How to Enforce Foreign Country Money Judgments Against U.S. Assets

October 16, 2016

What happens when a creditor receives a money judgment from a non-U.S. tribunal, but the judgment debtor’s assets are located within the United States? In legal-ease, this is considered a “foreign country money judgment,” and the United States is known to be liberal in their recognition and enforcement of such. Once a judgment creditor has received a money judgment outside of the United States, the judgment will likely be recognized in the U.S. jurisdiction where the debtor’s assets are located and then enforced against said assets to satisfy the outstanding money judgment.i

 

Understanding the laws applicable to foreign country money judgments is valuable and important to judgment creditors, as international trade/business results in more assets being located in different countries, as well as an increase in international litigation. This article will provide an overview of, and acknowledge the main differences between the three avenues to recognize and enforce a foreign country money judgment in the United States.

 

A state may choose to follow one of three legal frameworks:

  1. The 1962 Uniform Foreign Money-Judgments Recognition Act;

  2. The 2005 Uniform Foreign-Country Money Judgments Recognition Act; or

  3. The Restatement (Third) of Foreign Relations Law, §§ 481–482.

The United States is not a party to any international treaty on the recognition and enforcement of foreign country money judgments; thus, state law primarily governs. As of now, thirteen states follow the 1962 Recognition Act,ii twenty-one states follow the 2005 Recognition Act, iii and sixteen states have not adopted the 1962 or 2005 Recognition Acts.iv The sixteen states without an adopted Uniform Recognition Act rely on the Restatement (Third) and the doctrine of comity to govern whether foreign country money judgments will be recognized and enforced.

 

The 1962 Uniform Foreign Money-Judgments Recognition Act

The 1962 Recognition Act was promulgated to establish uniform and clear standards for state courts to enforce foreign country money judgments, with the purpose to persuade other countries to recognize/enforce money judgments rendered in the states. A “money judgment” is one that “grants or denies recovery of a sum of money.”v The Act does not apply, however, to judgments for taxes, fines, penalties, or domestic relations. Although the principle concern was international reciprocity of money judgments, the Act does not require reciprocity as a condition to recognition and enforcement. In practice, this means that a judgment creditor need not worry whether the foreign country has previously recognized/enforced U.S. money judgments or vice versa. So long as the requirements set forth in the Act are satisfied, the foreign country money judgment will likely be recognized and enforced by the U.S. state court.

 

So, a judgment creditor has received a foreign country money judgment and discovers that the judgment debtor holds assets in the United States; what now? The first step is recognition. The Act applies only to those judgments that are final, conclusive, and enforceable in the foreign country.vi A pending appeal of the foreign judgment or the opportunity for an appeal does not affect a judgment’s finality, conclusiveness, or enforceability.vii

 

Section 4 of the Act sets forth the three mandatory grounds for a U.S. state court to deny recognition,viii and six discretionary grounds for non-recognition.ix A judgment cannot be deemed “conclusive” and therefore “recognizable” if: (1) the foreign judicial system does not provide impartial tribunals or the procedures are incompatible with due process of law; (2) the foreign court did not have personal jurisdiction over the defendant; or (3) the foreign court did not have subject matter jurisdiction. The discretionary grounds for non-recognition include when the foreign judgment is obtained by fraud, the judgment is repugnant to the public policy of the U.S. state, and when the judgment conflicts with another final and conclusive judgment.x

 

When a foreign country judgment does not violate the mandatory requirements and the discretionary grounds are denied by the court, “the foreign judgment is enforceable in the same manner as the judgment of a sister state” under the Full Faith and Credit Clause.xi An important practice tip is that the judgment debtor need not be subject to personal jurisdiction in the U.S. state court that the judgment creditor is seeking to recognize and enforce the foreign judgment. Thus, when a judgment debtor has assets in the U.S. state, and the grounds for non-recognition are not present or permitted, the foreign country money judgment will be enforceable by the court against the U.S. assets.

 

The 2005 Uniform Foreign-Country Money Judgments Recognition Act

The 2005 Recognition Act is a revised version of the 1962 Recognition Act. Both Acts generally operate in the same fashion, yet the 2005 Act contains several significant additions. To begin, the 1962 Recognition Act made no reference to burdens of proof. The 2005 Act now states that the party seeking recognition of a foreign country money judgment has the burden to establish that the Act applies.xii Conversely, the Act places the burden to establish grounds of non-recognition on the party resisting recognition of the foreign country money judgment.xiii

 

Secondly, the mandatory grounds for non-recognition are identical between the Acts, but the 2005 Act added two additional discretionary grounds for non-recognition––when there is substantial doubt as to the integrity of the foreign court,xiv and if the “specific proceeding [is] not compatible with the requirements of due process of law.”xv

 

Thirdly, the 2005 Act created a statute of limitations for enforcement of a foreign country money judgment. If there is no limit on enforceability in the foreign country (i.e. a statute of limitations), the foreign judgment will be deemed unenforceable after “fifteen years from the date that the foreign country judgment became effective in the foreign country.”xvi

 

Lastly, the 2005 Act addresses the specific procedures available for seeking recognition of a foreign country money judgment. If recognition is sought as an original matter, the party must file an independent action in the respective U.S. court to obtain recognition.xvii But, when recognition is sought in a pending U.S. action, the party may raise the issue in a counterclaim, cross-claim, or by affirmative defenses.xviii The 1962 Act made no reference to recognition procedures and confusion amongst courts ensued, which appeared to eviscerate the purpose of having a “uniform” recognition act.

 

Listed above are the four primary additions concerning recognition and enforcement of a foreign country money judgment in a U.S. tribunal. These additions only affect those states that have adopted the 2005 Recognition Act. The states that have only adopted the 1962 Recognition Act are not impacted by the 2005 Act’s revisions.

 

The Restatement (Third) of Foreign Relations Law

Although most states have adopted either the 1962 or 2005 Recognition Acts, those that have not rely on common law principles as stipulated in the Restatement (Third) of Foreign Relations Law. States that rely on the Restatement tend to follow the comity approach as analyzed and held by Supreme Court of the United States in Hilton v. Guyot.xix

 

Similar to the uniform acts, the Restatement applies to “conclusive” foreign judgments.xx But, the Restatement applies to more than judgments granting or denying a sum of money, including those that “establish[] or confirm[] the status of a person, or determine[] interests in property.”xxi Section 482 of the Restatement lists the mandatory and discretionary grounds for non-recognition of foreign country judgments.

 

The Restatement’s mandatory grounds for non-recognition are substantially similar to the uniform acts, however it differs by holding that a lack of subject matter jurisdiction is a discretionary not mandatory ground for non-recognition.xxii The Restatement has one additional difference from the 1962 Recognition Act, which is that a court may not recognize a foreign judgment if it “is repugnant to the public policy of the United States or of the State where recognition is sought.”xxiii The 1962 Recognition Act lists the discretionary ground for non-recognition as when the judgment is repugnant only to the public policy of the state, with no explicit consideration for the public policy of the United States.xxiv The 2005 Recognition Act, however, aligns with the wording of the Restatement.xxv

 

Conclusion

When a party to a foreign country money judgment is granted a sum of money, that judgment may be used to attach assets located in the United States. The judgment debtor need not be subject to personal jurisdiction in the U.S. state for the foreign judgment to be recognized and enforced. As the United States has not signed any treaty in relation to recognition and enforcement of foreign country money judgments, state law generally governs. For a foreign country money judgment creditor, it is crucial to look to the law of the jurisdiction where the U.S. assets are located, as the requirements and procedures for recognition and enforcement depend on the idiosyncratic regulations of the law adopted by the respective state. A state can either adopt the 1962 or 2005 Recognition Acts, or follow the common law principles of comity stipulated in the Restatement (Third) of Foreign Relations Law.

 

 

 

Curran Antonelli represents a broad range of businesses and corporate entities, private equity funds, as well as governmental agencies and other interested parties in all phases of the bankruptcy process and in bankruptcy related transactions and litigation.  As advocates and trusted business advisors, our well-established foundation of knowledge and understanding of our clients’ business interests, enables our attorneys to deliver unparalleled individualized attention to our clients of all sizes with their litigation and corporate transactional needs.

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