Practical Considerations Of Multi-jurisdictional Enforcement of Judgments
"With more cross-border trade and foreign investments, businesses may find themselves in more disputes with counterparties before foreign courts or in international arbitration. Where a party chooses—or the parties’ contract requires—litigation in a foreign court, it may obtain a final judgment for money damages from the foreign court. However, that court judgment may not end the dispute. The losing party (the judgment debtor) may refuse to pay on the judgment or settle the dispute at a reasonable discount in exchange for giving up appeal rights, and the prevailing party (the judgment creditor) may not have seized assets prior to the judgment. In this situation, the judgment creditor or a distressed debt fund that purchases the judgment may seek to recognize and enforce the judgment in countries where the judgment debtor has assets. Where the final judgment is large, the parties may find themselves fighting or defending a global campaign to recognize and enforce the judgment in multiple countries where the judgment debtor has assets.
This article provides a brief practical overview of multi-jurisdictional enforcement of judgments. First, this newsletter surveys the laws on recognition and enforcement of foreign judgments of several different jurisdictions. The Hague Convention on Choice of Court Agreements has not yet entered into force, and there are accordingly procedural and substantive differences in the enforcement laws across countries, which should be accounted for in any global strategy. Second, this newsletter touches on some practical considerations to mount a successful global campaign to either enforce a judgment or defend against enforcement.
I. Survey of Recognition and Enforcement LawsThe laws that govern recognition and enforcement proceedings of foreign country judgments in various jurisdictions are often similar but not identical. This section provides a brief overview of those laws in several places where judgment debtors’ assets may be located, which are also countries in which Quinn Emanuel has offices: the United States, the United Kingdom, France, Russia and Hong Kong.
United States: In the United States, recognition and enforcement of foreign judgments is governed by state law. Many states have enacted a version of the Uniform Foreign Money-Judgments Recognition Act (the “Recognition Act”), helping to harmonize the standards for recognition and enforcement across states. In New York, the Recognition Act was enacted in 1970 as Article 53 of the New York Civil Practice Law and Rules (“CPLR”), to “promote the efficient enforcement of New York judgments abroad by assuring foreign jurisdictions that their judgments would receive streamlined enforcement” in New York. CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 100 N.Y.2d 215, 221, 792 N.E.2d 155, 159 (2003). Under Article 53, a foreign judgment is enforceable in New York if the foreign judgment is final, conclusive and enforceable where rendered even though an appeal therefrom is pending or it is subject to appeal.” CPLR §5302. A foreign judgment is conclusive where “it grants or denies recovery of a sum of money.” CPLR § 5303. Unless a ground for non-recognition is met (as discussed below), “‘foreign judgment[s] should be enforced in New York under well-settled comity principles without microscopic analysis of the underlying proceeding.’” Abu Dhabi Commercial Bank, 986 N.Y.S.2d at 458 (citing Sung Hwan Co. v. Rite Aid Corp., 7 N.Y.3d 78, 83, 850 N.E.2d 647, 651 (2006)). Other states, such as California, Illinois and the District of Columbia, have likewise enacted a version of the Recognition Act. See Cal. Civ. Proc. Code § 1715; 735 Ill. Comp. Stat. 5/12-663; D.C. Code § 15-363. Similar to New York, foreign judgments in California, Illinois and the District of Columbia that grant or deny recovery of a sum of money and that are final, conclusive, and enforceable under the law of the foreign country should be recognized. See, e.g., Hyundai Sec. Co. v. Ik Chi Lee, 215 Cal. App. 4th 682, 688, 155 Cal. Rptr. 3d 678, 681 (Cal. Ct. App. 2013). However, in contrast to New York, California, Illinois and the District of Columbia have now enacted the 2005 version as opposed to the 1962 version of the Recognition Act that remains in effect in New York. Accordingly, there are differences between each state’s analogue statute of which judgment creditors and debtors should be aware. See, e.g., Ahmad Hamad Al Gosaibi & Bros. Co. v. Standard Chartered Bank, 13-CV-1415, 2014 WL 4356135 (D.C. Sept. 4, 2014) (“[T]he New York statute governing recognition of foreign country judgments … provides New York courts with fewer grounds to withhold recognition of a foreign country judgment than are available to courts in the District of Columbia.”)
Each state’s statute further provides limited grounds for non-recognition of a foreign judgment.See CPLR § 5304; Cal. Civ. Proc. Code § 1716; 735 Ill. Comp. Stat. 5/12-664; D.C. Code § 15-364. Those grounds include, among others, if the judgment was rendered by a partial tribunal, the judgment was obtained by fraud, recognizing the judgment would be repugnant to public policy, the judgment conflicts with another final and conclusive judgment, or if the foreign proceeding was contrary to an agreement between the parties. See, e.g., Bridgeway Corp. v. Citibank, 45 F. Supp. 2d 276, 287 (S.D.N.Y. 1999), aff’d, 201 F.3d 134 (2d Cir. 2000) (refusing to recognize a Liberian judgment because the underlying proceeding occurred during “a state of chaos” and “civil war” in Liberia, “[t]he Liberian Constitution was ignored,” and “the record show[ed] that the regular procedures governing the selection of justices and judges had not been followed since the suspension of the 1986 Constitution.”); Bank Melli Iran v. Pahlavi, 58 F.3d 1406, 1412 (9th Cir. 1995) (refusing to recognize Iranian judgment against the sister of the former Shah of Iran for lack of due process where the evidence showed defendant could not personally appear before Iranian courts, could not obtain proper legal representation in Iran, and could not obtain local witnesses on her behalf). Where a judgment debtor can show one or more of these grounds exist, a United States court might not recognize the foreign judgment in question.
United Kingdom: Foreign judgments are not directly enforceable in the United Kingdom. Instead, depending on which country the foreign judgment is from, there are different enforcement procedures prescribed by regulation, statute or the common law.
For judgments from other European Union member states or parties to the Lugano Convention, the procedure for registering a foreign judgment in the UK is set out in the Brussels I Regulation. The Regulation provides the simplest procedure for enforcing foreign judgments in the UK, and is not limited to money judgments or final judgments. Where the judgment of an EU member state or a party to the Lugano Convention has been certified with a European Enforcement Order, it may be enforced in the UK without the need to apply for registration of the judgment.
For judgments from particular Commonwealth countries and former British colonies, the enforcement procedure is set out in the Administration of Justice Act 1920. For judgments from particular foreign countries that have reciprocal arrangements for recognizing UK judgments in their jurisdictions, the enforcement procedure is set out in the Foreign Judgments (Reciprocal Enforcement) Act 1933. Those two Acts apply to judgments from, amongst other countries, Canada, Australia, India, Israel, Singapore, New Zealand, the British Virgin Islands and the Cayman Islands. Pursuant to the Acts, a foreign judgment may be registered in the UK if it is for the payment of a sum of money in respect of compensation or damages, provided that the judgment is from a superior court and/or a recognized court of record (rather than district or county courts), and it is not subject to an appeal. The two statutes provide for limited defenses to registration. These defenses principally concern fraud, due process and the foreign court’s jurisdiction over the judgment debtor. There is no provision for the UK court to reconsider the merits of the case during the registration process.
For judgments from non-EU countries that are not covered by either the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933, the common law allows the holder of a foreign judgment to sue on that judgment as a debt. This latter group includes, for example, judgments from the United States and Russia. In England and Wales, foreign judgments can be enforced at common law only if they are: (1) for a “definite sum of money”, which includes amounts actually ascertained and amounts that merely require an arithmetic calculation; (2)”final and conclusive”, meaning that the foreign court would treat the judgment as res judicata and not able to be re-opened. A foreign judgment may be final and conclusive even though an appeal is pending in a foreign country; and (3) issued by a court that had jurisdiction over the party against whom the judgment is to be enforced, which the English court will evaluate as a question of English private international law (rather than the law of the foreign country). As with the statutes referred to above, the common law provides for some defenses to enforcement on the grounds of fraud, breaches of natural justice, and that the judgment is contrary to the English public policy. Importantly, there is no basis for the English courts to question or reconsider the merits of a foreign judgment. Enforcement of foreign judgments at common law in Scotland and Northern Ireland is on similar terms.
Russia: Arbitrazh Procedural Code (“APC”) of Russia provides that foreign judgments may be enforced on the basis of international treaty or federal law. Although a strict reading of this provision permits enforcement where provided for in a treaty (e.g., mutual legal assistance treaty (“MLAT”)) or in a Russian federal law (e.g., Russian bankruptcy law allows enforcement of foreign decisions on insolvency on the grounds of reciprocity even in the absence of an international treaty), our lawyers were the first to successfully enforce a foreign judgment where there was no direct MLAT or federal law. Specifically, the Russian courts enforced a decision of the UK High Court on the basis of a combination of international treaties (which, in their entirety, were seen by the courts as grounds for enforcement) and principles of reciprocity and comity (see Société Générale et. al. v. Yukos, case No. A40-53839/2005). In this case none of the grounds to deny the recognition and enforcement of the foreign judgment were applicable, namely:
1. The judgment has not entered into force in the state of the foreign court;2. The party was not timely and properly notified of the time and place the case was being considered, or could not give its explanations to the court for other reasons;3. A Russian court has exclusive jurisdiction to consider the case;4. An effective judgment of a Russian court has already been already delivered in a dispute between the same parties on the same subject matter and on the same grounds;5. There is a case concerning a dispute between the same parties, on the same subject matter and on the same grounds pending in a Russian court, which was commenced prior to the of proceedings in a foreign court;6. The term for the enforcement of the foreign court judgment has expired and was not restored by the Russian court;7. The enforcement of the foreign court judgment would contradict the public policy of Russia.
Russian cassation court referred to the Agreement between the UK and Russia on economic co-operation dated November 9, 1992 which established a national regime of access to the trial on the territory of both countries. The court also emphasized the right to a fair trial established by the Convention for the Protection of Human Rights and Fundamental Freedoms. The court also referred to Agreement on partnership and cooperation between the European Communities and the Russian Federation and Vienna Convention on International Treaties. This legal position has been relied upon in other cases involving the enforcement of UK and Dutch judgments in Russia. See, e.g., Boegli-Gravures S.A. v. LLC Darsail-ASP, case No. A40-119397/11, Rentpool B.V v. LLC Podyomnie technologii, case No. A41- 9613/09.
Moreover, there has been a trend in Russia to allow enforcement of a broader category of judgments, such as decisions on procedural matters and summaryjudgments. In particular, inMabofi v. Rosgas A.G. the trial court in Hungary rejected Mabofi’s claim based on the ICAC arbitration clause in the contract. The Hungarian appellate court reversed the trial court’s decision, inter alia, on the basis of exclusive jurisdiction of Hungarian courts over the case. A Russian court considered that Hungarian appellate court’s decision to have automatic effect in Russia on the basis of a USSR-Hungarian MLAT as judgment in non-property case. Similarly, in Société Générale et. al. v. Yukos, the court enforced a summary judgment of the UK court. At the same time, interim decisions, such as injunctive rulings, cannot be recognized and enforced (Information Letter of the Supreme Arbitrazh Court of Russia No. 78 dated 7 July 2004).
France: The recognition of foreign judgments in France is governed by a number of established and limited grounds. However, these grounds are not codified legislatively but rather arise from jurisprudence, where they have gradually evolved. The famous Munzer decision (Civ. 1re, 7 janv. 1964, GADIP, no 41; Rev. crit. DIP 1964. 344), rendered by the French Cour de cassation in 1964, was the first to lay out the conditions which must be met for the recognition of any foreign judgment, irrespective of subject. They were as follows: (1) the judgment had to conform to public order; (2) the foreign judge had to have had international jurisdiction according to French law (meaning there must have been a substantial connection between the dispute and jurisdiction where it was adjudicated, as assessed by a French judge on the basis of the circumstances of each case, see Simitch (Civ. 1re, 6 févr. 1985, n°83-11.241, GADIP no 70 ; Rev. crit. DIP 1985. 369)); (3) due process must have been respected; (4) the proper applicable law must have been applied to the dispute, according to French conflict of law rules; and (5) there must have been a total absence of fraud.
Two of these conditions have since been struck down in subsequent cases. In the 2007Cornelissen decision (Civ. 1re, 20 févr. 2007, n°05-14.082, Rev. crit. DIP 2007. 420), the requirement that a French judge review the law applicable to the dispute according to local conflict of law rules was removed. This requirement had been heavily criticized by doctrinal authorities and was largely a French particularity. See P. Mayer, V. Heuzé, Droit InternationalPrivé, Montéchristien, Lextenso, 2010 at para 387. When deciding to remove it, the Cour de cassation noted that it was sometimes relevant but largely unnecessary in the assessment of whether a foreign judgment ought to be executed on French territory. Moreover, in the Bachir ruling of 1967 (Civ. 1re, 4 oct. 1967, GADIP, no 45 ; Rev. crit. DIP 1968. 98), the requirement of due process, which centered on the need for a judgment to be enforceable and rendered by the proper authorities in its original jurisdiction, was placed under the umbrella of public order. Today, there are therefore three criteria used to evaluate foreign judgments in France: public order, international jurisdiction and absence of fraud. It is also worth noting that this general regime governing the recognition of foreign judgments is in some narrow cases where treaties are in place, inapplicable. For example, the recognition of a civil or commercial judgment from one E.U. country in another E.U. country is not governed by the above conditions but by the Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
Hong Kong: Hong Kong is a Special Administrative Region of the People’s Republic of China. A foreign judgment can be enforced in Hong Kong either under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (the “Ordinance”) or at common law. Enforcement under the Ordinance is the easier route because it requires only an ex parte application with the local court. But this avenue is limited to judgments entered in the following countries: Australia, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, The Netherlands, New Zealand, and Singapore. The other substantive requirements for recognition under the Ordinance are that the underlying judgment (1) must be final and conclusive and (2) must be a money judgment.Prime Credit Leasing SDN BHD v. Tan Cho Lung, 4 HKLRD 741 (2006); Cova Enterprises Ltd. v. Tjanaka, 1 HKLRD 199 (2003). A Hong Kong court will not enforce a foreign judgment that provides for injunctive relief or is penal in nature. See Nanus Asia Co. Inc. v. Standard Chartered Bank, 1 HKLR 396 (1990). Only limited defenses, including those related to the foreign court’s lack of jurisdiction, improper service, procurement of the foreign judgment by fraud, and the public policy concerns of Hong Kong, are available. A Hong Kong court will not reexamine the merits of the underlying foreign litigation.
An action to enforce a foreign judgment at common law is a comparatively cumbersome process. It is in essence an independent suit in Hong Kong and the judgment creditor must follow normally applicable service procedures. Judgments entered in the United States and the United Kingdom can be enforced in Hong Kong only at common law. Islamic Republic of Iran Shipping Lines v. Phiniqia International Shipping LLC, HKEC 1205 (2014); Morgan Stanley & Co. International Ltd. v. Pilot Lead Investments Ltd., 2 HKLRD 731 (2006). To be eligible for common-law recognition, the judgment must (1) be for a definite sum of money; (2) be final and conclusive; and (3) have been entered by a court with competent jurisdiction over the defendant. Id. With respect to finality, a Hong Kong court will generally refrain from enforcing a judgment during the pendency of an appeal. This raises the possibility of undue delay and asset dissipation. Judgment creditors can ameliorate that risk by requesting interim injunctive relief. With respect to jurisdiction, it is governed by private international law as interpreted in Hong Kong, not the law of the foreign forum. Jurisdiction can generally be asserted on the basis of the defendant’s physical presence in the foreign forum, appearance in the underlying legal proceeding or prior contractual consent to jurisdiction. As with the Ordinance, only limited defenses on the grounds of fraud, breaches of natural justice, and Hong Kong public policy can be raised. There is no mechanism for reconsideration of the merits of the underlying foreign litigation.
The recognition in Hong Kong of judgments entered on the Chinese mainland is governed by a separate set of rules.
II. Practical Considerations for a Global CampaignWhere a judgment creditor is considering filing multi-jurisdictional enforcement proceedings, or a judgment debtor finds itself defending multi-jurisdictional enforcement proceedings, certain practical considerations can make a difference between a winning and losing campaign. Below are some key considerations that every judgment creditor and debtor should bear in mind.
First, the location of assets. Before incurring the cost and time of bringing an enforcement action, a judgment creditor should be reasonably certain that there are assets against which to enforce the domesticated judgment and that those assets cannot be moved out of the jurisdiction while the enforcement action is pending. When formulating a defense strategy, a judgment debtor should consider whether it can legally remove assets from the jurisdiction without affecting its business and whether information on the location of its assets is easily obtained. For example, a publicly-listed company may have more public information about its assets and may be less able to move its assets quickly than a privately held company.
Second, the sequence of enforcement actions. If the judgment will be domesticated in several jurisdictions, the judgment creditor should decide whether to bring all the enforcement actions at once, or whether to bring them seriatim. If the recognition actions will be brought one after another, there could be an advantage in first domesticating a judgment in a respected jurisdiction with straightforward enforcement procedures, like New York, or choosing a particular jurisdiction which has prior judgments rendered by the foreign court that issued the judgment. Thereafter, the judgment creditor could proceed to domesticate the judgment in other jurisdictions with a higher threshold for domesticating foreign judgments. Although a judgment debtor would generally not be in a hurry to obtain a decision in any of the enforcement actions against it, if it was highly confident in defeating an enforcement action in a particular jurisdiction, it might consider speeding that action up to obtain a favorable decision first, such as by electing not to make procedural motions that could slow down the action.
Third, asset freezes. Some jurisdictions may allow assets to be frozen pending the outcome of the recognition proceedings, such as in France or New York, whereas other jurisdictions may require a high threshold to be met before the courts will freeze assets before the court has domesticated a foreign judgment. A judgment creditor should consider asset freezing wherever possible and a judgment debtor might consider removing assets from jurisdictions that easily allow asset freezes prior to the judgment creditor commencing an action.
Fourth, discovery. Some jurisdictions allow broad discovery, such as the United States. It might even be possible to get discovery from third parties, such as financial institutions, whether located within the U.S. or extraterritorially. In other jurisdictions, courts may only allow limited discovery, or bank secrecy laws may limit the amount of information that can be obtained from financial institutions. As part of a global strategy, a judgment creditor should consider an enforcement action in jurisdictions that permit liberal discovery. A judgment debtor should be aware that if an enforcement action is brought in a jurisdiction with liberal discovery, that particular action could be especially damaging to its global defense.
Every one of the issues above requires coordination at the global level to implement effectively. There are also a myriad of mundane but important ways for global collaboration, such as sharing translations of document exhibits to reduce client fees and cross-checking pleadings in every jurisdiction to ensure that they are consistent with each other. It is therefore important for the judgment creditor and debtor not only to retain the best lawyers in each jurisdiction but to assemble a team of lawyers in multiple countries who collaborate well with each other. This is one reason Quinn Emanuel not only has leading litigation specialists worldwide, but also places a premium on collaboration across offices and operating as one firm".