Will Your U.S. Judgment Be Enforced Abroad?

Home | HS Blog | Will Your U.S. Judgment Be Enforced Abroad? Table of Contents Toggle My law firm is frequently contacted by U.S. lawyers with judgments they are seeking to enforce overseas. The lawyer is seeking our assistance to enforce its U.S. court judgment against a foreign company that did business with the lawyer’s U.S.-based client. The procedural history is nearly always the same. The litigator served the defendant and, several months and many dollars later, they now have a U.S. judgment. When the foreign company refuses to pay even pennies on the dollar on the judgment, the litigator realizes the judgment will need to be taken overseas for enforcement. Only then (and usually not until we relay this information) does the litigator realize many countries do not enforce U.S. judgments. To have a chance at collection, the case often must be tried anew, only this time in a far less sympathetic forum. These nightmares are far too common, and their genesis is usually a contract that either calls for U.S. litigation or is completely silent on jurisdiction. The wise business lawyer has an arbitration provision, but unfortunately many contracts fail to contain this key element. I set forth below some suggestions for avoiding this nightmare, emphasizing European and, particularly, German legislation. Recognition of U.S. Judgments Under Foreign Local Law The United States is not a party to any bilateral treaties or multilateral international conventions governing reciprocal recognition and enforcement of foreign judgments. The reasons for the absence of such agreements seem to be that foreign countries perceive U.S. courts (particularly U.S. juries) as granting excessive awards (particularly in tort cases and particularly with punitive damage awards) and far too often asserting extraterritorial jurisdiction and disregarding international law. Absent a treaty, the question of whether the courts of a foreign country will enforce a U.S. judgment is governed by the rules of the foreign country and by international comity. Generally, U.S. judgments cannot be enforced in a foreign country without first being recognized by a court in that foreign country. The recognition and enforcement of U.S. judgments depend not only on the law of the foreign country, but also on the principles of comity, reciprocity, and res judicata. Foreign courts generally do not recognize U.S. money judgments unless: (1) the U.S. court had jurisdiction; (2) the defendant was properly served; (3) the proceedings were not vitiated by fraud; and (4) the judgment is not contrary to the public policy of the foreign country. Most European countries have similar code provisions, setting forth something along the lines of these four rules, but enforceability of U.S. judgments still varies widely from country to country, even within Europe. Some countries tend to enforce U.S. judgments, and some countries virtually never do. It can generally be said that non-default judgments not involving tort claims or punitive damages are more likely to be enforced. Enforcement problems in Europe usually arise when the U.S. court lacked jurisdiction, when the defendant was not properly served, or when there are public policy concerns. U.S. Court Jurisdiction European courts will not recognize U.S. judgments if the U.S. court lacked jurisdiction. Special attention needs to be paid to the fact that for purposes of recognizing foreign judgments, jurisdiction must be determined by the law of the European country, not by U.S. law. For instance, under the so-called “mirror-image principle,” German law projects its own jurisdictional rules on the foreign court, which is then treated as having international jurisdiction if a German court would have had jurisdiction had the situation been reversed. Under the Hague Choice of Court Convention, concluded in June 2005, signatories are to recognize and enforce judgments of other signatory countries when those judgments follow valid “choice of court agreements.” Under this convention countries are to enforce choice of court provisions and resulting judgments, much as the New York Convention does with arbitration clauses and subsequent arbitral awards. The EU (except for Denmark) is a signatory to this convention, but because the U.S. is not, the EU is under no legal obligation to enforce a U.S judgment. Proper Service European courts also frequently deny enforcement of U.S. judgments because of improper service of process. The defendant cannot assert this defense in the European court if it in any way engaged in the U.S. lawsuit. Consequently, this issue usually arises when trying to enforce a default judgment. Proper service usually requires service to have been in accordance with the laws of the European country, and, in most instances, pursuant to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of November 15, 1965, as well. Article 2 of the Hague Convention calls on each country to designate a central authority to receive service requests from other countries. Article 5 provides that the central authority shall itself render service or have the document served by an appropriate agency pursuant to the country’s own service of process laws or by a particular method requested by the applicant. It is essential to serve the right person with authority to accept such service, but it is equally important to provide the defendant with a translation of the complaint and summons. Failing to translate the court documents would, in most Hague Convention signatory countries, preclude a finding of proper service, even where a defendant had ample notice of the lawsuit. We see this requirement neglected at least as often as it is followed. Public Policy European countries will not recognize foreign judgments when doing so cannot be reconciled with their own laws. Enforcement ability will be denied if major principles, such as the violation of fundamental rights or fundamental principles of local civil procedure or the like, were disregarded by the foreign court that granted the judgment. Punitive and treble damage awards are generally regarded as excessive and contrary to the public policy of most European countries, and these portions of a judgment almost always should be removed from the U.S. judgment before taking it to Europe for recognition and enforcement. Our experience is that the U.S. federal courts are quite willing to give a new judgment with these damages removed, to make their judgment more likely to be enforced overseas. Conclusion Getting U.S. judgments recognized and enforced in European courts is possible, but only if the U.S. litigation is handled from its inception with an eye towards European enforceability. Before filing suit in the United States, it is critical to know the requirements for judgment recognition in the European country in which the judgment will eventually need to be recognized and enforced. Check Out Our Practice Areas Share Twitter Facebook LinkedIn E-mail Comment Nadja Vietz Nadja focuses on assisting American and European companies in their foreign direct investments into Spain and Germany and on assisting European companies with their foreign direct investment into the United States. Harris Sliwoski Attorney Read more posts [email protected] Dan Harris Dan Harris is a founding member of Harris Sliwoski, an international law firm where he mostly represents companies doing business in emerging market countries. Most of his time is spent helping American and European companies navigate foreign countries by working with the international lawyers at his firm in setting up companies overseas (WFOEs, Subsidiaries, Rep Offices and Joint Ventures), drafting international contracts, protecting IP, and overseeing M&A transactions. In addition, Dan writes and speaks extensively on international law, with a focus on protecting foreign businesses in their overseas operations. He is also a prolific and widely-followed blogger, writing as the co-author of the award-winning China Law Blog. 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