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Alan Cohen

8 Pertinent Questions about Foreign Judgment Enforcement for Commercial Debt Collection in USA

Complexity in commercial debt collection cases reaches a whole new level when a foreign jurisdiction is involved. If your debtor is in the USA and you have a foreign court’s order to receive your monies, there are a number of things that you need to know before you can successfully pursue what is yours.

As an experienced legal services establishment, the Law Offices of Alan M. Cohen’s, LLC, website is a platform for professional guidance for all matters related to debt collection.To help you with better planning your foreign judgment enforcement problem, here are eight critical questions whose answers you should know before you pursue legal assistance in any state of USA for with regard to foreign judgment enforcement.

1.  Is USA party to any multilateral treaty that would assist me in enforcing foreign judgment to successfully collect my debt?

Let’s begin with the most fundamental question: Is USA even part of any agreements or treaties that make it liable to entertain foreign judgments?

The answer is no. USA has not signed any such agreements with any other country and is not party to any treaties bounding it to any such obligations. US courts are not legally bound to recognize any foreign court’s judgments.

The three treaties that come rather close to such an obligation and that the US is party to are:

I. The UN Conventions on the Recognition and Enforcement of Foreign Arbitral Awards 1958 – more commonly known as the New York Convention;

II. The Multilateral Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 – more commonly known as the ICSID Convention; and

III. The Inter-American Convention on International Commercial Arbitration 1979 – more commonly known as the Panama Convention

Generally, judgments and arbitration awards emerging from decisions linked to The New York Convention and the Panama Convention are easier to pursue in USA than other foreign judgments. Similarly, decisions made by an ICSID Conventional panel are to be followed by USA courts as domestic court decisions.

2. Does USA have any federal laws that could help me in enforcing a foreign court’s judgment for debt collection?

No. There are no federal laws that can be pursued to ensure enforcement of a foreign judgment, regardless of whether or not it is associated with commercial debt collection. Every state’s courts in USA are to pursue the state laws or any related common laws to enforce any foreign judgments. In fact, a court may even refuse to recognize aforeign judgment if it so deems right.

Neither can a federal statute help you in this regard nor a letter rogatory from the foreign court that issued your decision.

For further understanding, consider this information: Commonly referred to as the 1962 Model Act (And, since its update in 2005, the 2005 Model Act or, officially, the Uniform Foreign Country Money Judgments Recognition Act), the 1962 Uniform Foreign Money Judgments Recognition Act was drafted majorly as a consequence to Hilton v Guyot, 159 US 113 (1895) to remedy the problem of foreign courts refusing US courts’ judgments due to the inconsistent nature of differences in the country’s law of recognition and enforcement of foreign judgments.

The 2005 update has since been adopted to varying degrees by 23 US states and the District of Columbia, with Texas and North Dakota only joining the group of states in 2017. However, the legislation supporting adoption of the Act in Massachusetts is still pending.

In short, some states of USA follow the 1962 Model Act, some others follow its 2005 version, and some others still address the problem of recognizing and enforcing foreign judgments based on traditional common law practices.

3. Do American courts ever recognize any foreign judgments for debt collection at all?

Yes, they do, but each state has its preferences. Provision of justice is the utmost guiding principle of the American judiciary system, and courts want to help parties – domestic or foreign – in getting what they are owed but are limited by the legislations passed by lawmakers.

Generally, however, with certain qualifications, the courts across USA have shown the will to recognize and even enforce foreign judgments of civil nature for fixed amounts, which means there are strong disagreements on recognition or awarding of additional taxes, fines and/or penalties. See, for instance, Huntington v Attrill, 146 US 657, 673-674 (1892), where the court further determined that the penal laws of one nation may not be enforced by the courts of another.

However, courts are at liberty to approve such awards if the award granted is for damages recognized by the state’s law as fair punitive compensation. For instance, De Fontbrune v Wofsy, 838 F3d 992, 1005 (Ninth Circuit, 2016) concluded with award of punitive damages initially approved by a French court because California’s law recognized that particular type of punitive award.

4. Should I take my case for foreign judgment enforcement to a particular court to attract better odds?

This is what you need to know regarding the matter at hand:

Virtually all state courts in USA will require you to file a lawsuit in the state court that has enforcement jurisdiction over your foreign judgment. You can file your action in either a federal court in the state or in a state court. The federal court will most probably determine the case using the law of the state it sits in, though some principles of the federal common law may be applicable in certain circumstances.

Additionally, you may file for foreign judgment enforcement using arbitral award recognized by the Panama Convention or the New York Convention.

5. Can the party against whom I hold a foreign judgment successfully raise defense to liability recognized in the foreign judgment?

Yes, that is entirely possible, and mainly depends on the state in which you are filing your petition. Generally, the debtor you are pursuing may defend their position using any of the defensive arguments recognized by the 1962 and 2005 Model Act or common law traditions, or both.

We already know a US court will simply refuse to recognize your petition if the foreign judgment includes awards that go against the constitution of USA. For example, see Osorio v Dole Food Co. 665 F Supp 2d 1307 (SD Fla 2009) where the court did not recognize the foreign court’s judgment on several grounds, including the fact that the awards in the foreign judgment were found in conflict with several US state and federal laws.

Therefore, the defendant, as long as they find a defense recognized by the state or federal laws of USA, may be able to build a defense against your petition. In this regard, if you pursue action using either the New York Convention or the Panama Convention platform, the damages recognized in the foreign judgment, and awards granted therein, will be judged on merit based on the descriptions provided in the texts of the said Conventions.

6. What requirements should I fulfil for a US court to recognize the foreign judgment I hold for collecting my debt?

The two foremost requirements your foreign judgment enforcement petition must fulfil for any chance of success in American courts are (a) that its basis is not fundamentally in conflict with any of the statutes of the US constitution or the law of the state where your petition is filed, and (b) that it grants you a certain specific amount as the compensatory award.

With these two characteristics, your petition will may some ground in an American court, and this may be the beginning of the court’s recognition of your foreign judgment.

The next important qualification is that of the permission of appeal in the foreign court that issued the foreign judgment. If there is considerable room for an appeal in the issuing court, or if an appeal has already been filed there, an American court would prefer to reserve judgment on a petition pursuing foreign judgment enforcement until such an appeal has been resolved in the issuing court.

As far as grounds for refusal to recognize a foreign judgment are concerned, the following may be the foremost on any list in any US state that follows either the 1962 or the 2005 Model Act:

I. The issuing court functions in a system that does not fulfil the US constitution’s requirements for an impartial tribunal system or due process;

II. The foreign issuing court did not possess the jurisdiction to move the defendant for legal compliance to its judgment; or

III. The foreign issuing court did not possess jurisdiction over the subject matter of the lawsuit.

You might want to study sections 4(a) and 4(b) of the 1962 and the 2005 Model Acts respectively for further information in this regard. As for further information on a US court’s discretionary power for refusal to recognize foreign judgments, see section 4(c) of the 2005 Model Act. Those states that have not adopted either of the Model Acts follow the common law principles, which also practice similar grounds for refusing to recognize foreign judgments.

7. Could an injunction help with my case?

This is a matter of discord and many states in USA are currently in mutual disagreement on this issue. Nevertheless, the US Racketeer Influenced and Corrupt Organizations Act (RICO Act) was used by a federal appellate court in 2016 to grant injunctive relief in a case of foreign judgment enforcement. Hearing the appeal on Chevron Corp v Donziger, Case No. 14-826, a panel in the US Courts of Appeal for the Second Circuit unanimously awarded Chevron Corporation injunctive relief on a foreign judgment of an Ecuadorian court that was procured using fraudulent means.

While the lower court where the lawsuit was first determined discovered this fraudulent practice and awarded Chevron Corporation acquittal from the allegations included in the lawsuit, it also enjoined the prosecution, including Donziger and partners, to never pursue to have this foreign judgment recognized or enforced in any US court. The US Courts of Appeal affirmed these decisions in full.

If your foreign judgment has been awarded after due process and the defendant has sought fraudulent means to escape due punishment, or vice versa, a US court may practice injunctive relief while deciding the case.

8. What is the one thing that can have my foreign judgment disqualified in any American court without any chance of redemption?

It would have to be the problem of procedural equivalence. If the foreign judgment you seek to enforce in a US court is in any significant way against the rights of parties declared in the US constitution, including mandatory due process and determination of the case in an impartial tribunal, you can expect your petition to be refused any further pursuit in an American court.

Conclusion

We hope the important questions and their answers we provided above will help you understand how foreign judgment enforcement is done in the United States. If you are represented by a professional team of attorneys who understand American procedures related to foreign judgment enforcement and are experts in commercial debt collection, you can expect to give your foreign judgment a shot in an American court.

When it comes to the state of Massachusetts, the Offices of Alan M. Cohen, LLC, can immensely help you seek justice and collect your due monies from elusive borrowers using the full force of the law. We can provide comprehensive legal guidance and services to not only domesticate your foreign judgment in a Massachusetts court but also help in recovering your monies from any debtors located within the state of Massachusetts.

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Apart from advanced knowledge of foreign judgment enforcement, our debt collection services have earned the highest rating from Martindale-Hubbell, an impartial nationwide recognized peer review and rating agency.

You can contact us for any further information regarding your foreign judgment by calling us on (508) 620-6900 or sending us an email to acohen@collections-law.com.

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