Consider the following scenario. After a legal battle in a foreign country selected by the parties as the mandatory forum for disputes arising under their contract, one party prevails and obtains a money judgment against the other party. Unfortunately for the prevailing party, some or all of the losing party’s assets are in the United States.
The goal – executing the foreign-country judgment against those assets in the U.S. – is obvious. What is much less clear is how to make that foreign-country judgment enforceable in the U.S.
Drawing from our experience in litigating judgment-recognition issues, we demystify the process of converting a foreign-country judgment that is often of little use in the U.S. into a domestic judgment that is fully enforceable. With a particular emphasis on how the process works in Texas, we provide a roadmap of the recognition process and identify some of the tricky issues that can arise in this unique area of law.
Landscape of recognition procedures
Judgments of a foreign country, unlike judgments of a sister state, are not entitled to full faith and credit under the U.S. Constitution. Nor is there a general federal statute or an applicable international treaty that governs the process of recognizing foreign judgments in the U.S. Instead, judgment-recognition generally is a question of state law.
The states have not diverged too sharply from one another on judgment-recognition standards and procedures for foreign-country money judgments. They generally follow one of these three basic approaches:
- 16 states follow common law comity principles, which are best captured in the 19th century Supreme Court case Hilton v. Guyot and the Restatement of the Law (Third) of Foreign Relations Law of the United States;
- 11 states follow the 1962 Uniform Foreign Money-Judgments Recognition Act; and
- 23 states and the District of Columbia follow the 2005 Uniform Foreign-Country Money Judgments Recognition Act.
The similarity among these three approaches is stronger still because common law comity principles provide the foundation and much of the structure of both the 1962 Uniform Act and the 2005 Uniform Act.
Navigating Texas’ version of the 2005 Uniform Act
Texas recently joined the plurality of states that have adopted a version of the 2005 Uniform Act. Texas had previously followed a version of the 1962 Uniform Act. Although the two uniform acts share much in common, the updated act alters some of the judgment-recognition procedures, resolves certain issues left unaddressed in the older act, and clarifies a few key points.
The differences between the two acts become manifest at the first step in the judgment-recognition process. Under Texas’ now-superseded version of the 1962 Uniform Act, a party seeking recognition needed only to file an application with the clerk of a court, serve the notice of filing, and wait 30 days to see if the losing party contested recognition.
Texas’ updated act brings more formality to the process. A judgment-recognition proceeding now must be initiated as a full-fledged lawsuit, or as a counterclaim, cross-claim or affirmative defense in a pending action.
After initiating the recognition proceeding, the party seeking recognition bears the burden of establishing that the foreign-country judgment meets the basic requirements necessary for recognition – that it “grants or denies recovery of a sum of money” and that “under the law of the foreign country in which the judgment was rendered, [it] is final, conclusive, and enforceable.” The Act does not apply to judgments for taxes or fines, or for those rendered in connection with domestic relations.
If the party seeking recognition makes that initial showing, the burden then shifts to the party resisting recognition to establish a ground for nonrecognition. Texas’ version of the 2005 Uniform Act provides an exclusive list of three mandatory and nine discretionary grounds for nonrecognition.
The three mandatory grounds for nonrecognition listed in section 36A.004(b) are:
- the judgment was rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law;
- the foreign court did not have personal jurisdiction over the defendant; [and]
- the foreign court did not have jurisdiction over the subject matter.
Courts have discussed each of these mandatory nonrecognition grounds in the course of considering challenges under them. There are well-developed bodies of law, for example, on the due process and personal jurisdiction grounds.
The nine discretionary grounds for nonrecognition listed in section 36A.004(c) are:
- the defendant in the proceeding in the foreign court did not receive notice of the proceeding in sufficient time to enable the defendant to defend;
- the judgment was obtained by fraud that deprived the losing party of an adequate opportunity to present the party’s case;
- the judgment or the cause of action on which the judgment is based is repugnant to the public policy of this state or the United States;
- the judgment conflicts with another final and conclusive judgment;
- the proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be determined otherwise than by proceedings in the foreign court;
- jurisdiction was based only on personal service and the foreign court was a seriously inconvenient forum for the trial of the action;
- the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering court with respect to the judgment;
- the specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law; [and]
- it is established that the foreign country in which the judgment was rendered does not recognize judgments rendered in this state that, but for the fact that they are rendered in this state, would constitute foreign-country judgments to which this chapter would apply under Section 36A.003.
There is a well-developed body of case law interpreting these discretionary nonrecognition grounds. For example, there are numerous cases discussing the public policy, fraud, and reciprocity grounds. However, the case law is noticeably sparser on grounds (7) and (8), which were added in the 2005 Uniform Act. Be aware that the reciprocity ground for nonrecognition – ground (9) above – is not included in the 2005 Uniform Act, but is added by some states, including Texas.
If the party seeking recognition carries its initial burden and the party resisting recognition fails to successfully establish one of the grounds for nonrecognition outlined above, according to the Act, a Texas court “shall recognize the foreign-country judgment.” At that point, the foreign-country judgment becomes “enforceable in the same manner and to the same extent as a judgment rendered in [Texas].”
Traps for the unwary
Although the route to recognition of a foreign-country judgment now may appear to be straightforward, there are many hidden dangers along the way. Some of the more common ones are discussed below.
Personal jurisdiction. Courts are divided on whether a court asked to recognize a foreign-country judgment must have personal jurisdiction over the party who lost abroad. One international law scholar observes that courts fall into three broad camps: (1) no personal jurisdiction required; (2) either personal jurisdiction or at least assets in the state (quasi in rem jurisdiction) required; or (3) full in personam personal jurisdiction required.
Although the Texas Supreme Court has not addressed this issue, at least one Texas court of appeals has come down in favor of the “no personal jurisdiction required” approach, holding that “a trial court does not have to possess jurisdiction over the judgment debtor or the judgment debtor’s property in order to rule on a motion for nonrecognition under the Uniform Act.”
Forum shopping. Although judgment-recognition law is similar across the states, material differences remain, especially between the states that have updated to the 2005 Uniform Act and those that remain with the 1962 Uniform Act. Those differences and the permissive views of many courts on personal jurisdiction in this area combine to create an opportunity for forum shopping.
Accordingly, a party seeking recognition might consider pursuing initial recognition of a foreign-country judgment in a state with lower recognition standards and then afterwards obtaining recognition and enforcement of the judgment in other states pursuant to the Full Faith and Credit Clause.
Whether such a forum-shopping gambit will succeed varies by jurisdiction because courts are divided on whether a foreign-country judgment recognized by one state is entitled to full faith and credit in other states. Some refuse to extend full faith and credit under these circumstances, reasoning that doing so would encourage litigants “to seek recognition in whichever state offers the most lax standards.” Others hold that a sister state’s “decision to recognize the foreign nation judgment is entitled to full faith and credit.”
The Texas Supreme Court has not addressed this issue, but Texas courts thus far have declined to extend full faith and credit to a foreign-country judgment that has been recognized by another state.
Finality. The requirement that the foreign-country judgment be “final, conclusive, and enforceable” “under the law of the foreign country in which the judgment was rendered” can become quite complicated in practice. What constitutes a “final, conclusive, and enforceable” judgment varies even domestically from state to state.
Those differences take on new dimensions when looking from country to country. Compare, for example, the rule in England and Romania that a judgment is considered final and conclusive even though it is on appeal with the opposite rule in Japan that a pending appeal or the possibility thereof prevents a judgment from becoming final and conclusive.
Careful review of the rendering country’s law on the finality, conclusiveness and enforceability of judgments is therefore a key step in any effort to obtain recognition of a foreign-country judgment.
Default judgments. As a practical matter, special care must be taken when seeking to obtain recognition of a foreign-country default judgment. Courts may take a harder look at both the requirements for recognition and the nonrecognition grounds when presented with a default judgment from another country. The notice-related and jurisdictional nonrecognition grounds, in particular, can become a focus in this type of judgment-recognition proceeding.
Accordingly, a party seeking recognition of a foreign-country default judgment should address those concerns proactively. For example, the pleadings in such a case should explain in detail the steps taken to serve and provide notice to the defaulted party in the foreign proceeding and the basis of the foreign court’s jurisdiction. That work on the front end can alleviate the court’s concerns and set the stage for a smoother path to judgment recognition.
Authentication. Establishing the authenticity of a foreign-country judgment can involve multiple steps through unfamiliar legal terrain. This process may involve obtaining a certified translation and proving that the foreign-country judgment tendered to the court is in fact what it purports to be.
Like many states, Texas provides various options for authenticating documents in its rules of evidence. Additionally, the U.S. is a party to the 1961 Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, which provides for a type of certificate known as an apostille that can aid in authenticating judgments from signatory countries.
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Keeping this overview of Texas’ new judgment-recognition act in mind and remaining vigilant for these common judgment-recognition pitfalls can make your task easier regardless of which side you find yourself on in a judgment-recognition proceeding.
Mark Little is a senior associate in the Houston office at Baker Botts, where he focuses his practice on litigation and appellate matters.
Liam O’Rourke is an associate in the Houston office at Baker Botts, where he focuses his practice on energy litigation and securities and shareholder litigation .