  heard  in  third-country 
courts, but otherwise the status quo would 
be maintained. 

Reduced  transaction  costs  associated 
with legal uncertainty 

Benefits  would  accrue  to  the  operators  receiving  the 
support. 

Reduce  time  and  costs  of  resolving 
disputes 

No  impact  on  the  actual  (economic)  time  and  costs, 
indeed these could increase as the insurance might lead to 
cases  going  to  court  that  would  not  otherwise  do  so. 
However, 
involved  would  benefit 
financially. 

the  companies 

Increases in international trade 

Some positive effects expected. 

Perceptions  of  advantages  and 
disadvantages 

Advantages 

Disadvantages 

Existing  EU 
(including their representatives) 

economic 

actors 

International lawyers 

No  direct  evidence  of 
to  be 
views,  but 
perceived as beneficial. 

likely 

No  direct  evidence  of 
to  be 
views,  but 
perceived as beneficial. 

likely 

Preconditions 
accompanying measures 

and 

essential 

Significant  financial  resources  would  be  required  at  EU 
and/or MS level; however, such a policy option could be 
limited  to  particular  sectors  or  types  of  company  that 
experience  the  greatest  legal  uncertainties  when  trading 
internationally. 

Complementarity with existing (and 
forthcoming) acquis 

Potential conflicts over State aids. 

Economic  and  social  impacts  in  EU 
and third countries 

In  effect  the  EU  or  the  Member  States  would  be  paying 
the costs of the legal uncertainty to the economy, through 
subsidies  for  insurance  rather  than  reducing  the  costs  to 
the  economy.  The  support  could  give  advantage  to  EU 

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Policy option 3 — provision of ‘public insurance’ 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

companies in disputes. 

Implementation costs 

There would be significant implementation costs involved 
in implementing this policy option. 

5.5. 

Policy  option  4  —  provision  of  information  to  businesses  on  current  risks 
stemming from uncertainty in the choice of courts 

This policy option is expected to increase the awareness of legal uncertainty among economic 
operators,  which  might  change  their  behaviour  and  consequently  they  may  take  appropriate 
action  to  protect  their  rights.  This  is  expected  to  be  particularly  beneficial  to  smaller 
companies. 

The effects of the policy option on international trade are difficult to predict: the option might 
have  a  possible  small  positive  effect,  but  it  could  also  potentially  reduce  international  trade 
through pointing out the ‘pitfalls’ of legal uncertainty. 

Table 5.3 — Summary assessment of policy option 4 

Policy  option  4  —  provision  of  information  to  businesses  on  current  risks  stemming  from 
uncertainty in the choice of courts 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

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

to 

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. 

√ 

0 

√ 

Small  effect:  it  would  increase  awareness 
of legal uncertainty. 

No effect: status quo. 

Small  effect:  operators  may  take  steps  to 
protect their rights. 

EN 

28 

   EN 

 
 
 
 
Policy  option  4  —  provision  of  information  to  businesses  on  current  risks  stemming  from 
uncertainty in the choice of courts 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

0 

No effect: status quo. 

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

courts 

Potential economic benefits to the EU 

Reduced  transaction  costs  associated 
with legal uncertainty 

Possible  small  effect  through  EU  operators  being  better 
aware of the uncertainties, and taking appropriate action. 

Reduce  time  and  costs  of  resolving 
disputes 

Possible  small  effect  through  EU  operators  being  better 
aware of the different dispute-resolution options available 
and choosing the appropriate one for their dispute. 

Increases in international trade 

Possible small positive effect, but it could also potentially 
backfire  and  reduce  international  trade  through  pointing 
out the ‘pitfalls’ of legal uncertainty. 

Perceptions  of  advantages  and 
disadvantages 

Advantages 

Disadvantages 

Existing  EU 
(including their representatives) 

economic 

actors 

International lawyers 

Some EU operators are not 
fully  aware  of  the  extent 
and potential consequences 
of legal uncertainty. 

Currently  lawyers  are  an 
this 
important  source  of 
policy 
information; 
option  might 
to  a 
decrease in demand for their 
services. 

this 
lead 

Preconditions 
accompanying measures 

and 

essential 

Would require commitment and financial resources, most 
likely at Member State level. 

Complementarity with existing (and 
forthcoming) acquis 

No impact. 

Economic  and  social  impacts  in  EU 
and third countries 

Provision of general information might lead to a decrease 
in demand for lawyers’ services. 

EN 

29 

   EN 

 
 
 
 
 
Policy  option  4  —  provision  of  information  to  businesses  on  current  risks  stemming  from 
uncertainty in the choice of courts 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up  to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

The effect on third countries might result in a decrease in 
trade  due  to  EU  companies’  higher  awareness  and 
unwillingness to take risks in respect of those countries. 

Implementation costs 

Only  minor  implementation  costs  would  accrue  at  EU 
level.  Costs  would  occur  at  national,  regional  and  local 
levels  commensurate  with 
resources 
committed and activities implemented. 

financial 

the 

5.6. 

Policy  option  5  —  conclusion  of  the  Convention  by  the  Community  without 
making any declarations under its Article 21 

The  conclusion  of  the  Convention  by  the  Community  without  any  declaration  under 
Article 21  would  mean  that  in  two  areas  identified  as  problematic  (insurance  and  copyright 
and related rights) the status quo would be affected to the potential detriment of the “weaker” 
party in the contractual relationship, even if the weaker party would have had to agree to the 
choice of a court in a third country. 

The conclusion of the Convention by the Community would increase EU economic operators’ 
legal certainty that their preference for the choice of court to resolve international commercial 
disputes would be respected. This increased legal certainty would affect all the trading sectors 
falling within the scope of the Convention as no specific matters would be excluded from the 
Convention. 

This  policy  option  would  increase  the  predictability  of  the  choice  of  court  to  resolve 
international  commercial disputes involving EU economic operators, because  the judgments 
of the courts would be eligible for recognition and enforcement in all the countries which are 
Contracting Parties to the Convention. 

The  policy  option  would  help  safeguard  the  rights  of  the  smaller  and  weaker  EU  economic 
operators  in  determining  the  choice  of  court.  The  stronger  partner  would  be  limited  in  its 
attempts to seize a court other than the one agreed in the contract with the weaker party. 

The policy option could lead indirectly to increased familiarity with EU law in third-country 
courts, because of a greater willingness to use those courts to resolve disputes. Consequently, 
legal rights protected under EU legislation could be given increased protection also in courts 
resolving international commercial disputes involving EU economic operators outside the EU. 

EN 

30 

   EN 

 
 
 
However,  the  benefits  to  EU  economic  operators  from  this  policy  option  are  based  on  the 
assumption  that  at  least  the  EU’s  main  trading  partners  (such  as  the  USA,  China  and  the 
Russian Federation) also ratify the Convention37. 

Some  negative  consequences  could  arise  from  this  policy  option.  If  not  excluded  from  the 
Convention,  some  problems  might  arise  in  connection  with  copyright  and  related  rights 
because  the  courts  of  third  countries  (agreed  upon  by  the  parties  to  a  contract)  would  be 
allowed  to  decide  issues  concerning  validity  of  copyright  linked  with  the  EU  and  such 
judgments would be eligible for recognition within the EU. Such results may have an impact 
on  actors  unrelated  to  the  dispute  or  even  the  public  at  large,  when  the  type  and  level  of 
protection differs in detail from what EU legislators deem proper. 

Furthermore, problems can arise in relation to insurance matters. Some discrepancies with the 
Brussels I Regulation might arise, since the Regulation allows the insured usually to sue the 
insurer at his own place of domicile irrespective of any other jurisdiction available under the 
law or under a choice-of-court agreement. It also limits party autonomy as regards the choice 
of court (which is not the case under the Convention). The application of the Convention in 
this field would therefore contradict the policy of the Brussels I Regulation. 

Companies  and  law  firms  perceive  the  Convention  as  a  beneficial  instrument  for  increasing 
legal certainty for economic operators engaging in international trade. Another impact of the 
conclusion  of  the  Convention  would  be  increased  willingness  by  companies  to  opt  for 
litigation instead of arbitration in international contracts. 

In this regard, the ABA survey38 demonstrated that, when asked if a Convention on choice-of-
court agreement would make economic operators more willing to opt for litigation instead of 
arbitration in contracts, 70% of respondents answered positively. Almost all the respondents, 
i.e. 98%, stated that such a Convention would be useful for their economic practice. 

The majority of  the  companies contacted when the Impact Assessment was being drawn up 
stated that the Convention would be useful for setting up a worldwide system of jurisdictional 
rules and rules on recognition and enforcement of judgments in civil and commercial matters. 
Also,  the  companies  affirmed  that  the  existence  of  the  Convention  would  impact  on  their 
willingness  to  go  to  court  instead  of  using  arbitration.  According  to  the  companies,  the 
Convention would reduce the risks of companies going through the entire complicated court 
process but not seeing the final judgment enforced. 

One stakeholder pointed out that the absence of a worldwide system of jurisdictional rules and 
rules  on  recognition  and  enforcement  in  civil  and  commercial  matters  generates  uncertainty 
and delays, thereby raising the cost of investment and trade. Another stakeholder stated that 
ratification of such a Convention would probably have only a marginal impact on companies’ 
willingness to go to court instead of using arbitration. The most common problems associated 
with  courts  would  not  be  solved  through  the  Convention,  namely  the  length  of  court 

37 

38 

All these countries were very active in the negotiations on the Convention and the final result achieved 
reflects  also  their  preoccupations.  Consequently,  it  is  expected  that  these  countries  will  ratify  the 
Convention.  Indeed,  according  to  informal  work  contacts  with  the  US  authorities,  they  are  currently 
preparing  to  sign  the  Convention  and  could  be  ready  in  the  second  half  of  2008.  The  signing  of  the 
Convention by the Community and the USA would be a strong impetus for other countries to become 
Parties to the Convention. 
See footnote 4. 

EN 

31 

   EN 

 
                                                 
procedures,  high  cost  and  impartiality  issues.  Therefore,  it  was  felt  that  the  relevance  of 
arbitration in international disputes would probably not be affected. 

On  the  other  hand,  two  stakeholders  stated  that  the  Convention  would  possibly  impact  on 
companies’  willingness  to  go  to  court  instead  of  using  arbitration,  since  the  better 
enforceability of arbitral awards was considered a major advantage of arbitration compared to 
court proceedings. 

One  stakeholder  expressed  a  contrasting  opinion  about  the  effectiveness  of  the  Convention, 
saying  that  although  the  Convention  would  introduce  a  clear  legal  framework,  arbitration 
would still normally prevail over proceedings in courts because it would still take less time, 
which is always crucial in doing business. 

Table 5.4 — Summary assessment of policy option 5 

Policy  option  5  —  conclusion  of  the  Convention  without  making  any  declarations  under  its 
Article 21 

Objective 
addressed 

to  be  achieved/problem 

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

to 

Anticipated 
impact 
(rated  up to 
√√√√√) 

√√√ 

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

courts 

√√ 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Significant  effect:  EU  economic  operators 
would be sure that their agreed preference 
of  court  would  be  respected  in  other 
Contracting Parties to the Convention. The 
extent  of  legal  certainty  would  depend  on 
the number of Contracting Parties. 

Significant  effect:  EU  economic  operators 
would  be  sure  that  the  judgment  made  by 
the chosen court would be respected in all 
the other Contracting Parties. The extent of 
the 
legal  certainty  would  depend  on 
number of Contracting Parties. 

–  Some effect: the stronger partner would 
be  limited  in  its  attempts  to  seize  a 
court  other  than  that  agreed  in  the 
the  weaker  party. 
contract  with 
is  a  potential  for 
However, 
difficulties  in  the  area  of  insurance 
matters  and  copyright  and 
related 
rights. 

there 

Some  effect:  the  policy  option  would  lead 
indirectly to increased familiarity with EU 
law  in  third-country  courts  because  of  a 
greater willingness to use courts to resolve 
disputes. 

EN 

32 

   EN 

 
 
Policy  option  5  —  conclusion  of  the  Convention  without  making  any  declarations  under  its 
Article 21 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Potential economic benefits to the EU 

Reduced  transaction  costs  associated 
with legal uncertainty 

The reduction would be proportionate to: the contribution 
of  choice-of-court  issues  to  overall  legal  uncertainty;  the 
countries  ratifying  the  Convention;  and  the  additional 
number of choice-of-court agreements entered into. 

Reduce  time  and  costs  of  resolving 
disputes 

The  reduction  would  be  proportionate  to:  the  number  of 
disputes that would be resolved in court; and the relative 
costs of courts versus other means of resolving disputes. 

Increases in international trade 

The decrease in uncertainty might work as an impetus for 
increased  interest  in  concluding  international  contracts 
and thus increase the amount of trade. 

Perceptions  of  advantages  and 
disadvantages 

Advantages 

Disadvantages 

Existing  EU 
(including their representatives) 

economic 

actors 

stated 

98%  of  the  ABA  survey 
respondents 
that 
such  a  Convention  would 
be 
their 
for 
useful 
economic practice. 

of 

The  majority 
the 
companies contacted stated 
that  the  Convention  would 
be useful in order to set up 
a  worldwide  system  of 
and 
jurisdictional 
rules  on  recognition  and 
enforcement  of  judgments 
in  civil  and  commercial 
matters. 

rules 

who 

risks 

some 

related 

the 
The  application  of 
to  copyright 
Convention 
rights  may 
and 
present 
for 
individual  authors  and/or 
performers, 
are 
generally  the  weaker  party 
to a contract. The latter may 
find  themselves  having  to 
accept  as  valid  a  choice-of-
court 
is 
imposed  on  them  by  and 
more  favourable  to  a  co-
contractor 
in  a  stronger 
position. 

clause  which 

International lawyers 

of 

The Convention may not be 
ratified  by  many  countries, 
significant 
because 
differences  in  legal  systems 
and  historic  and  political 
animosities  between  some 
countries. 

EN 

33 

   EN 

 
 
 
 
Policy  option  5  —  conclusion  of  the  Convention  without  making  any  declarations  under  its 
Article 21 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Preconditions 
accompanying measures 

and 

essential 

The benefits to EU economic operators that emerge from 
this  policy  option  are  based  on  the  assumption  that  the 
main commercial partners also ratify the Convention. 

Complementarity with existing (and 
forthcoming) acquis 

The  policy  option  would  affect 
I 
Regulation39,  in  particular  its  Article  23  and  the  rules  on 
lis  pendens40  (Chapter  II,  Section  9)  when  one  of  the 
parties  to  the  dispute  has  residence  in  the  EU  and  the 
other party has residence in another Contracting Party. 

the  Brussels 

Economic  and  social  impacts  in  EU 
and third countries 

The  potential  for  increased  international  trade  with  third 
countries is high, but: 

– 

– 

problems  with  certain  intellectual  property  rights 
may  arise,  because  they  could  be  tried  in  courts 
where these rights are less protected (although the 
rightsholder  would  have  had  to  agree  to  the 
jurisdiction of such courts); 

problem  with  insurance:  the  EU  weaker  party  is 
not protected enough. 

Litigants  would  have  an  increased  guarantee  that  their 
choice-of-court  agreements  in  favour  of  the  court  in  a 
third country (Contracting Party to the Convention) would 
be  upheld  by  the  courts  within  the  EU  (and  vice  versa), 
and  that  judgments  given  by  the  chosen  court  in  third 
countries  would  be  eligible 
recognition  and 
enforcement within the EU (and vice versa). 

for 

The  costs  of  conclusion  of  the  Convention  are  very  low. 
The  costs  at  Community  level  would  involve  only  the 
time 
the 
inputs  of  policy  makers  for  undertaking 
conclusion.  The  Convention  would  be  implemented 
directly by the courts. 

Implementation costs 

39 
40 

For further analysis see Annex 4 of the study referenced in footnote 1. 
Lis pendens is Latin for “suit pending”. In the Brussels I Regulation it refers to situations where the fact 
that  one  court  was  seized  of  a  dispute  prohibits  another  court  seized  of  the  same  dispute  from 
proceeding as long as the jurisdiction of the court first seized has been established. 

EN 

34 

   EN 

 
 
 
                                                 
5.7. 

Policy  option  6a  —  conclusion  of  the  Convention  with  a  declaration  under  its 
Article  21  excluding  copyright  and  related  rights,  where  the  validity  of  these 
rights is linked to a Member State 

Taking into consideration the sensitivity of the copyright issue and its implications for society 
as a whole (see point 2.2.2.3. above), the exclusion of copyright and related rights from the 
scope of the Convention would have the following advantages: 

•  the  Convention  would  not  apply  to  the  choice-of-court  agreements  that  could  weaken 
protection with respect to copyright and related rights and would maintain the standards set 
by the EU on these matters; 

•  EU  holders  of  copyright  and  related  rights  could  not  be  forced  into  choice-of-court 
agreements that would undermine the protection of their rights accorded to them within the 
EU. 

The consultations with different stakeholders on the Commission’s 2004 Consultation Paper 
on  the  draft  Convention  showed  diverging  opinions  on  exclusion  of  copyright  and  related 
rights from the scope of the Convention. 

Member  States  that  contributed  to  the  consultation  (France,  Estonia,  Latvia  and  the  Czech 
Republic)  answered  that  copyright  should  be  included  in  the  scope  of  the  Convention.  Two 
stakeholders stated that copyright should be treated in the same way as the other intellectual 
property  rights  under  the  Convention.  For  them  there  was  no  reason  to  exclude  copyright 
from the Convention and deprive authors of benefiting from the Convention. 

On  the  other  hand,  three  stakeholders  stated  that  copyright  and  related  rights  should  be  left 
outside  the  scope  of  the  Convention.  The  application  of  the  Convention  to  copyright  and 
related  rights  may  present  some  risks  for  individual  authors  and/or  performers,  who  are 
generally the weaker party to a contract. The latter may find themselves having to accept as 
valid  a  choice-of-court  clause  which  is  imposed  on  them  by  a  co-contractor  in  a  stronger 
position.  It  is  therefore  necessary  to  protect  the  authors  (and  performers)  against  choice-of-
court agreements which may oblige them to plead far from their country, with all the possible 
consequences in terms of complexity and costs. 

It has to be taken into account that there are areas in which the Community has set standards 
for the protection of certain parties which, within the EU, may not be infringed by choice of 
court clauses. The protection of these parties could nevertheless be undermined in case of a 
choice of court clause in favor of a court in a third State. Problems could arise for the specific 
area in which the EU and its Member States might wish to exercise exclusive control such as 
intellectual property rights and, specifically, copyrights. The most important factor, as shown 
by  an  EC  survey,  is  that  the  frequency  of  intellectual  property  rights  infringements  in  third 
countries is growing. These infringements affect more and more often EU operators trading 
with these countries.  

The exclusion suggested under this policy option will therefore address most of the concerns 
raised by stakeholders. 

Table 5.5 — Summary assessment of policy option 6a 

EN 

35 

   EN 

 
Policy  option  6a  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  copyright  and  related  rights,  where  the  validity  of  these  rights  is  linked  to  a 
Member State 

Objective 
addressed 

to  be  achieved/problem 

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

to 

Anticipated 
impact 
(rated  up to 
√√√√√) 

√√√ 

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

courts 

√√ 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Important  effect:  EU  economic  operators 
would  be  sure  that  their  agreed  choice  of 
in  other 
court  would  be 
Contracting  Parties  to  the  Convention  in 
the  areas  covered  by  the  Convention.  The 
extent  of  legal  certainty  would  depend  on 
the number of Contracting Parties. 

respected 

Important  effect:  EU  economic  operators 
would  be  sure  that  the  judgment  made  by 
the chosen court would be respected in all 
the  Contracting  Parties.  Choice-of-court 
agreements  in  the  field  of  copyright  and 
related  rights  would  not  benefit  from  the 
rules of the Convention. 

Important  effect: 
the  stronger  partner 
would be limited in its attempts to seize a 
court other than that agreed in the contract 
with the weaker party. Community policies 
in  the  area  of  copyright  and  related  rights 
would be safeguarded. 

Some  effect:  the  policy  option  would  lead 
indirectly to increased familiarity with EU 
law  in  third-country  courts  because  of  a 
greater willingness to use courts to resolve 
disputes. 

Potential economic benefits to the EU 

Reduced  transaction  costs  associated 
with legal uncertainty 

The reduction would be proportionate to: the contribution 
of  choice-of-court  issues  to  overall  legal  uncertainty;  the 
additional  number  of  choice-of-court  agreements  entered 
into;  and  the  countries  that  ratify  the  Convention. 
Arguably  the  reduction  would  be  less  than  in  policy 
option  5.  However,  without  this  exclusion  some  costs 
could arise for copyright holders. 

Reduce  time  and  costs  of  resolving 
disputes 

The  reduction  would  be  proportionate  to:  the  number  of 
disputes that would be resolved in court; and the relative 

EN 

36 

   EN 

 
 
Policy  option  6a  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  copyright  and  related  rights,  where  the  validity  of  these  rights  is  linked  to  a 
Member State 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Increases in international trade 

costs  of  courts  versus  other  means  of  resolving  disputes. 
Arguably  the  benefits  of  reduced  time  and  costs  of 
resolving  disputes  would  be  less  than  in  policy  option  5. 
However,  without  this  exclusion  some  costs  could  arise 
for copyright holders. 

The decrease in uncertainty might work as an impetus for 
increased  interest  in  concluding  international  contracts 
and  thus  increase  the  amount  of  trade,  arguably  with  the 
exception of the area excluded by declaration. 

Perceptions  of  advantages  and 
disadvantages 

Advantages 

Disadvantages 

Existing  EU 
(including their representatives) 

economic 

actors 

opinion 

that 
of 

Two  organisations  were  of 
the 
the 
application 
the 
to  copyright 
Convention 
rights  may 
related 
and 
present  some 
for 
individual  authors  and/or 
are 
performers, 
generally  the  weaker  party 
to a contract. 

risks 

who 

scope 

answered 

that 
All  Member  States 
responded  to  this  particular 
question 
that 
copyright  should  be  within 
the 
of 
the 
Convention. 
Similarly, 
some  stakeholders  declared 
that  copyright  and  related 
rights  should  be  treated  in 
the  same  way  as  other 
intellectual  property  rights 
under the Convention. 

International lawyers 

One  law  firm  stated  that 
copyright and related rights 
should  also  be  outside  the 
scope of the Convention. 

Preconditions 
accompanying measures 

and 

essential 

The benefits to EU economic operators that emerge from 
this  policy  option  are  based  on  the  assumption  that  the 
main commercial partners also ratify the Convention. 

Complementarity with existing (and 
forthcoming) acquis 

The policy option would affect the Brussels I Regulation, 
in  particular  its  Article  23  and  the  rules  on  lis  pendens 
(Chapter  II,  Section  9)  when  one  of  the  parties  to  the 
dispute  has  residence  in  the  EU  and  the  other  party  has 
residence in another Contracting Party. 

EN 

37 

   EN 

 
 
 
 
Policy  option  6a  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  copyright  and  related  rights,  where  the  validity  of  these  rights  is  linked  to  a 
Member State 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Economic  and  social  impacts  in  EU 
and third countries 

The  potential  for  increased  international  trade  with  third 
countries is high, but: 

– 

problem  with  insurance,  the  EU  weaker  party  is 
not protected enough. 

Litigants  would  have  an  increased  guarantee  that  their 
choice-of-court  agreements  in  favour  of  the  court  in  a 
third country (Contracting Party to the Convention) would 
be  upheld  by  the  courts  within  the  EU  (and  vice  versa), 
and  that  judgments  given  by  the  chosen  court  in  third 
countries  would  be  eligible 
recognition  and 
enforcement within the EU (and vice versa). 

for 

There would be no negative social impacts for the weaker 
parties in the area of copyright and related rights. 

Implementation costs 

Very low (same as policy option 5). 

5.8. 

Policy  option  6b  —  conclusion  of  the  Convention  by  the  Community  with  a 
declaration  under  its  Article  21  excluding  insurance  matters,  where  the 
policyholder  is  domiciled  in  the  EU  and  the  risk  or  insured  event,  item  or 
property is related exclusively to the EU 

This  policy  option  would  mean  that  EU  policyholders  could  not  be  ‘pressed’  into  litigating 
insurance  benefits  at  courts  which  might  reduce  the  protection  of  their  rights,  and  the 
economic interests of the areas in which they are located, to a level below what is applicable 
within the EU. 

The  Convention  on  Choice  of  Court  Agreements  contains  exclusion  from  its  scope  which 
takes  into  account  the  many  concerns  raised  during  the  consultations.  Very  importantly  for 
EU interests and with regard to protective rules for such parties existing in Community law, it 
applies only to business to business relations and not to business to consumer  and  excludes 
employment  contracts  that  were  important  points  for  EU  States  and  some  stakeholders41. 
Insurance  contracts  are  a  matter  not  excluded  from  the  scope  of  the  Convention  but  EU 

Article 2 Exclusions from scope 

41 
1. This Convention shall not apply to exclusive choice of court agreements - 
a) to which a natural person acting primarily for personal, family or household purposes (a consumer) is a party;  
2. Relating to contracts of employment, including collective agreements. 

EN 

38 

   EN 

 
 
 
                                                 
legislation contains protective rules of jurisdiction. This exclusion is important to avoid that 
the choice of a foreign court could lead to the deprivation of the protection provided to these 
weaker parties by Community law. 

In  relation  to  insurance,  it  has  been  decided  in  the  EU  that  the  weaker  party  should  be 
protected  by  rules  of  jurisdiction  more  favorable  to  his  interests  than  the  general  rules  of 
Council  Regulation  (EC)  No  44/2001  of  22  December  2000  on  jurisdiction  and  the 
recognition  and  enforcement  of  judgments  in  civil  and  commercial  matters  (so-called 
"Brussels  I")42.  In  particular,  for  this  reason,  the  autonomy  of  the  parties  to  an  insurance, 
consumer  or  employment  contract  to  determine  the  courts  having  jurisdiction  has  been 
limited. If there would be no exclusion from the scope of the Convention for insurance sector, 
there  could  be  a  conflict  between  the  Convention  and  the  Community  legislation  on 
jurisdiction  in  matters  of  insurance.  Indeed,  the  Convention  foreseen  in  its  Article  26  (6) 
related  to  the  relationship  with  other  international  instruments,  that  it  shall  not  affect  the 
application of the EC rules only where none of the parties is resident in a Contracting State 
that is not a Member State of the European Community. It means that when one of the parties 
to  the  dispute  has  its  residence  in  the  EU  and  the  other  party  has  its  residence  in  another 
Contracting  Party,  the  Convention  would  apply  and  affect  negatively  the  EC  Regulation 
"Brussels I". This regulation indeed also applies in this case and contains protective rule for 
the policy holder, the insured or the beneficiary, even if the insurer is not domiciled in the EU, 
but has a branch, agency or other establishment in one of the Member States43. It should be 
noted however that the exclusion is limited to risk or insured event, item or property related 
exclusively to the EU 

This  exclusion  may  have  also  negative  implications.  For  instance,  a  judgment  given  by  the 
court at the domicile of the policyholder would not benefit from recognition and enforcement 
abroad under the Convention. 

However, these are minor disadvantages/downsides compared to the possibility of excluding 
insurance  matters  either  completely  from  the  scope  of  the  Convention  or  excluding  them 
whenever the policyholder and the risk are located in the EU. 

42 

See  Council  Regulation  (CE)  No  44/2001  of  22.12.2000, OJ  L  12,  16.1.2001,  p.  1,  and,  in  particular 
Chapter I, section 3. 
Article 12: 

43 
1. Without prejudice to Article 11(3), an insurer may bring proceedings only in the courts of the Member State in 
which  the  defendant  is  domiciled,  irrespective  of  whether  he  is  the  policyholder,  the  insured  or  a 
beneficiary. 

2.  The  provisions  of  this  Section  shall  not  affect  the  right  to  bring  a  counter-claim  in  the  court  in  which,  in 

accordance with this Section, the original claim is pending. 

Article 13 
The provisions of this Section may be departed from only by an agreement: 
1. which is entered into after the dispute has arisen, or 
2.  which  allows  the  policyholder,  the  insured  or  a  beneficiary  to  bring  proceedings  in  courts  other  than  those 

indicated in this Section, or 

3. which is concluded between a policyholder and an insurer, both of whom are at the time of conclusion of the 
contract  domiciled  or  habitually  resident  in  the  same  Member  State,  and  which  has  the  effect  of 
conferring  jurisdiction  on  the  courts  of  that  State  even  if  the  harmful  event  were  to  occur  abroad, 
provided that such an agreement is not contrary to the law of that State, or 

4.  which  is  concluded  with  a  policyholder  who  is  not  domiciled  in  a  Member  State,  except  in  so  far  as  the 

insurance is compulsory or relates to immovable property in a Member State, or 

5. which relates to a contract of insurance in so far as it covers one or more of the risks set out in Article 14.  

EN 

39 

   EN 

 
                                                 
The impacts of this policy option depend on the scope of the EU insurance sector. A recent 
EC  report  on  the  business  insurance  sector  showed  that  the  size  of  the  global  non-life 
insurance market was over 1.1 trillion euro in 2005. The European non-life insurance market, 
collectively,  is  comparable  but  smaller  in  size  to  that  of  the  USA,  the  other  major  world 
market.  The  number  of  non-life  insurers  in  Europe  has  declined  steadily  in  recent  years. 
However, there are still close to 3 000 non-life companies operating within the EU insurance 
market. 

Table 5.6 — Summary assessment of policy option 6b 

Policy  option  6b  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  insurance  matters, where the policyholder is domiciled in the EU  and the risk or 
insured event, item or property is related exclusively to the EU 

Objective 
addressed 

to  be  achieved/problem 

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

to 

Anticipated 
impact 
(rated  up to 
√√√√√) 

√√√ 

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. 

√√√ 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Important  effect:  EU  economic  operators 
would  be  sure  that  their  agreed  choice  of 
court  would  be 
in  other 
Contracting Parties to the Convention. The 
extent  of  legal  certainty  would  depend  on 
the number of Contracting Parties. 

respected 

Important  effect:  EU  economic  operators 
would  be  sure  that  the  judgment  made  by 
the chosen court would be respected in all 
the  Contracting  Parties.  Companies  acting 
in the field of insurance would not benefit 
from the Convention. 

the  stronger  partner 
Important  effect: 
would be limited in its attempts to seize a 
court other than that agreed in the contract 
with the weaker party. Community policies 
in the area of protection of weaker parties 
be 
in 
safeguarded. 

contracts  would 

insurance 

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

courts 

√√ 

Potential economic benefits to the EU 

Some  effect:  the  policy  option  would  lead 
indirectly to increased familiarity with EU 
law  in  third-country  courts  because  of  a 
greater willingness to use courts to resolve 
disputes. 

Reduced  transaction  costs  associated 
with legal uncertainty 

The reduction would be proportionate to: the contribution 
of  choice-of-court  issues  to  overall  legal  uncertainty;  the 

EN 

40 

   EN 

 
 
Policy  option  6b  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  insurance  matters, where the policyholder is domiciled in the EU  and the risk or 
insured event, item or property is related exclusively to the EU 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Reduce  time  and  costs  of  resolving 
disputes 

Increases in international trade 

additional  number  of  choice-of-court  agreements  entered 
into;  and  the  countries  that  ratify  the  Convention. 
Arguably  the  reduction  would  be  less  than  in  policy 
option  5.  However,  without  this  exclusion  some  costs 
could arise for those entering insurance contracts. 

The reduction is proportionate to: the number of disputes 
that would be resolved in court; the relative costs of courts 
versus  other  means  of  resolving  disputes.  Arguably  the 
reduction in time and costs of resolving disputes would be 
less  than  in  policy  option  5.  However,  without  this 
exclusion  some  costs  could  arise  for  those  entering 
insurance contracts. 

The decrease in uncertainty might work as an impetus for 
increased  interest  in  concluding  international  contracts 
and  thus  increase  the  amount  of  trade,  arguably  with  the 
exception of the area excluded by declaration. 

Perceptions  of  advantages  and 
disadvantages 

Advantages 

Disadvantages 

Existing  EU 
(including their representatives) 

economic 

actors 

Insurance  companies  might 
disappointed 
be 
by 
exclusion 
insurance 
of 
matters  from  the  scope  of 
the 
The 
Convention. 
representatives of the sector 
expressed a positive opinion 
the 
towards 
sector  within  the  scope  of 
the Convention. 

inclusion  of 

International lawyers 

No  direct  evidence  of 
views. 

Preconditions 
accompanying measures 

and 

essential 

The benefits to EU economic operators that emerge from 
this  policy  option  are  based  on  the  assumption  that  the 
main commercial partners also ratify the Convention. 

Complementarity with existing (and  The policy option would affect the Brussels I Regulation, 

EN 

41 

   EN 

 
 
 
 
 
Policy  option  6b  —  conclusion  of  the  Convention  with  a  declaration  under  its  Article  21 
excluding  insurance  matters, where the policyholder is domiciled in the EU  and the risk or 
insured event, item or property is related exclusively to the EU 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

forthcoming) acquis 

in  particular  its  Article  23  and  the  rules  on  lis  pendens 
(Chapter  II,  Section  9)  when  one  of  the  parties  to  the 
dispute  has  residence  in  the  EU  and  the  other  party  has 
residence  in  another  Contracting  Party.  If  the  insurance 
sector is not excluded from the scope of the Convention, 
there  could  be  a  conflict  in  policy  aims  with  Chapter  II 
Section 3 of the Brussels I Regulation. 

Economic  and  social  impacts  in  EU 
and third countries 

The  potential  for  increased  international  trade  with  third 
countries is high, but: 

– 

problems  with  certain  intellectual  property  rights 
may  arise,  because  they  could  be  tried  in  courts 
where these rights are less protected (although the 
rightsholder  would  have  had  to  agree  to  the 
jurisdiction of such courts). 

Litigants  would  have  an  increased  guarantee  that  their 
choice-of-court  agreements  in  favour  of  the  court  in  a 
third country (Contracting Party to the Convention) would 
be  upheld  by  the  courts  within  the  EU  (and  vice  versa), 
and  that  judgments  given  by  the  chosen  court  in  third 
countries  would  be  eligible 
recognition  and 
enforcement within the EU (and vice versa). 

for 

There would be no negative social impacts for the weaker 
parties in the area of insurance contracts. 

Implementation costs 

Very low (same as in policy option 5). 

5.9. 

Policy option 7 — combination of policy options 6a and 6b 

This  policy  option  achieves  overall  results  comparable  to  policy  option  5  as  regards  policy 
objectives. By excluding, however, both problem areas (insurance matters and copyright and 
related rights) it has does not generate a negative effect on existing Community policies. 

Table 5.7 — Summary assessment of policy option 7 

Policy option 7 — combination of policy options 6a and 6b 

EN 

42 

   EN 

 
 
Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

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

to 

√√ 

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

courts 

√ 

Some  effect:  EU  economic  operators 
would be sure that their agreed preference 
of  court  would  be  respected  in  other 
Contracting Parties to the Convention. The 
extent  of  legal  certainty  would  depend  on 
the  number  of  Contracting  Parties. 
Operators  in  the  areas  of  insurance  and 
copyrights  and  related  rights  would  not 
benefit from the Convention. 

Some  effect:  EU  economic  operators 
would  be  sure  that  the  judgment  made  by 
the chosen court would be respected in all 
the  other  Contracting  Parties  in  all  areas 
covered  by  the  Convention.  Operators  in 
the  areas  of  insurance  and  copyrights  and 
related  rights  would  not  benefit  from  the 
Convention. 

Significant  effect:  Community  policies  in 
protecting the weaker parties in the area of 
insurance  matters  and  copyright  and 
related rights would be safeguarded. 

in 

third-country  courts  (with 

Small  effect:  the  policy  option  would  lead 
indirectly to increased familiarity with EU 
law 
the 
exception  of  the  areas  of  insurance  and 
copyright and related rights), because of a 
greater willingness to use courts to resolve 
disputes. 

Potential economic benefits to the EU 

Reduced  transaction  costs  associated 
with legal uncertainty 

Reduce  time  and  costs  of  resolving 
disputes 

The reduction would be proportionate to: the contribution 
of  choice-of-court  issues  to  overall  legal  uncertainty;  the 
countries  ratifying  the  Convention;  and  the  additional 
number  of  choice-of-court  agreements  entered 
into. 
Effects expected to be positive. 

The  reduction  would  be  proportionate  to:  the  number  of 
disputes that would be resolved in court; and the relative 
costs  of  courts  versus  other  means  of  resolving  disputes. 
Effects expected to be positive. 

EN 

43 

   EN 

 
 
Policy option 7 — combination of policy options 6a and 6b 

Objective 
addressed 

to  be  achieved/problem 

Anticipated 
impact 
(rated  up to 
√√√√√) 

Explanation  of  rating  and  aspects  of  the 
policy option necessary to achieve impact 

Increases in international trade 

The decrease in uncertainty might work as an impetus for 
increased  interest  in  concluding  international  contracts 
and thus increase the amount of trade.  

Preconditions 
accompanying measures 

and 

essential 

The benefits to EU economic operators that emerge from 
this  policy  option  are  based  on  the  assumption  that  the 
main commercial partners also ratify the Convention. 

Complementarity with existing (and 
forthcoming) acquis 

This policy option would affect the Brussels I Regulation, 
in  particular  its  Article  23  and  the  rules  on  lis  pendens 
(Chapter  II,  Section  9)  when  one  of  the  parties  to  the 
dispute  has  residence  in  the  EU  and  the  other  party  has 
residence in another Contracting Party. 

Economic  and  social  impacts  in  EU 
and third countries 

The  potential  for  increased  international  trade  with  third 
countries is high. 

Litigants  would  have  an  increased  guarantee  that  their 
choice-of-court agreements in favour of a court in a third 
country  (Contracting  Party  to  the  Convention)  would  be 
upheld by the courts within the EU (and vice versa), and 
that  judgments  given  by  the  chosen  court  in  third 
countries  would  be  eligible 
recognition  and 
enforcement within the EU (and vice versa). 

for 

No  negative  social  impacts  on  the  weaker  parties  in  the 
area of insurance and copyright and related rights. 

Implementation costs 

Very low (same as in policy option 5). 

6. 

COMPARISON OF THE POLICY OPTIONS 

6.1. 

Comparison of individual policy options 

In  Section  5  each  policy  option  has  been  assessed  against  a  number  of  different  criteria 
derived from the policy objectives and the wider considerations of costs and benefits. In this 
Section the assessments of the different policy options are compared with each other in order 
to highlight factors in favour or against their adoption. 

All of the policy options (except policy option 1) would reduce the costs of legal uncertainty 
(the  general  objective  as  identified  in  Section  3),  and  thus  have  the  potential  to  increase 
international trade and investment and hence lower prices of goods and services. 

EN 

44 

   EN 

 
 
Table 6.1 presents a comparative assessment of the policy options in terms of achieving the 
specific objectives and other criteria used in Section 5. 

Table 6.1 — Comparative assessment of policy options 

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

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

To 
the 
increase 
predictability  of  the 
to 
choice  of  court 
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. 

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. 

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 

√√√ 

√√√ 

√√√ 

√√ 

0 

√ 

√ 

√ 

√√ 

√√√ 

√√√ 

√√√ 

0 

√ 

0 

0 

√√ 

√√ 

√√ 

√ 

0 

0 

0 

√√ 

√√ 

0 

Potential 
competition 
effects 

√√ 

0 

√√ 

√√√ 

√√√ 

√√√ 

Conflicts 
with 
Community 
policies 

Conflicts 
with 
Community 
policies 

Conflicts 
with 
Community 
policies 

0 

Very low 

High 

Low 
medium 

to 

Very low 

Very low 

Very low 

 Very low 

No 

No 

No 

No 

Potential 

Potential 

Potential 

0 

EN 

45 

   EN 

 
Preferred option. 

No 

No 

No 

No 

No 

No  

No  

Yes 

6.2. 

The preferred option 

In  the  light  of  the  assessment  in  Table  6.1  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. 

7. 

ELABORATION OF THE PREFERRED OPTION 

7.1. 

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, the 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. 

The  extent  to  which  the  benefits  possible  from  the  preferred  option  would  accrue  would 
depend on the following factors: 

•  Which  third  countries  ratify  the  Convention.  Here  it  is  possible  to  quantify  the  scale  of 
benefits  that  will  accrue,  as  they  would  be  proportionate  to  the  amount  of  current  and 
future  trade  between  the  EU  and  these  countries.  The  EU’s  largest  trading  partner  is  the 
USA (18% of total EU external trade). The USA has indicated its willingness to ratify the 
Hague  Convention;  there  is  also  evidence  that  US  economic  operators  would  be  more 
likely  to  make  recourse  to  the  courts  if  the  Convention  were  ratified  (as  showed  by  the 
ABA  survey).  The  second  largest  ‘trading  partner’  is  the  EFTA  countries  (11%).  In  this 
case  the  preferred  option  would  not  increase  legal  certainty  because  the  EFTA  countries 
are already covered by the Lugano Convention44. The third largest trading partner and one 
of  growing  importance  is  China  (10%).  Because  of  the  differences  in  commercial  law 
between  the  EU  and  China  and  the  latter’s  growing  importance  as  a  trading  partner, 
reductions in legal uncertainty could be particularly beneficial. The next largest EU trading 
partners  and  their  respective  shares  of  total  EU  external  trade  are  as  follows:  Dynamic 
Asian  Economies45  (9%),  OPEC  countries  (9%),  Russian  Federation  (8%),  Japan  (5%), 
Africa and Caribbean (5%) and Turkey (4%). All of these trading partners could ratify the 

44 

45 

EN 

Lugano 
http://curia.europa.eu/common/recdoc/convention/en/c-textes/_lug-textes.htm 
Singapore, Thailand, Malaysia, Korea, Taiwan and Hong Kong. 

Convention, 

Convention 

Texts: 

and 

Protocols 

46 

   EN 

 
 
                                                 
Convention, though it is considered unlikely that the OPEC countries would choose to do 
so because this would require mutual recognition of western courts by Islamic States. Thus 
the preferred option could lead to a potential reduction in legal uncertainty affecting up to 
59%  of  the  EU’s  external  trade.  The  estimated  total  value  of  trade  in  2006  was  2 260 
billion euro, 59% of this amounts to 1 330 billion euro. The reduction in legal uncertainty 
would be proportionate to the trading partners that ratify the Convention. 

•  The extent of exclusions via Article 21. Because of the exclusions from the scope of the 
Convention  under  Article  21  in  the  preferred  option,  the  potential  for  decreasing  legal 
uncertainty is reduced to some extent. Although it is not possible to measure the scale of 
copyright and related rights and insurance in EU external trade, the relative importance of 
this economic activity within the EU provides some indication of their  likely importance 
more  widely.  The  copyright  industry  contributed  more  than  1.2  trillion  euro46  to  the  EU 
economy, while the size of the global non-life insurance market was over 1.1 trillion euro 
in 200547, although their importance in international trade is likely to be less. Some third 
countries also indicated during the Convention negotiations their intent or need to exclude 
additional matters under Article 21. For example, Canada would exclude asbestos-related 
matters. 

•  The  nature  of  international  contracts.  It  is  likely  that  the  conclusion  of  the  Convention 
would  have  greater  effects  on  larger  and  more  complex  forms  of  contract  rather  than 
smaller and more straightforward contracts involving the purchasing of goods or services. 
It is estimated that the costs of individual international business-to-business cases brought 
to  court  is  in  the  order  of  40 000  euro.  Normally  only  contracts  that  involve  disputes 
considerably  in  excess  of  this  amount  are  likely  to  be  brought  to  court.  The  preferred 
option would not directly influence the nature of contracts. 

•  Whether or not economic operators actually make choice-of-court agreements. Conclusion 
of the Convention would  reduce legal uncertainty for companies that choose to conclude 
choice-of-court  agreements.  Empirical  information  on  the  number  of  choice-of-court 
agreements  is  limited.  A  survey  carried  out  by  the  ICC  showed  that  almost  75%  of 
companies  specify  courts  in  more  than  half  of  their  international  contracts.  In  the  ABA 
survey48  over  half  of  respondents  said  that  more  than  half  of  their  contracts  included 
choice-of-court  agreements.  It  is  probable  that  the  majority  of  international  contracts 
include such agreements, but many do not. The preferred option could increase companies’ 
propensity  to  include  choice-of-court  agreements  in  international  contracts,  especially  if 
the  conclusion  of  the  Convention  were  to  be  accompanied  by  publicity  and  raised 
awareness. 

•  Whether  or  not  disputes  would  be  resolved  in  courts.  As  evidenced  in  Section  2,  most 
disputes  concerning  business-to-business  international  contracts  are  resolved  by  means 
other than courts. Indeed, courts are perceived to be relatively expensive and very much a 
last resort. However, the conclusion of the Convention could increase the propensity to use 
courts as a means to solve disputes. 

46 

47 

48 

EN 

of  Copyright 

The  Contribution 
http://ec.europa.eu/internal_market/copyright/docs/studies/etd2002b53001e34_en.pdf 
Inquiry. 
Business 
http://www.eftasurv.int/information/reportsdocuments/competitionreports/dbaFile11953.pdf 
See footnote 4. 

Interim  Report.  EFTA 

and  Related  Rights 

Insurance 

Sector 

to 

the  European  Economy 

Surveillance  Authority 

47 

   EN 

 
                                                 
7.2. 

Estimate of best-case economic benefits 

The above analysis can be used to estimate the best-case economic benefits that could accrue 
from the preferred option: 

The total international trade that could be affected is currently 1 800 billion euro per annum, 
although it is estimated that around half of this trade is intra-company trade. 

All business transactions involve an element of legal uncertainty. Legal uncertainty increases 
where the transactions are international. The preferred option would reduce some of the legal 
uncertainty experienced in international trade, bringing it closer to levels of uncertainty that 
exist within the EU under the Brussels I Regulation and within the EU and EFTA countries 
under the Lugano Convention. 

In  the  absence  of  reliable  data49  about  the  total  costs  of  legal  uncertainty,  it  can  only  be 
deduced  from  the  fact  that  such  costs  are  considered  to  be  just  a  small  component  of  the 
‘additional’ risk of international business that the total costs of legal certainty will not likely 
exceed  1%  of  the  value  of  international  trade.  Risks  from  security,  cultural  and  political 
concerns drive businesses to expect larger returns from their dealings in international markets 
compared  with  domestic  markets,  in  part  to  offset  potential  costs  in  seeking  redress  where 
contracts are not complied with. 

The best-case reduction in legal uncertainty would be a proportion of all legal uncertainty. It 
is reasonable to assume that if the preferred option is adopted, this proportion would increase 
(due  to  similarities  developing  between  legal  systems  and  their  outcomes).  For  the  sake  of 
argument it is reasonable to assume that 50% of legal uncertainty would be removed by the 
conclusion of the Convention. 

The best-case reduction in legal uncertainty due to the preferred option would not affect the 
excluded  sectors  of  international  commerce,  in  particular  copyright  and  related  rights  and 
insurance (i.e. perhaps 8% of extra-EU international trade). 

The  best-case  reduction  in  legal  uncertainty  due  to  the  preferred  option  would  affect  only 
contracts with choice-of-court agreements. It is reasonable to assume that 70% of the value of 
international trade would be subject to choice-of-court agreements. 

The best-case reduction in legal uncertainty due to the preferred option would mainly affect 
contracts where resolution of disputes by court was a likely option. It is reasonable to assume 
that  only  a  minor  share,  say  25%,  of  the  value  of  international  trade  is  of  this  type  and 
alternative methods of dispute resolution will continue to be the main mechanisms applied. 

Given these (rather tenuous) assumptions, a best-case estimate of the value of the reduction in 
legal uncertainty due to the preferred option would be: 1 330 billion euro per annum x 0.01 
(legal  uncertainty)  X  0.5  (legal  uncertainty  affected  by  the  preferred  option)  x  0.92 
(exclusions) x 0.7 (value of international trade affected by choice-of-court agreements) x 0.25 

49 

Although  this  Impact  Assessment  includes  estimates  of  the  costs  of  legal  uncertainty  these  are, 
unfortunately,  highly  uncertain.  Although  there  are  analytical  studies  of  the  factors  influencing  legal 
uncertainty,  little  work  appears  to  have  been  done  to  quantify  it  in  monetary  or  other  terms.  This  is 
regrettable  as  an  improved  theoretical  and  empirical  understanding  of  the  phenomenon  would  be  of 
great relevance to policy making and could indicate the degree of priority that should be given to efforts 
to reduce what is a significant constraint on international trade. 

EN 

48 

   EN 

 
                                                 
(value of trade where courts are likely to be used). That is, assuming all trading partners ratify 
the Convention (except OPEC countries), possible benefits in the order of 1.07 billion Euro 
per annum can be achieved. Achieving such benefits would, however, depend, in particular, 
upon which trading partners ratify the Convention, the propensity to enter into choice-of-court 
agreements, the costs of going to court as opposed to using other means of dispute resolution 
and, critically, the success of enforcement of judgments recognised under the Convention. 

7.3. 

The costs of the preferred option 

The preferred option will involve only small implementation costs associated with preparing 
the  legislative  instruments  linked  with  the  signing  and  conclusion  of  the  Convention  by  the 
Community,  including  drafting  of  the  exemptions  under  Article  21,  and  involved  in  the 
process  of  signing  and  concluding  the  Convention  on  behalf  of  the  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. There would also be merit in spending some 
resources to publicise the conclusion of the Convention and its ramifications. 

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. 

7.4. 

EU added value, proportionality and subsidiarity 

The  preferred  option  of  the  Community  concluding  the  Convention  with  certain  exclusions 
under Article 21 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 to 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. 

As indicated above, 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  judgments  given  by  third-country  courts  which  are  considered 
controversial. 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. The preferred option is thus proportionate. 

Given the existence of exclusive Community competence in the area under the scope of the 
Convention, and the fact that individual Member States cannot achieve the defined objective 
through individual action, the conclusion of the Convention is appropriate and the principle of 
subsidiarity will have been followed. 

EN 

49 

   EN 

 
7.5.  Measures to maximise the benefits of the preferred option 

There  are  two  ways  in  which  all  the  potential  benefits  of  the  preferred  option  could  be 
improved: 

•  The scale of benefits accruing depends on the number of other Contracting Parties to the 
Convention. Once several countries have ratified the Convention, the potential costs of not 
ratifying it need to be stressed to those that have not ratified it. 

•  The  scale  of  benefits  will  partly  depend  upon  companies’  awareness  of  the  potential 
benefits of choice-of-court agreements and their propensity to include them in contracts. It 
would  be  beneficial  to  promote  conclusion  of  the  Convention  through  awareness-raising 
campaigns and providing information on the key similarities and differences in commercial 
law,  court  procedures  and  court  judgments  between  the  EU  and  the  other  Contracting 
States. 

8. 

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  its  special  commissions  to 
evaluate  the  practical  application  of  conventions,  in  order  to  monitor  and  evaluate  their 
success and help resolve difficulties arising in their application and implementation. 

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

Table 8.1 provides suggestions for monitoring and evaluation criteria, indicators and potential 
methods to inform these criteria. Achievement of the general objective could be monitored by 
reviewing trade statistics. However, there are many factors affecting trade and, as indicated in 
Section 7, the reductions in legal uncertainty that can follow from concluding the Convention 
are  presumed  to  be  very  small  when  compared  with  the  scale  of  international  trade.  The 
statistics are not sufficiently ‘fine-tuned’ to enable estimates of the contribution the preferred 
option would make when implemented. 

The monitoring and evaluation will also need to focus on operational objectives. Examples of 
indicators are given in Table 8.1. 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  every  four  years)  assisted  by  a  study  done  by  an  external 
source. This approach would generate costs50, but in the absence of specific data such an ad 
hoc approach seems to be the most suitable. 

Also, at a later stage, further issues should be analysed such as: 

50 

The  value  of  such  contracts  varies  between  60 000  and  300 000  euro,  depending  on  the  scope  of  the 
review. 

EN 

50 

   EN 

 
                                                 
•  exploring  the  possibility  of the Community making a declaration under Article 22 of the 
Convention which allows its scope to be extended to cover recognition and enforcement of 
non-exclusive choice-of-court agreements; 

•  excluding additional matters under Article 21 when the need arises due to new acquis; and 

•  the possibility of withdrawing some or all of the declarations made under Article 21. 

Finally, if the Convention is  concluded by the  Community,  an ex post evaluation should be 
carried  out  in  the  future  to  assess  possible  changes  in  companies’  perception  of  the 
Convention and the use of choice-of-court agreements. 

Table 8.1 Potential monitoring and evaluation indicators 

General Objective 

Potential indicators 

Notes, 
responsibilities 

sources 

and 

To  promote  international  trade  (external 
to  the  EU)  and  investment,  through 
reducing legal uncertainty in commercial 
contracts 

Levels  of  trading  with  main  EU  trading 
partners. 

It  will  be  useful  to  distinguish  between 
those  countries  that  have  ratified  the 
Convention and others. 

Levels  of  trading  with  main  EU  trading 
partners in different sectors. 

Use  could  be  made  of  existing  trade 
statistics. 

Specific objectives 

Given  under  operational  objectives 
below. 

for  monitoring 

In  broad  terms  it  would  be  helpful  if 
responsibility 
and 
evaluation  were shared  between DG  JLS 
(legal  impacts),  DG  ENTR  and  DG 
TRADE  (economic  impacts).  In  practice 
specific  work  may  need  to  be  contracted 
the  available 
from 
secondary-source 
is 
inadequate to  properly  inform  evaluation 
of  the  effectiveness  of  the  preferred 
option. 

third  parties  as 

information 

Operational objectives 

1.1 To increase the number and value of 
contracts  (between  EU  operators  and 
those  in  third  countries)  indicating  an 
exclusive choice of court. 

Proportion  of  EU  companies  entering 
into choice-of-court agreements. 

Specific work may need to be contracted 
from third parties. 

Proportion  of  value  of  EU  companies’ 
international  trade  covered  by  choice-of-
court agreements. 

1.2  To  reduce  (preferably  eliminate)  the 
instances  of  choice-of-court  agreements 
not being respected. 

Number  and  proportion  of  choice-of-
court agreements not respected. 

2.1 To reduce the uncertainty of outcome 
of court judgments. 

Number  and  type  of  anomalous  court 
third 
judgments  made  by  courts 
countries. 

in 

Instances  reported  in  press  and  via  EU 
trade associations. 

2.2  To  reduce  the  uncertainty  that  court 
judgments  might  not  be  respected  by 
courts in the countries of both parties. 

Number and type of court judgments not 
respected. 

Specific work may need to be contracted 
from third parties. 

EN 

51 

   EN 

 
 
 
2.3  To  reduce  the  uncertainty  that  court 
judgments would be enforced. 

Number and type of court judgments not 
enforced. 

Specific work may need to be contracted 
from third parties. 

3.1  To  reduce  the  time  and  costs  of 
resolving disputes in court. 

The  time  taken  and  costs  of  resolving 
disputes  (of  different  types)  in  (different 
types of) courts. 

Case histories. 

increase 

companies’ 
3.2To 
willingness  to  enter  into  international 
agreements with larger concerns. 

smaller 

increase 

likelihood 

3.3  To 
that 
the 
smaller  companies  would  challenge 
larger  concerns  with  whom  they  are  in 
dispute. 

Numbers  of  SMEs  entering  EU  external 
markets. 

Feedback  from  representatives  of  SMEs 
in the EU. 

Levels  of 
trade 
external markets. 

involving  SMEs 

in 

Specific work may need to be contracted 
from third parties. 

The  actual  courts  specified  in  choice-of-
court  agreements  made  by  EU  economic 
operators. 

Numbers  of  SMEs  challenging  larger 
concerns. 

Specific work may need to be contracted 
from third parties. 

4.1 To reduce differences in the outcome 
of disputes dependent upon the country in 
which the case is heard. 

Number  of  instances  where  legal  rights 
that  would  pertain 
the  EU  are 
breached. 

in 

Specific work may need to be contracted 
from third parties. 

4.2  To  reduce  the  variation  between  the 
judgments  made  in  EU  courts  and  those 
made in third countries. 

Number and nature of judgments made. 

Qualitative  assessments  of  convergence 
of  laws  and  judgments  illustrated  by 
cases. 

EN 

52 

   EN 

 
 
 
 
ANNEX 1 

Analysis of previous consultations: contribution to the Consultation Paper 

In  addition  to  consultations  with  companies,  insurance  companies  and  sectoral  EU 
representatives  (list  in  Annex  2),  the  answers  of  various  stakeholders  to  the  Consultation 
Paper  have  been  analysed.  Specific  focus  has  been  placed  on  those  questions  in  the  Paper 
which might give more insights for the Impact Assessment. 

The  public  consultation  launched  by  the  European  Commission  in  August  2004  received  a 
total of 24 contributions from a wide range of stakeholders. The list of respondents is given at 
the end of this Annex. 

The  table  below  provides  an  overview  of  responses  to  the  issues  raised  in  the  process  of 
public  consultation.  The  responses  are  classified  by  the  types  of  respondent  and  give  a 
summary of opinions expressed on each particular question. Where no consensus existed on a 
particular question, the difference in opinions is indicated (e.g.☺ (cid:47)). 

Respondents → 

Issues  as  outlined  in 
the 
consultation 
document ↓ 

Governments 
and public 
administration 

NGOs, 
consumer 
and  interest 
associations 

Industry, 
entrepreneur 
associations 
and 
companies 

Law and 
academic 

Do  you  consider  the 
exclusions 
current 
scope 
from 
sufficient? 

the 

Are  these  exclusions 
for  industrial  property 
rights sufficient? 

☺ 

(cid:47) 

☺ 

(cid:47) 

(cid:47) 

Is the inclusion within 
for 
scope 
the 
copyright  and  related 
rights  acceptable  and 
should the Convention 
take  into  account  the 
position  of  individual 
authors  as  the  weaker 
to a contract? 

protection 
Is 
the 
accorded 
the 
to 
defendant  by  Article 
9(c) sufficient? 

☺ 

☺ 

☺ 

☺ 

- 

(cid:47) 

- 

- 

NA 

the 
Should 
Community 
avail 
itself of the possibility 

☺ 

NA 

(cid:47) 

☺ 

(cid:47) 

☺ 

☺ 

☺ 

(cid:47) 

EN 

53 

   EN 

 
 
 
 
 
 
 
 
given  in  Article  18 
a 
make 
and 
declaration  in  respect 
of  courts  within  the 
Community? 

that 

Is  it  acceptable,  as  a 
general 
matter 
of 
the 
policy, 
would 
Convention 
prevail 
other 
over 
previous  international 
thus 
instruments, 
affecting 
the 
international 
assumed 
obligations 
prior to the ratification 
of this Convention? 

Do  you  think  that  the 
Convention 
should 
allow  the  recognition 
and  enforcement  of 
judgments  given  on 
the  basis  of  a  non-
exclusive 
choice-of-
court agreement? 

(cid:47) 

- 

NA 

☺ 

☺ 

(cid:47) 

NA 

☺ 

(cid:47) 

☺ 

Key to symbols: 

☺ Yes (most respondents) 

(cid:47) No (most respondents) 

- Mixed opinion expressed 

NA No Answer on specific question 

This  following  Section  of  the  Annex  presents  an  overview  of  responses  to  a  number  of 
selected  issues  particularly  relevant  to  the  Impact  Assessment  and  raised  in  the  process  of 
public consultation. The relevant questions in the Consultation Paper that have been analysed 
are: 

Q2. Do you consider the current exclusions from the scope sufficient? 

Q3a. Are these exclusions for industrial property rights sufficient? 

Q3b. Is the inclusion within the scope for copyright and related rights acceptable and should 
the  Convention  take  into  account  the  position  of  individual  authors  as  the  weaker  to  a 
contract? 

Q 14. Is the protection accorded to the defendant by Article 9(c) sufficient? 

EN 

54 

   EN 

 
 
 
Q22.  Should  the  Community  avail  itself  of  the  possibility  given  in  Article  18  and  make  a 
declaration in respect of courts within the Community? 

Q24.a Is it acceptable, as a matter of general policy, that the Convention would prevail over 
other previous international instruments, thus affecting the international obligations assumed 
prior to the ratification of this Convention? 

Q  26.a  Do  you  think  that  the  Convention  should  allow  the  recognition  and  enforcement  of 
judgments given on the basis of a non-exclusive choice-of-court agreement? 

It  has  to  be  stressed  that  due  to  the  low  number  of  responses  to  the  Consultation  Paper  the 
sample is not fully representative. 

Q2  of  the  Consultation  Paper:  Do  you  consider  the  current  exclusions  from  the  scope 
sufficient? 

Member States and institutional bodies 

The  attitude  of  this  group  of  stakeholders  towards  the  issue  of  current  exclusions  is  mixed. 
Two Member States reacted positively, stating that the exclusions mentioned under Article 2 
were  sufficient.  On  the  other  hand,  the  Czech  Republic  and  Russia  stated  that  the  list  of 
exclusions is not sufficient enough as: 

Article 2 should also exclude international transport by air. 

Only disputes related to employment contracts are excluded, while many kinds of agreement 
to which an employee is a party would fall under the scope of the Convention. 

NGOs, consumer and interest organisations 

The majority of respondents expressed a negative opinion. They pointed out that: 

•  Contracts  that  restrain  competition  or  impede  the  transfer  of  technology  should  be 

excluded. 

•  It is of critical importance that the current wording of Article 2(2)(k) be revised to exclude 

trademark validity determinations. 

•  It  would  be  very  detrimental  to  deprive  natural  persons  acting  as  entrepreneurs  from  the 
benefit of the Convention. This exclusion (Article 2(1)(b) should not affect contracts with 
authors, including collective bargaining agreements negotiated, for example, with authors 
and performers. 

Industry, entrepreneur associations and companies 

The two organisations which answered this specific question expressed some concerns about 
the current exclusions from the Convention. 

•  The wording in Article 2(2)(k) should differentiate more precisely between the rights being 
subject  to  the  Convention  and  those  that  should  be  left  aside.  Otherwise,  the  uniform 
interpretation provided by Article 21 is at risk. 

EN 

55 

   EN 

 
•  The  current  exclusions  raise  a  problem  concerning  the  definition  of  “consumer”.  In  fact, 
European documents use the definition of consumer as “any natural person who is acting 
for purposes which are outside his trade and business profession”. It is important to keep 
this positive definition and not the one proposed by the Convention. 

Law and academic 

The attitude of this group of stakeholders towards exclusions was varied. Some concerns were 
pointed out: 

•  The  bracketed  words  in  Article  2(2)(f)  should  be  retained,  thereby  excluding  all  other 
admiralty and maritime matters. Maritime law is the subject of a number of international 
agreements. In particular, the Convention should apply to claims for salvage or the ability 
of  ship-owners  to  limit  their  liability,  or  cargo  owners’  liability  to  pay  general  average. 
Equally,  passenger  claims  should  be  excluded  as  they  are  governed  by  the  Athens 
Convention. 

•  Stronger  protection  should  be  introduced  for  weaker  parties  falling  within  the  current 

scope. 

•  Under certain circumstances (see the example of the passenger in the Consultation Paper) 
persons  who  should  be  excluded  will  remain  within  the  scope  of  the  Convention.  Non- 
profit  organisations  should  also  be  excluded  because  the  Convention  is  meant  to  be 
applicable to business-to-business situations. 

•  Not all natural persons should be excluded from the scope of the Convention. The purpose 
of  the  exclusion  is  to  protect  weaker  parties.  Consumers  are  generally  accepted  to  be 
weaker  parties,  but  a  natural  person  acting  in  a  commercial  capacity  is  not  necessarily 
either weak or weaker than a company. 

Q3a. Are these exclusions for industrial property rights sufficient or on the contrary too 
broad? 

Member States and institutional bodies 

Most of the Member States responding to this question replied positively. Only one of them 
stated  that  the  scope  of  the  Convention  should  be  extended,  taking  into  account  how 
intellectual  property  rights  and  particularly  industrial  property  rights  can  be  subject  to 
litigation  in  practice,  including  litigation  before  the  designated  court  pursuant  to  choice-of-
court agreement. 

NGOs, consumer and interest organisations 

The majority of this group of stakeholders responded negatively on this issue. They pointed 
out that: 

•  It  is  necessary  to  include  the  following  phrase:  “The  Convention  shall  not  apply  to 
proceedings  that  have  as  their  main  object  any  of  the  following  matters  —  ...  n)  parallel 
trade or the exhaustion of intellectual property rights”. 

EN 

56 

   EN 

 
•  IPR is not a defined legal term as different legal fields summed up as IPR have different 
bases. It is important to break this down field and create sui generis provisions. Patent law 
and copyright law, for example, are totally different legal fields. Trademarks and patents 
are granted by the State while copyright has a natural rights foundation. 

•  Decisions on trademark validity should be within the exclusive jurisdiction of the courts or 
administrative  agencies  of  the  State  where  the  rights  arose,  and  decisions  on  trademark 
validity made by other States should not be within the scope of the draft. 

•  The  current  wording  of  Article  2(2)(k)  excludes  trademark  validity  determinations  from 
the  scope  of  the  draft.  A  decision  on  trademark  validity  rendered  in  the  context  of 
proceedings over a trademark licence agreement would be within the scope of the draft as 
currently  worded.  As  claims  of  trademark  validity  often  arise  in  disputes  over  trademark 
licence agreements, it is critically important that the current wording of Article 2(2)(k) be 
revised to exclude trademark validity determinations. 

•  Another problem with Article 2(2)(k) is its limitation of agreements within the scope of the 
draft to licence agreements and assignment agreements. Trademark owners enter into many 
other  sorts  of  agreement,  such  as  agency  agreements,  distribution  agreements  and 
coexistence  agreements.  It  would  benefit  trademark  owners  for  these  agreements  to  be 
within the scope of the draft. 

•  There is a need to exclude from the scope the validity of IPRs when this validity depends 
on the sovereign act of a State. However, infringement proceedings should not be excluded 
from  the  Convention.  Moreover,  Article  2(2)(k)  of  WD  110  is  very  complex  and  may 
create diverging interpretations as to what is excluded or not concerning IPRs  other  than 
copyright. Moreover, it will be essential to list which IPRs are exactly excluded and decide 
whether there should be an exhaustive list of exclusion. An exhaustive list or some other 
approach,  which  would  preserve  legal  certainty,  would  be  preferred.  This  list  should  be 
limited to those IPRs agreed upon internationally. 

Industry, entrepreneur associations and companies 

The  two  organisations  which  answered  this  question  expressed  some  concerns  about  the 
exclusions for industrial property rights. 

•  It is not acceptable that the Convention stipulates special treatment for the matters linked to 
intellectual  property  (though  excluded  from  the  scope  of  the  Convention  under  Article 
2(2)(k),  stating  that  a  chosen  court  can  stay  proceedings  when  the  decision  incidentally 
relates to the matters excluded from the scope of the Convention. 

•  The wording in Article 2(2)(k) should differentiate more precisely between the rights that 

are subject to the Convention and those that should be left aside. 

Law and academic 

The  majority  of  stakeholders  who  answered  this  question  commented  positively.  However 
some concerns were put forward: 

•  It  is  difficult  to  understand  the  reason  why  copyright  and  related  rights  are  treated 
differently  from  other  intellectual  property  rights  under  the  Convention.  Copyright,  like 

EN 

57 

   EN 

 
other IPRs, is territorial in scope and depends for its recognition on the national law of the 
State where protection is sought. 

•  It  is  not  clear  why  “copyright  and  related  rights”  should  be  singled  out  for  special 
treatment. There seems no reason not to include other unregistered rights, such as database 
and  design  rights.  It  is  also  unclear  why  only  licence  and  assignment  agreements  are 
covered.  There  are  other  forms  of  agreement  which  relate  to  unregistered  intellectual 
property  rights,  such  as  security  agreements,  settlement  agreements,  coexistence 
agreements and delimitation agreements. 

•  The current Regulation under the Convention seems complicated and is probably difficult 
to  administer  in  practice.  A  point  of  discussion  would  be  an  exception  for  individual 
authors — as the creators of their works — as the weaker party to a contract who might 
require some appropriate safeguard. 

Q3b.  Is  the  inclusion  within  the  scope  for  copyright  and  related  rights  acceptable  and 
should the Convention take into account the position of individual authors as the weaker 
to a contract? 

Member States and institutional bodies 

All the Member States that responded to this question answered positively. 

NGOs, consumers and interest organisations 

The majority of this group of stakeholders replied positively. However, one stated that: 

•  Copyright  is  seen  as  an  individual  author’s  right  in  Germany.  If  physical  persons  are 
excluded, there would be nobody to exercise such rights. Therefore, compatibility with the 
concept  of  author’s  rights  has  to  be  checked.  The  weaker  party  should  be  protected  by 
public  policy  exception.  The  phrase  “related  rights”  is  not  defined.  It  has  to  be  affirmed 
that exclusive rights such as patents are not “related rights”. 

Law and academic 

Most  stakeholders  answering  this  question  commented  positively.  However,  some  concerns 
were put forward: 

•  Copyright and related rights should also be outside the scope of the Convention, except for 
proceedings to enforce a licence. Intellectual property rights are territorial in nature, being 
an  expression  of  the  sovereignty  of  the  State  conferring  protection.  Decisions  on  the 
validity  of  individual  rights  should  be  reserved  to  the  courts  of  the  country  conferring 
protection. It will be difficult to make a principled distinction between those authors that 
are  truly  in  a  weaker  bargaining  position,  and  internationally  successful  writers  able  to 
negotiate from an equal bargaining position. 

Q 14. Is the protection accorded to the defendant by Article 9(c) sufficient? 

Member States and institutional bodies 

Most  Member  States  that  responded  to  this  question  answered  positively.  However,  one 
(Latvia) pointed out that: 

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•  In  relation  to  protection  accorded  to  the  defendant,  another  possibility  could  be 
contemplated  whereby  the  defendant  has  the  opportunity  to  appear  before  a  court  and 
defend his position in the process of litigation. 

NGOs, consumers and interest organisations 

All the stakeholders who answered this question commented positively. 

Law and academic 

Similarly  to  NGOs,  consumers  and  interest  organisations,  law  and  academic  stakeholders 
answered this question positively. 

Q22. Should the Community avail itself of the possibility given in Article 18 and make a 
declaration in respect of courts within the Community? 

Member States and institutional bodies 

Most  Member  States  that  responded  to  this  question  answered  positively.  However,  one 
pointed out that: 

•  The possibility given in Article 18 limits the benefit of the Convention and would have to 
be  abolished.  The  chosen  judge  should  not  have  the  possibility  to  refuse  to  exert  his 
competence. 

Industry, entrepreneur associations and companies 

One stakeholder expressed a negative opinion towards the possibility given in Article 18. As 
the body stated, there are several specialised courts in Europe. For example, the London court, 
specialised in matters concerning maritime law, is often chosen even if no connection exists 
with the United Kingdom or even the EU. 

Law and academic 

Most  law  and  academic  stakeholders  that  responded  to  this  question  answered  negatively. 
They pointed out that: 

•  The  Community  should  not  avail  itself  of  the  possibility  under  Article  18  as  the  same 
considerations  applying  to  domestic  cases  (in  the  sense  of  domestic  to  one  particular 
Member  State)  do  not  apply  for  the  Community  as  a  whole.  There  is  not  a  single 
“Community interest” at stake. Such declarations should be a matter for individual States. 

•  If  individual  States  do  not  wish  the  resources  of  their  courts  to  be  used  in  disputes 
unconnected with that State, it is a matter for them. Some States, such as the UK, regard 
litigation services as providing a valuable export. 

•  The English courts are commonly chosen by parties as a neutral forum even though they 
may have no other connection with the parties or the dispute. The promotion of London as 
a forum for resolution of international litigation is and has for many years been a policy of 
the  United  Kingdom,  and  generates  considerable  invisible  earnings  for  the  UK.  The 
English courts have also developed considerable expertise in insurance and maritime law 
disputes  even  where  the  accident  or  policy  has  no  connection  with  the  UK.  Therefore, 

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Article  18  should  not  apply  to  the  English  courts.  Should  other  States  take  a  different 
approach, and it is possible to apply Article 18 on a basis that varies from Member State to 
Member  State,  then  there  would  not  be  any  objection  to  the  European  Commission 
entering a reservation in respect of those states. 

Q24.a Is it acceptable, as a matter of general policy, that the Convention would prevail 
over  other  previous 
international 
obligations assumed prior to the ratification of this Convention? 

instruments,  thus  affecting  the 

international 

Member States and institutional bodies 

All the Member States that responded to this question answered negatively. The governments 
have pointed out that: 

•  Article  23  lacked  clarity  and  coherence  in  its  actual  outline.  The  interlinking  with  other 
international instruments is particularly complex and raises complex concerns related to its 
application. It is therefore not acceptable that the Convention would prevail over previous 
international instruments as it would affect the stability that these instruments have already 
created. 

•  The current Convention should not put States in a position where they are forced to violate 

previously accepted international obligations. 

Industry, entrepreneur associations and companies 

The  two  organisations  which  answered  this  question  replied  positively  on  the  Convention 
predominating over other previous international instruments. 

It  seems  logical  that,  in  case  of  conflict  between  the  Convention  and  Regulation  (EC) 
No 44/2001 on judicial competence, the rules set by the Convention would prevail (as far as 
forum selection clauses between an EU Member State and a third country are concerned). 

Law and academic 

Similarly to the previous group of stakeholders, the majority of organisations which answered 
this  question  expressed  a  positive  opinion  on  the  Convention  predominating  over  other 
previous international instruments. 

However, a stakeholder stated that: 

•  An approach that placed Member States in breach of their existing international obligations 
is not acceptable. It follows from Article 30(4)  of the Vienna Convention  on the Law of 
Treaties  that  whilst  the  Member  States  may  agree  to  modify  the  requirements  existing 
under the Brussels Regulation inter se, they cannot modify their obligations towards non-
Member States that are Contracting Parties to the Lugano Convention without denouncing 
those  treaties.  On  the  assumption  that  the  Lugano  Convention  is  retained,  it  will  need  to 
prevail over the proposed Convention in respect of any judgment required to be enforced 
by  a  Contracting  State  to  the  Lugano  Convention  that  does  not  ratify  the  proposed 
Convention.  The  position  will  need  to  be  the  same  in  respect  of  any  other  international 
convention or treaty to which a Member State is party which does not allow for a choice of 
court,  or  contains  rules  on  exclusive  jurisdiction.  As  it  does  not  achieve  this  result, 
Article 23(4)  would  place  Member  States  in  breach  of  their  obligations  under  public 

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international  law.  The  rules  set  out  in  the  Convention  should  also  be  subject  to  existing 
international conventions or treaties to which a Contracting State is subject which regulate 
a particular area or subject matter and contain rules that restrict party autonomy, or rules of 
exclusive jurisdiction. 

Q 26.a Do you think that the Convention should allow the recognition and enforcement 
of judgments given on the basis of a non-exclusive choice-of-court agreement? 

Member States and institutional bodies 

The attitude of this group of stakeholders towards this issue was varied. One Member State 
was  in  favour  of  recognition  and  enforcement  of  judgments  given  on  the  basis  of  non-
exclusive choice-of-court agreements while other countries voiced more negative comments: 

•  Considering  the  difficulties  met  during  negotiations,  a  realistic  way  should  be  preferred. 

The Convention would have to be limited to exclusive choice-of-court agreements. 

•  This  issue  could  be  subject  to  further  debate  and  discussion.  By  providing  for  the 
possibility  to  recognise  judgments  delivered  by  the  courts  designated  in  non-exclusive 
choice-of-court  agreements,  the  scope  of  the  Convention  would  become  substantially 
broader as would its practical effects and utility. 

NGOs, consumer and interest organisations 

Similarly  to  the  Member  States,  NGOs,  consumer  and  interest  organisations  also  expressed 
varied opinions. One  stakeholder  responded  positively, while  another supported  limiting the 
Convention  to  recognition  and  enforcement  of  judgments  given  on  the  basis  of  exclusive 
choice-of-court agreements. 

Law and academic 

All  the  stakeholders  that  answered  this  question  were  in  favour  of  recognition  and 
enforcement  of  judgments  given  on  the  basis  of  non-exclusive  choice-of-court  agreements. 
One argued that such extension was of vital importance as: 

•  Non-exclusive  jurisdiction  clauses  are  very  commonly  used  in  international  trade  and 
finance.  The  use  of  a  non-exclusive  jurisdiction  clause  reflects  a  legitimate  choice  by 
parties where they wish the chosen forum to have jurisdiction but to retain the flexibility to 
bring proceedings before any other court of component jurisdiction. Such clauses respond 
to a genuine commercial need and would not be used in business-to-business contracts if 
this were not the case. Failure to include such clauses will seriously reduce the advantages 
of an international convention for international trade and finance. 

List of respondents to the Consultation Paper 

Governments and public administration 

Délégation française 

Czech Republic (Ministry of Justice) 

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Estonia 

Ministry of Foreign Affairs of the Russian Federation 

Latvia 

NGOs, consumer and interest associations 

European Consumers’ Organisation 

British Music Rights 

Foundation for a Free Information Infrastructure (FFII) 

European Grouping of Societies of Authors and Composers (GESAC) 

International Trademark Association (INTA) 

Motion Pictures Association (MPA) 

Trade Marks, Patents and Designs Federation (TMPDF) 

Industry, entrepreneur associations and companies 

Association Française des Entreprises d’Investissement 

BASF 

EUROCHAMBRES (Association of European Chambers of Commerce and Industry) 

La Fédération Bancaire Française 

MEDEF 

Federal Association of German Industry 

Law and academic 

Council of Bars and Law Societies of the European Union (CCBE) 

Clifford Chance  

Conference of the Notariats of the European Union 

Deutscher Richterbund 

Slaughter and May international law firm 

Faculty of Law, Bond University, Australia 

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Companies and other stakeholders interviewed 

ANNEX 2 

Companies 

Skanska AB (Sweden) 

Innogenetics (Belgium) 

Ontex NV (Belgium) 

Micotron a/s (Denmark) 

Packard Bell (France) 

Umicore SA-NV (Belgium) 

Hamilton Precision Metals Europe (HPM) (France) 

Teyssou Rhônes Alpes SAS (France) 

Pom’Alliance (France) 

Medicasoft (France) 

Dismat SAS (France) 

Acim Jouanin S.A. (France) 

Decanova NV (Belgium) 

HORLOGES HUCHEZ SAS (France) 

Norail S.A. (France) 

Dagnaud Fabrications (France) 

Indusafe Bvba (Belgium) 

SENSY (Sensors and Synergy) SA (Belgium) 

Thermax Ltd (Belgium) 

Maersk Benelux BV (Belgium) 

Nestlé (Switzerland) 

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Insurance companies 

ATE Insurance (UK) 

Euler Hermes Credit Insurance (Belgium) 

Law firms 

Carlos de Sousa e Brito & Associados 

Hannes Snellman Attorneys at Law 

ABA 

Business and sectoral organs 

Agency of Lithuanian Copyright Protection Association 

British affiliate of the ICC 

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