Alasdair Wallace
Head of International and
Common Law Services Division
Lord Chancellor's Department,
Southside
105 Victoria St.
London ME 6QT
England

Re: Negotiation of a Draft Hague Convention on
Jurisdiction and Enforcement of Foreign Judgments



Dear Alasdair:

In anticipation of meeting with you and your colleagues on September
18, I am responding in writing to the comments and questions contained
in your letter of April 18, 2000, regarding the above-captioned
negotiation. Your letter responded to issues flagged in my letter of
February 22, 2000, to the Secretary General of the Hague
Conference. Although members of the U.K. and U.S. delegations have
held several discussions on the contents of these two letters since
February, I am happy at your request to put some thoughts informally
into, writing. It is important to understand, however, that by no
means is this letter intended to be a final or comprehensive statement
of U.S. difficulties with the project.

As a general matter, let me begin by stressing again that the
U.S. delegation believes the October 1999 draft is not an effective
vehicle for achieving a convention to which the United States can
become a party. The October 1999 draft presents a deal on jurisdiction
that is heavily weighted against U.S. jurisdiction practices. The Bar
would reject it in this country.

We believe, nevertheless, that a global convention can be achieved. In
our view, delegations must first reexamine together the goals of the
convention. If we are able to achieve greater commonality of vision
than what is reflected in the October 1999 text it may then be
possible to make real drafting progress.

In this connection, we note that the October 1999 text follows too
closely the structure and content of the Brussels Convention. The
Brussels Convention was developed by neighboring countries with common
legal, cultural, and political traditions to be an essential part of
their common effort to build a greater economic and political
union. The regional success of this convention does not necessarily
project it as a global solution because its context and objectives are
very different from those of a worldwide convention.

At its best a worldwide Hague Convention can only aspire to achieve
incremental improvement in international litigation practice. The
Hague Convention can standardize some basic grounds of jurisdiction
(requiring some and prohibiting some) and provide for prompt and
effective recognition of judgments based on the required grounds. Like
the New York Convention on the Enforcement of Foreign Arbitral Awards,
creating such a structure is likely to transform. national commercial
and litigation practice to take advantage of the bases of jurisdiction
and enforcement the convention provides

Unlike the Brussels Convention, a global convention must necessarily
leave substantial room for national practices to continue outside the
limited core jurisdictional provisions of the convention. It is simply
not feasible to do more: first, because the global convention must
embrace geographically distant states with widely different legal
systems and traditions that are not seeking union; and second, because
uniformity of application of the jurisdictional provisions cannot be
assured.

If we find that there is in fact general agreement on the goals of the
negotiation, we should begin to search for a structure that better
represents those shared goals. In doing so we should keep in mind that
the only protection against inconsistent application of the convention
is the ability of the F2 court to verify the jurisdiction of the F1
court on a case-by-case basis, not the comprehensiveness or analytical
purity of the jurisdictional provisions themselves.

Delegations should revisit the text not as a redrafting exercise but
first to see in which areas and articles consensus can be found. Where
there is consensus, jurisdictional provisions can be drafted; where
consensus is not possible, matters should be left to national law and
practice. This is likely to suggest a new, simplified structure for
the text. Though less ambitious on its face,such a convention would
offer substantial benefits over the status quo and be the starting
point for better practices and more ambitious developments in the
future.

We look forward to discussing with you new ideas and solutions for
accommodating the very different legal traditions represented in the
Hague Conference. We also hope that key Hague parties will be willing
and able to meet in informal sessions first to rethink and then to
redraft the current text. In this respect, we hope that your
delegation will join ours in seeking to promote the upcoming schedule
of informal meetings and contact groups for this purpose.  I will key
this letter to the headings in your letter, but I would note that
better solutions for many of the articles are likely to be found in a
more radical restructuring and simplification of the convention text.


Article 1: Substantive Scope 

On the issue of the application of the Convention to government
litigation, we find it very difficult to propose language beyond that
contained in our proposal of June 7, 1999 (WD#149). Since there is no
consensus among different delegations on how the language "civil and
commercial matters [with the exception ofd administrative matters"
would be implemented by national courts, we had proposed deleting the
reference to "administrative matters." We know that this latter phrase
is subject to widely different interpretations under existing national
law and decisions of the European Court of Justice. Thus, under our
proposal, the convention would apply to "civil and commercial matters"
full stop. This standard would be clarified solely by paragraph (3) of
Article 1: i.e., a matter would not be excluded from this definition
"by the mere fact that a government agency" is a party. Even this
formulation is ambiguous, but we believe it is less ambiguous than the
current draft because it does not introduce the term "administrative."

We think this proposal should be the starting point for a more probing
analysis and careful negotiation. We have been seeking since November
1998 to convene a special government litigation working. group to
discuss.these issues in detail. Without the benefit of expert
government litigators exchanging views and information it is very
difficult to draft the kind of precise text necessary to reduce the
uncertainties raised by this article. We would
appreciate very much your support in convening such a working group.

Article 3: Defendant's Forum

We are attracted to your suggestion on how to approach the problem of
defining "habitual residence," but we worry whether consensus can be
achieved on a presumption of three months. This is an issue on which
more thought and discussion is necessary, and a paper along the lines
you suggest would be indispensable.

Article 6: Contracts

We agree that this article is unsatisfactory in part because it does
not address cases of non-performance. Your suggestion that we return
to the June 15, 1999, proposal (WD#224) to use the defendant's
activities in the forum to address cases of non-performance is a
helpful reminder of the benefits of that approach. This article must
also be carefully considered in light of e-commerce concerns.

Article 7: Contracts Concluded by Consumers

The difficulties posed by Article 7 illustrate why we would be well
advised to abandon the effort to duplicate the structure and language
of the Brussels Convention in a worldwide convention. As you point
out, it is a tall order to attempt to regulate national consumer
policy through a convention setting out rules of jurisdiction. We are
not sanguine that any mandatory rule on choice of court clauses
entered into by consumers could be included in this convention without
ensuring that a significant group of countries would face difficult
and divisive domestic opposition. Indeed, it is to avoid forcing votes
on policy choices such as this that we proposed the mixed
convention. We agree that one helpful way to move forward might be to
propose a series of options for further discussion, including the
option of deleting special jurisdiction provisions on consumers from
the convention.

Article 8: Individual Contracts of Employment

Our comments on Article 7 also apply to Article 8. We do not believe
that any consensus can be achieved to nullify all pre-dispute choice
of court agreements in employment contracts. Nor do we believe
consensus is possible on more general principles of special employment
jurisdiction.

Article 9: Branches [and Regular Commercial Activity]

The focus in this article is on the bracketed language that addresses
jurisdiction where a claim arises out of commercial activity in the
forum without the presence of a branch or fixed establishment (which I
shall call "transacting business" jurisdiction). The U.S. delegation
cannot imagine our Bar accepting a convention that prohibits existing
bases of jurisdiction without providing this type of activity-based
jurisdiction on the white list.  

Efforts made to redraft the bracketed language to require something
close to a fixed presence are missing the point of this provision for
us. We feel strongly that a fixed presence is not necessary where a
defendant has come into the forum to conduct business and a claim has
arisen from that conduct. We would note that the thrust of the June
15, 1999, proposal (WD#244), which was favorably mentioned in your
letter with respect to Article 6 is the same as the bracketed language
here -- to require both commercial activity in the forum and a
relationship between that activity and the claim. Finally, we do not
think that it can necessarily be said that jurisdiction should never
be possible where a claim has arisen out of a defendant's visit to a
trade fair every three years.

There is still a great deal of misunderstanding about transacting
business jurisdiction and its relation to the other type of doing
business jurisdiction -- i.e., jurisdiction based on activities in the
forum that are unrelated to the cause of action (which I shall call
"general doing business jurisdiction," discussed below under Article
18). Before addressing the drafting issues raised in your letter
delegations should seek to reach a broader understanding of what
activity-based jurisdiction options are on the table for the white,
black, and gray lists in order to clarify the policy issues at stake.

Article 10: Torts

The torts provision needs considerable attention. We note that
addressing U.S. constitutional due process concerns with the current
draft of paragraph (1) would have the effect of narrowing, not
expanding, the possible scope of the article. Unfortunately, U.S. case
law in this area is not altogether clear, so it is difficult for us to
be certain that any formulation would perfectly capture future case
development. Our tort lawyers in fact generally favor the current
language, but worry that if it were invalidated or cut back in a
constitutional challenge to the Supreme Court, some type of
activity-based jurisdiction is necessary to back it up.

Paragraph (2) of Article 10 remains a certain bar to U.S. acceptance
of the Convention. The U.S. delegation is not in a position to argue
to U.S. antitrust enforcement agencies in favor a convention that
would limit some U.S. jurisdiction over antitrust actions unless we
could demonstrate clear benefits in terms of white-list effects
jurisdiction applicable to antitrust actions (such as in paragraph
(1)) and predictable and economical enforcement of most domestic
antitrust judgments. Since this is not likely to be possible,
paragraph (2) should be deleted and antitrust actions removed from the
scope of the convention.

We are not clear about problems you may have with respect to direct
versus indirect effects jurisdiction under paragraph (1) in relation
to paragraph (4): It may be helpful for you to send us a copy of the
Marinari case along with an additional description of the issues you
see.

As for the paragraph (4) limitation on the availability of damages, we
believe it is not necessary or wise to attempt in this convention to
address issues involving enforcement of damages through novel
jurisdiction provisions.

Article 12: Exclusive Jurisdiction

Article 12 offers another example of the problems with reflexively
following the Brussels Convention in a worldwide convention that is
negotiated in a very different context and with very different
objectives. The Brussels Convention establishes exclusive jurisdiction
for certain cases involving local registration of rights as part of
the ambitious process of advancing greater economic and political
union through the harmonization of civil and commercial law. It also
authorizes the European Court of Justice to ensure consistency of
application of these novel provisions. The Hague Convention, by
contrast, has more modest goals and will have no mechanism except
non-enforcement to ensure consistency of application as between two
countries. In that context, what is realistic is for the Hague
Convention to ensure that courts are not required to enforce judgments
substantially affecting locally registered rights.

In the Hague Convention, creating an "exclusive" jurisdiction forum
does not necessarily make practical sense as a way to achieve the goal
of not requiring courts to enforce foreign judgments involving local
registered rights. There is likely to be a wide disparity in approach
to the "exclusive" grounds -- particularly in such areas as
intellectual property --leading to much wasteful litigation and
uncertainty. Addressing the policy of favoring jurisdiction in the
country of registration through rules of exclusive jurisdiction would
therefore increase the likely number of conflicting decisions in the
F1 courts without reducing the number of conflicting decisions in the
F2 courts.

In the absence of an overall court of appeal to regulate
interpretation of the convention, these conflicts seem assured. For
example, while we in the United States have well developed
jurisprudence on when a patent claim requires exclusive jurisdiction
in specialized federal courts, we do not know if the principles
underlying this jurisprudence would be applied in all other party
states. Members of the U.S. delegation have therefore suggested that a
better approach may be for the convention to provide that recognition
and enforcement of judgments involving, inter alia, the validity and
infringement of registered rights is not required in the country of
registration of those rights. We hope to work out this idea with more
specificity.

The overriding concern of the U.S. delegation is that delegations not
cripple the convention by trying to do what is unattainable. In areas
like intellectual property, the risk is very high that we will not be
able to reach an adequate compromise on jurisdiction that will satisfy
the very different litigation, technology, and business interests at
stake. Moreover, the more we incorporate controversial items in the
jurisdiction provisions the more likely the convention will be
rejected as attracting expensive litigation with uncertain results,
which will tip the balance against acceptance. Where we can
effectively address the concerns through an exception to recognition
and enforcement we should do so. In this same connection, the
U.S. delegation believes we should consider strongly deleting Article
13 and limiting the Convention to money judgments.

Article 17: Jurisdiction Based on National Law

We do not understand the outcome of the crossreferences to other
articles in this article.

Article 18: Prohibited Grounds of Jurisdiction

The black list as drafted in Article 18 is fundamentally inconsistent
with what we believe is acceptable for a worldwide Hague
convention. If our position is not yet clear, let me underline that
the U.S. delegation believes that it is precisely the non-exhaustive
nature of Article 18 that makes it unacceptable.

We are prepared to discuss specific grounds of jurisdiction that are
known and practiced by member states and others for inclusion in the
list, but are not prepared to accept a vague and unknown general
standard of prohibition, or to accept illustrative factors such as
those listed in paragraph (2). The suggestion that somehow the
standard in paragraph (1) and the illustrative list in paragraph (2)
provide a "safeguard" to states that are bent on getting around the
prohibited list simply is not borne out by the structure of the
convention. There is no penalty for not complying with paragraph (1)
except non-enforcement of the resulting judgment. However, faithful
compliance . with paragraph (1) in the F1 court is no assurance that
the standard in that paragraph will not then be applied in an overly
restrictive manner in the F2 court to deny enforcement.

We believe the problem with this article is conceptual, not simply a
matter of drafting. We suggest a return to what we thought was the
basis for the decision to negotiate a mixed convention: a limited
number of jurisdictional bases would be so universally accepted as to
be included in the white list: a limited number of jurisdiction bases
would be so universally disapproved as to be included in the black
list: and everything else would be in the gray area.

The U.S. delegation also has special policy concerns in the area of
prohibited jurisdiction that we believe must be considered if a
revised structure of the convention can be agreed on.

First, the basic concept of general doing business jurisdiction is a
fundamental concept to American lawyers. 'In this country it is
understood that where a person purposely avails himself in a
substantial way of the business opportunities present in a .forum --
whether or not he has organized his affairs in such a way as to
include a physical establishment -- he should be available to answer
for any claims against him. Wholly apart from the notion of
"transacting business"' discussed in connection with Article 9 above,
the U.S. Bar will be extremely critical of any convention that would
not allow this basic notion of jurisdiction to continue in the gray
area as a matter of national law.

Second, the human rights exception poses special policy problems that
are likely to prevent acceptance of the convention in the United
States if not adequately addressed in the text. While it is possible
that the international human rights organizations may at some point be
prepared to agree to limit the exception so that it does not encompass
a virtually indefinite spectrum of social and economic rights, I would
be surprised if they are satisfied that the draft adequately covers
fundamental human rights claims. It is critical that delegations
engage in intensive and open negotiations on the text of this
provision, and ensure that key nongovernmental groups are fully
engaged with us on it.

Articles 21 and 22: Authority of the Court Seized

While we realize that any tinkering with the present articles on forum
non conveniens and lis pendens could risk unraveling the consensus
achieved so far, we believe we must continue to look hard at the text
and consider it in light of real cases. Moreover, it is critical to
keep in mind that the convention may be better off not addressing
these practices at all -- the risk that they will attract opposition
to the convention could outweigh their potential benefits. .

Recognition and Enforcement

We agree that we should begin bilaterally and in smaller working
groups to review in-detail these provisions to ensure that they are
well drafted and that there are not important flaws lurking in them.

Article 37: Relationship with Other Conventions

We seem to be of a similar mind on the importance of the connection of
the Brussels Convention and other conventions to the Hague project and
the need to begin open and active discussion in a larger group. We
understand that there are various legal and political issues related
to the development of internal EU law based on the Brussels Convention
that are affecting, EU members' consideration of this
issue. Nevertheless, we must begin now to hear what the issues are so
that we may work together on the solution for this convention. A
detailed analytical paper from European delegations would facilitate
this dialogue. I have addressed these issues in an August 18 email to
you and others.

Article 41: Federal Clauses

We believe that a suitable clause can be drafted to meet the concerns
and requirements of all of the federal states that are participating
in the negotiations. We will endeavor to produce such a draft based on
the discussions held among several delegates in Ottawa last February.

General Considerations

I have not addressed the major U.S. concerns related to e-commerce
because we are still deep in consultations with private sector experts
and other government agencies on the e-commerce issues raised by the
convention. These novel problems must be addressed in an effective way
for the convention to have any chance of success.

I have stressed the structural limitations posed by a convention on
jurisdiction that has no supreme court to regulate jurisdictional
decisions in national courts. I am not, however, suggesting that there
should be agreement on such a court. This is not realistic and we are
not proposing it. Rather, we are suggesting that delegations recognize
the inherent limitations of the Hague Convention project and approach
the drafting of the convention accordingly.

I look forward to meeting with you and your colleagues in London. Ron
Brand will be joining me. While I regret that I will be unable to
attend the informal meeting scheduled for later that week in the
Netherlands, Arthur von Mehren will be joining Ron those
days. Moreover, we hope that your delegation will be able to come to
Washington October 30-November 1 to discuss these issues with the
wider group of Hague delegations. We hope that this letter will
provide you with some additional information with which to prepare for
these upcoming sessions.  With all best wishes to you and your
colleagues, Sincerely,

Jeffrey D. Kovar
Assistant Legal Adviser
for Private International Law