Enforcement of Foreign Judgments in the United States - · PDF fileEnforcement of Foreign Judgments in the United States ... Federal vs. State court does not generally affect what

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Enforcement of Foreign Judgments in the United States

Union Internationale des AvocatsWinter Seminar

February 27, 2014

Robert K. KryMoloLamken LLP 600 New Hampshire Ave., NWWashington, DC 20037(202) [email protected]


1. Obtaining Recognition

2. Grounds for Resisting Recognition

3. Enforcement After Recognition

4. Asset Discovery

5. Arbitral Awards

6. Sovereign Immunity

Overview


The United States has a federal system Federal and State courts in 50 different States

Each court can act only on property or persons subject to its jurisdictionSeek recognition where the judgment debtor has either: property or other minimum contacts

Once you have recognition in one U.S. court, you can use the “Full Faith and Credit” Clause to obtain recognition in others

Federal or State court? Federal courts may be more receptive to foreign judgments Additional jurisdictional requirements apply

»diversity, amount in controversy Federal vs. State court does not generally affect what law applies

1. Obtaining RecognitionWhat Court?


Recognition is normally governed by state law, not federal lawExceptions:

»arbitral awards (New York Convention)»defamation judgments (SPEECH Act)

About two-thirds of the States have adopted Uniform Acts(some with modifications): 1962 Uniform Foreign Money-Judgments Recognition Act 2005 Uniform Foreign-Country Money Judgments Recognition Act

Some States still follow common-law rules (judicial precedent) E.g., Hilton v. Guyot, 159 U.S. 113 (1895).

What Law?


Most States (e.g. New York) require a new action to recognize the judgment complaint plus motion for summary judgment

Some States have streamlined recognition procedures similar to procedures for domestic sister-state judgments

States vary as to technical requirements e.g., authentication

What Procedures?


(1) the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law focus is on systemic unfairness rather than a particular case See, e.g., U.S. State Department Country Reports; expert testimony 2005 Act also includes case-specific unfairness as permissive ground

(2) the foreign court did not have personal jurisdiction over the defendant personal service in foreign state voluntary general appearance forum-selection clause domicile business offices or vehicles (specific jurisdiction only)

(3) the foreign court did not have jurisdiction over the subject matter determined by foreign law

2. Grounds for Resisting Recognition

Uniform Foreign Money-Judgments Recognition Act § 4(a).

Mandatory Grounds for Non-Recognition


(1) the defendant in the proceedings in the foreign court did not receivenotice of the proceedings in sufficient time to enable him to defend compliance with foreign service of process requirements consistency with U.S. standards of due process

(2) the judgment was obtained by fraud only extrinsic fraud (rule not consistently followed)

(3) the cause of action on which the judgment is based is repugnant to the public policy of this state narrow exception (ordre public) – not mere difference in laws

(4) the judgment conflicts with another final and conclusive judgment last-in-time rule (not consistently followed)

Uniform Foreign Money-Judgments Recognition Act § 4(b).

Permissive Grounds for Non-Recognition


(5) the proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court forum-selection clauses arbitration clauses

(6) in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action “forum non conveniens” doctrine

Uniform Foreign Money-Judgments Recognition Act § 4(b).

Permissive Grounds for Non-Recognition (Continued)


Federal “SPEECH Act” (2010) enacted to address problem of “libel tourism”:

[A] domestic court shall not recognize or enforce a foreign judgment for defamation unless the domestic court determines that—

(A) the defamation law applied in the foreign court’s adjudication provided at least as much protection for freedom of speech and press in that case as would be provided by the First Amendment . . . ; or

(B) even if the defamation law applied in the foreign court’s adjudication did not provide as much protection for freedom of speech and press as the First Amendment . . . , the party opposing recognition or enforcement of that foreign judgment would have been found liable for defamation by a domestic court applying the First Amendment . . . .

28 U.S.C. § 4102.

First Amendment standard: public figure must show “actual malice” – knowledge the

statement was false or reckless disregard of the truth(New York Times Co. v. Sullivan, 376 U.S. 254 (1964))

Non-Recognition of Defamation Judgments


1. Foreign judgment still on appeal You can obtain recognition in the United States even though an

appeal is still pending in the foreign country Uniform Act applies to any foreign judgment that is final and conclusive and enforceable where rendered even though an appeal therefrom is pending or it is subject to appeal.

Uniform Foreign Money-Judgments Recognition Act § 2.

A pending appeal may be a basis for seeking a stay court may require a bond/security

If the judgment debtor prevails on appeal, it can seek to vacate

2. Foreign nation does not grant reciprocity to U.S. judgments Most States no longer require reciprocity as a condition to recognition

(although some do). no reciprocity requirement in Uniform Acts

Not Grounds for Non-Recognition


Targeting debtor property held by third parties is often the best strategy because third parties are more likely to comply with court orders and not conceal or abscond with assets

Examples:» banks or other financial institutions where the debtor maintains

bank accounts, brokerage accounts, or other liquid assets» customers or other third parties who owe the debtor money» suppliers or other third parties who owe the debtor goods in

return for payment

Targeting debtor property held by the debtor may make sense where the property is hard to transfer or conceal

Examples:» real estate

Certain property may be exempt (e.g. “homestead” exemption) Bankruptcy filing imposes an “automatic stay” (11 U.S.C. § 362)

3. Enforcement After RecognitionIdentifying Assets for Execution


Vary widely from state to state

Attachment/Restraining Notice temporarily freezes assets pending direction of the court can be issued by counsel or court clerk without judicial involvement typically issued to financial institutions holding debtor assets,

or to third parties who owe money to the debtor

Turnover Order an in personam order to transfer certain property to the creditor can be issued against either the debtor or third parties because it is in personam, not necessarily limited to property

in the state

Procedures for Execution


Appointment of Receiver court can appoint a receiver to sell or administer debtor’s property receiver can be the creditor’s lawyers

Garnishment an order, typically to the judgment debtor’s employer, to pay some

or all of the debtor’s income to the creditor instead

Writ of Execution physical seizure of debtor’s property executed by U.S. Marshals or equivalent state officers

Procedures for Execution (Continued)


Liberal U.S. discovery rules apply to judgment enforcement

Discovery is available from both the judgment debtor and third parties

Types of discovery include: Depositions Document Requests Interrogatories

Discovery is not necessarily limited to assets within the jurisdiction Once you have a recognized judgment in one State, you can use

asset discovery to find out where else the debtor has assets, and then obtain additional judgments there

4. Asset DiscoveryScope of Discovery


Assets of the Debtor

Payments Received by the Debtor Recurring receipts help identify third parties that may owe

the debtor money in the future

Payments Made by the Debtor Purchase payments help identify third parties who may be

holding money on the debtor’s behalf or who may owe the debtor goods

Discovery Strategy


The United States has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (June 10, 1958, 21 U.S.T. 2517) and implemented it through the Federal Arbitration Act (9 U.S.C. §§ 201 et seq.)

Enforcement is thus governed by federal rather than state law

Under the New York Convention, there is no need for a judicial order confirming the arbitral award from the rendering nation. The award itself can be recognized and reduced to judgment by a U.S. court

Procedure for recognition is streamlined automatic federal court jurisdiction (case arises under federal law) petition to confirm award (summary proceeding) (9 U.S.C. § 207)

5. Arbitral AwardsProcedure Under the New York Convention


1.(a) The parties to the agreement . . . were . . . under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it . . . ; (b) The party against whom the award is invoked was not given proper notice . . . or was otherwise unable to present his case; (c) The award . . . contains decisions on matters beyond the scope of the submission to arbitration . . . ; (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties . . . ; (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which . . . that award was made.

2.(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; (b) The recognition or enforcement of the award would be contrary to the public policy of that country.

New York Convention arts. V.1, V.2.

Grounds for Non-Recognition Under the New York Convention


Judgments against sovereigns arise in several contexts, for example: sovereign debt litigation (sovereign issues government bonds; indenture

includes a waiver of sovereign immunity; sovereign defaults on the bonds; hedge funds buy up the defaulted bonds and try to collect) investment arbitration (foreign investor agrees to a joint venture with the

sovereign; project development agreement contains an arbitration clause and waiver of sovereign immunity; sovereign breaches the agreement; investor obtains an arbitral award and tries to collect) terrorism claims (Congress enacts a statutory exception to sovereign

immunity for claims against state sponsors of terrorism; victims obtain multimillion-dollar default judgments against countries like Iran and Cuba; plaintiffs try to collect)

The Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602 et seq., prohibits execution and attachment of sovereign property subject to certain exceptions

Unlike some countries’ laws, the FSIA restricts execution even where there is a waiver of sovereign immunity

6. Sovereign Immunity


The property in the United States of a foreign state . . . used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution . . . if—

(1) the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication . . . ,

(2) the property is or was used for the commercial activity upon which the claim is based,

(3) the execution relates to a judgment establishing rights in property which has been taken in violation of international law . . . ,

(4) the execution relates to a judgment establishing rights in property(A) which is acquired by succession or gift, or (B) which is immovable and situated in the United States . . . ,

(5) the property consists of any contractual obligation . . . under a policy of automobile or other liability or casualty insurance . . . ,

(6) the judgment is based on an order confirming an arbitral awardrendered against the foreign state . . . , or

(7) the judgment relates to a claim [for terrorism against a state sponsor].

28 U.S.C. § 1610(a).

Exceptions to Immunity


Issue currently pending before the United States Supreme Court in Republic of Argentina v. NML Capital, Ltd., No. 12-842

One view: If the sovereign has waived its immunity from suit, the court should be able to order asset discovery against the sovereign to the same extent as any other judgment debtor

Opposing view: Since the sovereign’s property is presumptively immune from execution even if there is a waiver of immunity, asset discovery should not be permitted unless the creditor can identify some specific basis for overcoming immunity

Decision is expected by June 2014

Asset Discovery Against Foreign Sovereigns


Asset Discovery Against Foreign Sovereigns

The issue is currently pending before the United States Supreme Court in Republic of Argentina v. NML Capital, Ltd., No. 12-842

One view: If the sovereign has waived its immunity from suit, the court should be able to order asset discovery against the sovereign to the same extent as any other judgment debtor

Opposing view: Since the sovereign’s property is presumptively immune from execution even if there is a waiver of immunity, asset discovery should not be permitted unless the creditor can identify some specific basis for overcoming immunity

Decision is expected by June 2014Robert K. Kry

MoloLamken LLP 600 New Hampshire Ave., NW

Washington, DC 20037(202) 556-2011

[email protected]

Enforcement of Foreign Judgments in the United States - · PDF fileEnforcement of Foreign Judgments in the United States ... Federal vs. State court does not generally affect what

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