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Legal alerts / 22.7.2019

Misleading news on the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters

During the last two weeks, the Internet was full of news that Russia had signed the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Convention”). Many reputable Russian legal portals as well as law firms spread the news that Russia had signed the Convention and would, from now on, recognize and enforce foreign judgements.

Contrary to this information, for the moment the only country to have signed (though not yet ratified) the Convention is Uruguay.

Delegates from many countries, including Russia, did indeed participate in the Hague Conference on Private International Law, and signed the Final Act of the Twenty-Second Diplomatic Session, thereby adopting the Convention.

However, signing the Final Act is not equivalent to signing the Convention itself. In order for the Convention to take effect in Russia, it must be at least signed and ratified. Moreover, the Convention itself has not yet come into force. Therefore, the conclusion that Russia will enforce foreign judgments under the Convention is rather premature.

The Convention, its scope and the potential impact for Russia

The Convention is aimed at creating a uniform set of rules for the recognition and enforcement of foreign judgments in civil or commercial matters and at enhancing predictability and certainty in cross-border litigation. It covers a wide range of issues relating to the recognition and enforcement of foreign court decisions, establishing exclusive grounds for a refusal to recognize and enforce judgments while prohibiting a review on the merits.

The Convention is limited in scope. It does not apply to a significant number of matters, e.g. family matters, insolvency, the carriage of passengers and goods, defamation etc. Moreover, states are allowed to make a number of declarations. For instance, a state may declare that it will not apply the Convention to certain specific matters or that its courts may refuse to recognize or enforce a foreign judgment if there is a close connection between the dispute and the requesting state.

Another prerequisite for the application of the Convention to a particular foreign judgment is that both states (the state where the decision was rendered, and the state where recognition and enforcement are sought) are contracting states to the Convention, which have not used their right under the Convention to declare that the Convention will not have the effect of establishing relations between the two states.

At present, the enforcement of a foreign judgement in Russia is possible only under an international treaty (multilateral or bilateral) or under federal law. If Russia does not have a treaty with a particular state, the decision of a foreign court can arguably be enforced under the reciprocity principle. Under this principle it is essential for the applicant to provide evidence that Russian decisions are recognized and enforced in the relevant foreign state. Otherwise, recognition and enforcement of the foreign judgment can be refused. Nevertheless, the reciprocity principle does not enjoy uniform acceptance by Russian courts. Consequently, whether a particular foreign judgment will be recognized and enforced in Russia can be rather unpredictable.

The success of the Convention will largely depend on the number of states that will join it. Russia has not yet signed or ratified the Convention.

If Russia becomes a contracting state to the Convention, there will definitely be an increase in certainty and predictability in the recognition and enforcement of foreign judgments, especially for decisions of those countries which lack an international treaty with Russia. In any case, despite the limited scope of the Convention, it can be seen as a positive step towards establishing a universal regime for the recognition and enforcement of foreign judgments.

Recognition and enforcement of foreign arbitral awards

The mechanism of the Convention is similar to that used in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). The New York Convention is the most important international instrument for the recognition and enforcement of foreign arbitral awards, with 159 contracting states including Russia.

In comparison with the Convention, the New York Convention has a wider scope of application. It applies to awards made in any foreign state, irrespective of whether or not that state is a contracting state. Under the New York Convention, states can only make two reservations. The first reservation allows a state to apply the New York Convention only to awards made in another contracting state. The second reservation allows a state to apply the New York Convention only to commercial matters. In addition, unlike the Convention, the application of the New York Convention does not depend on the residence, or on the place of incorporation / business activity, of the parties to arbitration proceedings.

The popularity of the New York Convention can also be explained by the fact that it is a lively and dynamic instrument, as it exercises the maximum level of control, allowing states to apply more liberal rules than those established in the New York Convention.

Whether the Convention will truly change the current situation in the field of international dispute resolution will become clear only with the passage of time. It is too early to conclude that the adoption of the Convention will decrease the popularity of international commercial arbitration and the New York Convention.

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