Note: This article references the 1962 Uniform Foreign-Money Judgments Recognition Act, which has been adopted by 30 U.S. states, the District of Columbia and the Virgin Islands. In 2005, to meet the increased needs for enforcement of foreign country money-judgments, the Uniform Law Commissioners completed a revision of the 1962 Act, titled the Foreign-Country Money Judgments Recognition Act. At this writing the 2005 Act has been adopted in only three states - California, Idaho and Nevada. Mr. Fielding, aware of this fact, points out that both Acts are basically codifications of the common law and that the principles articulated in this article would be generally accepted in all 50 states. [Editor]

In international commercial transactions the most effective way to obtain a judgment enforceable in the United States or some other country is to obtain an arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Such an award will be easily recognized as enforceable in the country in which the debt collection occurs. Unfortunately, not all international contracts contain arbitration requirements. It may be necessary to obtain a court judgment in one country and later seek to have that judgment recognized and enforced in another country where the opposing party’s assets are located. In those instances, a prudent litigator must consider not only how to obtain the judgment but also the steps that must be taken to ensure that the judgment will be enforceable in another country.

To that end, this article highlights key factors that litigants in foreign countries must consider as they seek to obtain judgments for commercial debts that will subsequently be recognized as enforceable in the United States of America. For purposes of this article, the term “foreign judgment” will mean any judgment rendered by the tribunals of any nation other than the United States of America.

Uniform Foreign Money-Judgments Recognition Act

Foreign litigants cannot immediately enforce a foreign judgment in the United States. They must first file an action with a federal or state court in the United States seeking recognition. Then they must obtain a court order recognizing the foreign judgment, and then enforce it. Currently, there is no federal legislation providing for the recognition and enforcement of foreign judgments. Rather, enforcement is determined on a case-by-case basis by applying either the common law or state statutory law such as the Uniform Foreign Money-Judgments Recognition Act (“UFMJRA”).¹ The UFMJRA, which has been adopted by more than 30 jurisdictions in the United States², is a uniform act intended to codify the common law. Although the remaining jurisdictions have not adopted the UFMJRA, enforcement of a foreign judgment in those states will generally be similar to the principles and standards articulated in the UFMJRA.

As its name implies, the UFMJRA only applies to foreign money judgments and section 1 of the Act specifically excludes tax judgments, fines, penalties, and family support judgments. However, section 7 provides that the specific exclusions do not prevent a state from recognizing these other types of judgments if they could be validly recognized under the common law or some other statute. Even if the judgment is subject to or pending on appeal, under section 2, the UFMJRA applies to any foreign judgment that is final, conclusive, and enforceable in the jurisdiction where it was originally rendered.

Grounds for non-recognition of a foreign money judgment

Section 4 of the UFMJRA provides three mandatory grounds for denial of recognition of a foreign judgment:

the judgment was rendered by an impartial tribunal or legal due process was not present;
the defendant was not subject to the personal jurisdiction of the foreign tribunal; or
the foreign tribunal lacked subject matter jurisdiction.

Additionally, section 4 also provides six discretionary grounds for denial of recognition of a foreign judgment:

lack of sufficient and timely notice,
fraud,
the cause of action upon which the judgment was based is contrary to public policy,
the judgment conflicts with another judgment,
the foreign proceeding was contrary to a prior dispute resolution agreement between the parties, or
the foreign tribunal was an inconvenient forum.

Additionally, a few states also include lack of reciprocity as a basis for non-recognition. Each of these is addressed in turn.

Due process necessary for recognition of a foreign judgment

The single most important consideration to enforcing a judgment in the United States is ensuring that it was obtained in accordance with due process of law. The due process that is necessary for recognition of a foreign judgment needs to be compatible with United States standards of due process.³ This means that the foreign procedures must be “fundamentally fair” and not offend “basic fairness.”⁴ In analyzing due process concerns, courts focus on the foreign country’s system rather than the judgment itself.⁵ The central concern is that the foreign “system” provides the defendant with a fair tribunal that is compatible with due process standards.⁶

Fundamentally, due process requires that the parties “receive an actual opportunity for a full and fair trial.”⁷ By implication, this means that the defendant must receive reasonable notice that the action has been brought against it and have a reasonable opportunity to appear and defend itself before its interest is adversely affected.⁸ A foreign court’s procedures can differ from those of United States courts so long as they do not violate due process principles.⁹ For example, procedural differences such as a party’s inability to subpoena witnesses or documents, compel indispensable testimony, cross-examine adverse witnesses or conduct pre-trial discovery or the fact that a judge simply reviews summaries of testimonies or the lack of a jury trial do not constitute violations of due process.¹⁰ Furthermore, a defendant’s decision to simply not participate in a foreign proceeding and later collaterally challenge the foreign judgment’s enforcement is not a valid denial of due process.¹¹ In contrast, due process is clearly not provided if the tribunal is not impartial.¹² Indeed, domination of the judiciary by other governmental branches constitutes grounds for non-recognition of a foreign judgment.¹³

Personal and subject matter jurisdiction

As noted above, an essential requirement to enforcement of a foreign judgment is that the foreign court must have had valid subject matter jurisdiction and personal jurisdiction over the parties. As a practical matter, courts in the United States almost always find that the foreign court had subject matter jurisdiction.¹⁴

Regardless of the foreign tribunal’s conclusion regarding its personal jurisdiction, United States courts will apply United States’ standards to determine if the foreign tribunal properly had personal jurisdiction.¹⁵ This is done because due process concerns are integrally related to personal jurisdiction under United States jurisprudence. Fortunately, section 5 of the UFMJRA identifies several situations where personal jurisdiction will be found to exist including:

personal service on the defendant in the foreign state,
the defendant’s voluntary appearance in the foreign tribunal,
a prior agreement to submit to the foreign court’s jurisdiction,
in the foreign country the defendant is either domiciled, has its principal place of business, or has obtained corporate recognition, or
the defendant has a business office in the foreign state and the cause of action arises out of the defendant’s dealings through that office.

This list, however, is not exclusive and courts may also recognize other bases of jurisdiction. For instance, courts in a foreign country may be deemed to have personal jurisdiction over an entity that actively markets and sells product via the Internet in the foreign country.¹⁶

Notice

Lack of notice to a defendant of the underlying action is a sufficient reason to deny recognition of a foreign judgment.¹⁷ Indeed, lack of proper notice is often equated with a failure of due process.¹⁸ Notice must be actually, properly, and timely given to the defendant such that the defendant recognizes the foreign proceedings and has a reasonable opportunity to appear and defend itself.¹⁹ Notice should be provided in the language of the jurisdiction where the defendant is served.²⁰ Indeed, lack of notice is often equated with lack of proper jurisdiction over the person.²¹

“To support an action to recognize and enforce a foreign judgment, service of process must satisfy both the foreign law under which service was effectuated and [United States] due process requirements.”²² Because the United States has ratified the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, persons living in another signatory country can effectuate proper service in accordance with the Convention’s provisions.

Fraud

Extrinsic fraud is another basis by which a foreign judgment will likely not be enforced.²³ Extrinsic fraud relates “to matters other than issues that could have been litigated and must be a fraud on the court.”²⁴ For example, extrinsic fraud occurs where one party fraudulently tells another that it will discontinue a pending action.²⁵

In contrast, foreign judgments will be enforced despite allegations or even the existence of intrinsic fraud.²⁶ Intrinsic fraud involves “the merits of a case or issues that were or could have been litigated.”²⁷ It includes items such as perjury, forged documents, and other fraudulent misrepresentations that were presented at the trial.²⁸ Intrinsic fraud also includes fraud that may have occurred in the events that ultimately gave rise to the cause of action that was brought in the foreign country.²⁹ The rationale for enforcing judgments where intrinsic fraud may have occurred is that the foreign court had the opportunity to weigh the evidence and discover intrinsic fraud. In contrast, extrinsic fraud fundamentally affects the defendant’s ability to appear and properly defend itself—something that is beyond the court’s control

Public Policy

Public policy exceptions are very narrow in nature and are rarely found to apply. Slight or even “substantive differences between [state] law and the law of the nation that rendered the judgment do not automatically trigger a public policy exception.”³⁰ A foreign judgment does not necessarily violate public policy even if a United States court might reach a contrary conclusion to that of the foreign tribunal if the case were tried in the United States.³¹ Rather, to prohibit the recognition of a foreign judgment on public policy grounds, the differences between the foreign law and that of the United States “must present a substantial risk to fundamental public values against which only nonrecognition of the judgment can protect. As such, the standard is unquestionably a high one.”³²

“The rationale for the enforcement of such foreign judgments has been, on occasion, both with respect to contract actions, and with respect to certain other miscellaneous actions, that once a party has had the opportunity to appear and litigate in a foreign jurisdiction, or has submitted to the operation of the laws of the foreign forum by engaging in business there, the party will be precluded from arguing that the judgments of those courts may not be given effect because of public policy objections.”³³ As such, the foreign judgment will be upheld on public policy grounds unless it is manifestly contrary to a fundamental part of United States jurisprudence.³⁴

Conflicting judgments, judgment obtained contrary to prior agreement, and inconvenient forum

Under section 4 of the UFMJRA a court can refuse to recognize a foreign judgment if it conflicts with a prior judgment rendered elsewhere. One commentator has noted, however, that when “confronted with conflicting foreign judgments, [United States] courts have applied the general rule applicable to sister-state judgments, and have found the judgment last in time will generally prevail.”³⁵ Furthermore, if the parties previously agreed to resolve any disputes in a particular forum or through arbitration and the plaintiff subsequently obtains a foreign judgment in a different jurisdiction, a United States court can refuse to enforce that foreign judgment.³⁶ The rationale for non-enforcement in such a situation is that it is similar to an extrinsic fraud. Finally, where a court’s jurisdiction is only based upon personal service and the geographic location of the court constitutes a seriously inconvenient forum, a United States court may refuse to recognize the foreign judgment.³⁷

Reciprocity

Early jurisprudence suggested that a foreign judgment would not be recognized in the United States unless the foreign jurisdiction also recognized United States judgments.38 Now, however, “the vast majority of states have abandoned the reciprocity requirement.”39 Indeed, only a few states have provisions in the UFMJRA which include lack of reciprocity as a discretionary ground for non-recognition, and only the Georgia and Massachusetts versions of the UFMJRA specifically require reciprocity as a grounds for recognition of the foreign judgment.⁴⁰

Burden of Proof

Foreign judgments are given a strong presumption of validity by courts in the United States.⁴¹ “[I]n order to obtain recognition and enforcement of a foreign country’s judgment, its proponent must initially make a prima facie showing of

a final judgment, conclusive and enforceable where rendered;
subject matter jurisdiction;
jurisdiction over the parties or the res; and
regular proceedings conducted under a system that provides impartial tribunals and procedures compatible with due process.”⁴²

As a practical matter, this is done by presentation of an authenticated copy of the judgment that becomes prima facie evidence of its validity.⁴³ At that point the burden then shifts to the opposing party to prove why the judgment should not be enforced based upon any of the reasons enumerated above.⁴⁴ Once the judgment is recognized, section 3 of the UFMJRA provides that the judgment may be enforced just like any other judgment obtained in a sister-state in the United States.

Conclusion

By knowing and implementing the legal principles discussed in this article, a litigant in a foreign country can better insure that the foreign judgment it obtains for a commercial debt will ultimately be enforceable in the United States of America. To obtain an enforceable foreign judgment, the plaintiff must show that it was rendered in harmony with due process, that the court had proper personal and subject matter jurisdiction, and that adequate notice was given such that the defendant could appear and defend itself. The judgment must not be obtained by extrinsic fraud, it must not violate United States public policy, it should be rendered in accordance with any agreement to adjudicate disputes, and it should be rendered by a convenient forum.

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Michael D. Fielding is an attorney in the Bankruptcy, Restructuring & Creditors’ Rights practice group of Husch Blackwell Sanders, LLP in Kansas City, Missouri where he focuses his practice on bankruptcy and commercial litigation. His accomplishments include serving as counsel in a successful Chapter 11 reorganization proceeding for a not-for-profit women’s shelter and counseling service. He also defended the Dominican Republic and its state-owned electrical company in an attempted confirmation of an adverse arbitration award.

Mr. Fielding has made numerous presentations on a variety of bankruptcy related topics including ethical issues relating to electronically stored information and avoiding arbitration in bankruptcy. Fluent in Spanish, he has published articles nationally and internationally on selected bankruptcy issues. He was also a contributing author for version 1.0 of the Open Compliance & Ethics Group's Internal Audit Guide.

________________________

¹9 Am Jur Proof of Facts 3d 687, section 3.
²Uniform Laws Annotated, Vol. 13, Part II, Pocket Part, p. 5 (2005).
³Society of Lloyd’s v. Turner, 303 F.3d 325, 330 (5th Cir. 2002); Society of Lloyd’s v. Ashenden, 233 F.3d 473, 477 (7th Cir. 2000).
⁴ Id.
⁵Society of Lloyd’s v. Reinhart, 402 F.3d 982, 994 (10th Cir. 2005).
⁶Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 472 (E.D. Pa. 2003).
⁷9 Am Jur Proof of Facts 3d 687, section 8.
⁸ See e.g., Int’l Transactions, Ltd. v. Embotelladora Agral Regiomontana, SA de CV, 347 F.3d 589, 594 (5th Cir. 2003).
⁹9 Am Jur Proof of Facts 3d 687, section 8.
¹⁰See e.g., Society of Lloyd’s v. Ashenden, 233 F.3d 473, 480 (7th Cir. 2000); Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680, 686-87 (7th Cir. 1987); Bolanos v. Gulf Oil Corp., 502 F.Supp. 689, 693 (W.D. Pa. 1980); Panama Processes, S.A. v. Cities Service Co., 796 P.2d 276, 285-86 (Okla. 1990).
¹¹CIBC Mellon Trust Co. v. Mora Hotel Corp., 743 N.Y.S.2d 408, 417 (N.Y. App. Div. 2002)
¹²Bank Melli Iran v. Shams Pahlavi, 58 F.3d 1406, 1410 (9th Cir. 1995).
¹³Bridgeway Corp. v. Citibank, 201 F.3d 134, 142 n.3 (2nd Cir. 2000).
¹⁴9 Am Jur Proof of Facts 3d 687, section 7.
¹⁵See e.g., Ackermann v. Levine, 788 F.2d 830, 838 (2nd Cir. 1986); Koster v. Automark Industries, Inc., 640 F.2d 77 (7th Cir. 1981); Nippon Emo-Trans Co., Ltd. v. Emo-Trans, Inc., 744 F.Supp. 1215 (E.D. N.Y. 1990).
¹⁶See e.g., Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997).
¹⁷See e.g., Choi v. Kim, 50 F.3d 244 (3rd Cir. 1995); Gondre v. Silberstein, 744 F.Supp. 429, 434 (E.D. N.Y. 1990).
¹⁸See e.g., Int’l Transactions, Ltd. v. Embotelladora Agral Regiomontana, SA de CV, 347 F.3d 589, 594 (5th Cir. 2003); Gondre v. Silberstein, 744 F.Supp. 429, 431 (E.D. N.Y. 1990).
¹⁹See e.g., Gondre v. Silberstein, 744 F.Supp. 429, 434 (E.D. N.Y. 1990); Julen v. Larson, 101 Cal. Rptr. 796, 798 (Cal. App. 1972); 9 Am Jur Proof of Facts 3d 687, section 9.
²⁰Julen v. Larson, 101 Cal. Rptr. 796, 798 (Cal. App. 1972).
²¹ 9 Am Jur Proof of Facts 3d 687, section 9.
²² Id.
²³ See e.g., Westminster Brokers, Ltd., 532 A.2d 130, 133 (D.C. App. 1987).
²⁴ Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 473 (E.D. Pa. 2003) (citations omitted and emphasis in original); Fairchild, Arabatzis & Smith, Inc. v. Prometco Co., Ltd., 470 F.Supp. 610, 615 (S.D. N.Y. 1979); Bank of Nova Scotia v. Tschabold Equipment Ltd., 754 P.2d 1290, 1294 (Wash. App. 1988).
²⁵ 9 Am Jur Proof of Facts 3d 687, section 10.
²⁶ Id.
²⁷ Bank of Nova Scotia v. Tschabold Equipment Ltd., 754 P.2d 1290, 1294 (Wash. App. 1988).
²⁸ 9 Am Jur Proof of Facts 3d 687, section 10.
²⁹ Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 473 (E.D. Pa. 2003).
³⁰ Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 475 (E.D. Pa. 2003). See also Society of Lloyd’s v. Reinhart, 402 F.3d 982, 995 (10th Cir. 2005).
³¹ Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 476 (E.D. Pa. 2003).
³² Society of Lloyd’s v. Mullin, 255 F.Supp. 2d 468, 475 (E.D. Pa. 2003); see also Milhoux v. Linder, 902 P.2d 856, 861 (Colo. App. 1995).
³³ Wanda Ellen Wakefield, Judgment of Court of Foreign Country as Entitled to Enforcement or Extraterritorial Effect in State Court, 13 A.L.R. 4th 1109 section 2.
³⁴ See e.g., Society of Lloyd’s v. Turner, 303 F.3d 325, 332 (5th Cir. 2002); McCord v. Jet Spray Int’l Corp., 874 F.Supp. 436, 439 (D. Mass. 1994).
³⁵ 9 Am Jur Proof of Facts 3d 687, section 12.
³⁶ 88 A.L.R.5th 545, section 2[a].
³⁷ CIBC Mellon Trust Co. v. Mora Hotel Corp., 743 N.Y.S.2d 408, 424 (N.Y. Sup. Ct. 2002); see also 9 Am Jur Proof of Facts 3d 687, section 14.
³⁸ See Hilton v. Guyot, 159 U.S. 113 (1895).
³⁹ Linda J. Silberman, “Enforcement and Recognition of Foreign Judgments in the United States,” 688 PLI/Lit 451, 458 (2003)
⁴⁰ Id at 458-59.
⁴¹ 9 Am Jur Proof of Facts 3d 687, section 2.
⁴² CIBC Mellon Trust Co. v. Mora Hotel Corp., 743 N.Y.S.2d 408, 421 (N.Y. App. Div. 2002) (citations omitted); see also UFMJRA section 4; 9 Am Jur Proof of Facts 3d 687, section 4 (1990).
⁴³ 9 Am Jur Proof of Facts 3d 687, sectionsection 17, 20.
⁴⁴ Id at sectionsection 2, 20

Enforceable Foreign Judgments

Obtaining Foreign Judgments for Commercial Debts that are Enforceable in the United States