Debt Collection in USA

An Expert's View about Legal Services in the United States

Posted on: 15 Jun 2010

In this guide, the main focus is the recognition and enforcement in the USA of judgments of foreign country courts. It does not deal, other than minimally, with the recognition and enforcement in the USA of arbitral awards rendered in a foreign country.

Debt Collection: WILL UNITED STATES COURTS RECOGNIZE AND ENFORCE FOREIGN COUNTRY JUDGMENTS? A Practical Guide for the Foreign Lawyer and Business Person (With Particular Reference to New York State Law and Practice as to Foreign Country Money Judgments) BY AARON N. WISE Attorney at Law, Member of the New York Bar Aaron N. Wise, Esq., Aaron N. Wise 8 2006 Attorney at Law and Partner All Rights Reserved Gallet Dreyer & Berkey, LLP th 845 Third Avenue, 8 Floor New York, NY 10022 Telephone: 212-9335-3131 Telefax: 212-935-4514 Email: 2{Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}2 INDEX ABOUT THE AUTHOR; THE SERVICES OF GALLET DREYER & BERKEY, LP I. INTRODUCTION II. PRELIMINARY POINTS A. Setting the Scene B. Competent Court stated in Seller=s General Terms of Sale or Similar Document; Losing Party paying Winner=s Legal Fees and other Important Points: Agreement in Writing Required III. THE UNIFORM FOREIGN COUNTRY MONEY JUDGMENT ACT (the ?Act?) IV. RECOGNITION OF FOREIGN MONEY JUDGMENTS UNDER THE NY ACT A. Application of the NY Act B. Grounds for Non-Recognition Listed in the NY Act (i) Mandatory Non-Recognition Grounds (ii) Discretionary Non-Recognition Grounds C. Jurisdictional Criteria for Recognition under the NY Act D. A Hypothetical Case: The ?Personal Jurisdiction? Issue (i) The Hypothetical Situation (ii) The Jurisdictional Issues (iii) Examples of Documents and Information Needed By U.S. Lawyer 2 to Render Opinion on whether Foreign Money Judgment will be Recognized (iv) Recognition and Enforcement Proceedings in New York State: Attachment of Defendant?s Assets V. RECOGNITION AND ENFORCEMENT OF FOREIGN MONEY JUDGMENTS IN STATES OTHER THAN NEW YORK VI. RECOGNITION AND ENFORCEMENT OF FOREIGN COUNTRY MONEY JUDGMENTS OF THE TYPE EXCLUDED FROM THE ACT?S COVERAGE AND NON-MONEY FOREIGN COUNTRY JUDGMENTS VII. FOREIGN STATE AS JUDGMENT DEBTOR VIII. EFFECT OF RECOGNITION OF FOREIGN COUNTRY JUDGMENT IX. RECOGNITION AND ENFORCEMENT IN THE USA OF FOREIGN COUNTRY ARBITRAL AWARDS X. CONCLUSIONS {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 3 4{Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}4 ABOUT THE AUTHOR Aaron N. Wise is a partner of the New York City law firm, Gallet Dreyer & Berkey, LLP. Mr. Wise?s areas of expertise include corporate, commercial and contract law, taxation, intellectual property law, litigation and arbitration, and other areas dealt with in this guide. Mr. Wise holds law degrees from Boston College Law School, New York University Law School and the University of Paris Law School (France). He is a frequent speaker inside and outside the USA. Mr. Wise biography is listed in Who?s Who in the World, Who?s Who in America and Who?s Who in American Law. He also practices in the sports law field, both domestically and internationally. Mr. Wise is proficient in German, French, Italian, Spanish, Portuguese, Russian and Japanese, and has a basic working knowledge of several other foreign languages. He is the author of a multivolume work, International Sports Law and Business (The Hague and Cambridge, Massachusetts 1997) and several other publications.. He has many years of broad, in-depth experience in representing foreigners in connection with their US and international legal and tax matters. THE SERVICES OF GALLET DREYER & BERKEY, LLP Gallet Dreyer & Berkey, LLP (?GDB?) is a law firm based in New York city, offering a full array of legal and tax services. GDB is capable of handling client matters throughout the USA, as well as their international legal and tax matters. Examples of GDB?s fields of expertise include: ? Direct investments in the USA of all kinds, including acquisitions and, mergers, joint ventures, establishing companies and manufacturing faci- ties; ? Commercial law generally; ? Contracts of all types; ? Intellectual property law; ? Technology transfer and licensing; franchising; ? Real property law; ? Computer law and related contracts; ? Visas and immigration; ? Tax law and planning (US and international); ? Litigation, arbitration and mediation ; ? Sports law (US and international). I. INTRODUCTION 4 In this guide, the main focus is the recognition and enforcement in the USA of judgments of foreign country courts. It does not deal, other than minimally, with the recognition and enforcement in the USA of arbitral awards rendered in a foreign country. The subject of obtaining recognition and enforcement in the USA of foreign country judgments, and in particular, foreign country money judgments, is complicated. In this relatively short publication, we cannot and do not try to cover every aspect. In many instances, those aspects that are treated are not done so exhaustively. Rather, this guide is intended to provide a somewhat detailed overview, and offer some practical perspectives from a practitioner=s standpoint.1 It is intended for both the lawyer and the non-lawyer. Lawyers, foreign ones included, should not have particular difficulty in digesting the material herein. For the non- lawyer, especially one not familiar with the general subject matter, concepts and terminology, the digestion process may be more arduous. By taking the time to peruse this text, he or she will hopefully obtain enough information to be able to assist in planning and coordination with legal counsel. II. PRELIMINARY POINTS A. Setting the Scene A party may have an existing money claim against a U.S. legal entity or individual that arises in a foreign country or jurisdiction----that is, other than in the USA and its territories and possessions. The issues will arise: ! Assuming it is legally possible under that foreign country=s laws, should I sue the U.S. party there, or in the USA? ! If I sue in the foreign country and obtain a money judgment against the U.S. party, will I be able to enforce that judgment in a U.S. court, particularly one where the U.S. party is located or has substantial assets? ! Which way is best, quickest, and least expensive? Occasionally, the foreign party and its legal counsel will not have given much thought to 1 This guide does not offer legal advice to anyone as to any particular matter or situation, nor is it a substitute for consulting competent legal counsel. {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 5 6{Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}6 these issues and not have consulted competent U.S. counsel. Rather, they will sue in the foreign court and obtain a money judgment there against the U.S. party. Only then, if the U.S. side does not voluntarily pay the judgment, will they be face-to-face with the issue of the recognition and enforcement of the foreign country money judgment in one or more particular U.S. states. Here is another situation. A party in a foreign country is negotiating a contract with a U.S. party. What, from that party=s standpoint, should the contract say regarding what court or tribunal will resolve disputes and claims arising out of the contract, and about related issues, such as applicable law. If the contract would contain a clause stating that the court(s) of a particular foreign country are competent to decide such matters, would a money judgment rendered by such a court be enforceable in the U.S. state in which the defendant is located or has substantial assets? Or should the foreign party=s negotiating position be that a U.S. court---- either one located not in the area where the U.S. party has its operations or one within such area-- -should decide disputes and claims arising from the contract? Still another possibility is for the foreign party to try to negotiate a favorable arbitration clause for the resolution of disputes and claims. If the arbitration were held outside of the USA, there are international conventions permitting relatively easy recognition enforcement of foreign arbitral awards in the USA, particularly commercial awards (and vice versa for American arbitral awards in those foreign countries). In a great many situations, arbitration in the USA under the American Arbitration Association?s International Rules, in a U.S. city relatively convenient for the foreign party but not in the ?back yard? of the U.S. party, will be the best solution for the foreign party. But in many cases, the parties will not have agreed on a particular court or arbitral tribunal to resolve their disputes and claims. That takes us back to the questions at the beginning of this section. Unlike with arbitral awards, the USA is not party to any international convention or treaty dealing with the recognition and enforcement of foreign country court judgments, money judgments included. The law and procedures relative to enforcement of foreign court judgments are primarily matters of U.S. Astate@ law, not federal law. Thus, the American legal landscape will depend will vary from state to state. B. Competent Court stated in Seller=s General Terms of Sale or Similar Document; Losing Party paying Winner=s Legal Fees and other Important Points: Agreement in Writing Required Assume that a foreign seller of goods or services uses General Terms of Sale (AGTS@) in connection with its sales of goods (including computer software) or services to a U.S. party, which state that all disputes and claims will be decided by a court located in seller=s country---- or for that matter in any location other than the buyer=s place of business. Unless the U.S. buyer 6 has, in writing, accepted the seller=s GTS generally, or that particular clause, a U.S. court will quite probably not recognize the clause as valid. That result follows both from U.S. domestic law and the international convention on the sale of goods.2 Without such written agreement, the seller will not be able to convince the U.S. court in which it seeks recognition of the foreign country money judgment that the parties Aagreed@ on the rendering foreign court as being competent (having jurisdiction). That means that the judgment creditor would have to demonstrate one or more other criteria to obtain recognition. It may be that an oral agreement between the parties on that same point would be enforceable, however, it would typically be extremely difficult to prove to the court. In fact, just about any material clause contained in the seller=s GTS will only be enforceable under New York law and the law of other U.S. states if the buyer has accepted the seller=s GTS in writing. That applies, for example, to one stating the losing party will pay the winner=s legal fees in any litigation (or agreed arbitration). Throughout the U.S.A., the rule, not just in sale of goods situations, but generally, is that each party pays its own legal fees unless the parties have agreed that the loser pays the winner?s. If there is such a real agreement and it is properly and correctly drafted, the agreement is enforceable. There are a few other exceptions to the general rule of each party bearing its own legal fees, but they will not apply to the great majority of transactions and disputes.3 I. THE UNIFORM FOREIGN COUNTRY MONEY JUDGMENT ACT (the AAct@) At this writing, some 31 of the 50 U.S. states have adopted that Act, which deals with the recognition and enforcement of foreign country money judgments. While the Act originated from a Amodel uniform law@, the text adopted by the various states may differ somewhat one from the other. In New York State and several others that adopted the Act, the case law prior to adoption was rather liberal in favor of recognizing foreign judgments. In many of those states, a main purpose for adoption of the Act was to enhance the prospect of their own money judgments being accorded recognition by foreign courts. That being said, obtaining recognition of a foreign country money judgment under the Act is not necessarily a sure thing, nor an easy or inexpensive process. 2 That is, the United Nations Convention on Contracts for the International Sale of Goods to which more than 60 countries adhere, including the USA. See Article 19 of that Convention. 3 This writer has authored a guide on General Terms of Sale for foreign enterprises which is available from him upon request, at no charge. {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 7 8{Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}8 For the most part, our discussion below of the Act and its interpretation is keyed to the version adopted by the State of New York which we will refer to as the ANY Act@. IV. RECOGNITION OF FOREIGN MONEY JUDGMENTS UNDER THE NY Act A. Application of the NY Act It applies to 1. a judgment of a foreign state (meaning, essentially, any non-U.S. governmental unit) that grants or denies recovery of a sum of money, 2. that is final, conclusive and enforceable in the rendering foreign state, even if an appeal from the judgment is pending or is still possible. Excluded from the scope of the NY Act are foreign country money judgments for taxes, a fine or other penalty, or for support in matrimonial or family matters. Those exclusions do not necessarily mean that such judgments will not be recognized by a New York federal or state court, but only that the NY Act is not applicable to them. If an appeal from the foreign money judgment is taken and that judgment is vacated (e.g., reversed), the judgment will not be enforced in New York State. If the defendant satisfies the New York court that an appeal is pending or that it intends to appeal from the foreign country money judgment, the New York court can stay its recognition proceedings until the appeal is completed or until a sufficient time expires for defendant to prosecute the appeal. Unless one of the NY Act=s listed exceptions applies, a foreign money judgment is conclusive between the parties to the extent it grants or denies recovery of a sum of money. B. Grounds for Non-Recognition Listed in the NY Act (i) Mandatory Non-Recognition Grounds The NY Act lists two grounds on which recognition will, mandatorily, be denied: 1. The judgment was rendered under a system not providing impartial tribunals or procedures compatible with Adue process of law@. 2. The foreign court did not have ?personal jurisdiction? over the defendant. 8 In New York recognition proceedings, the judgment holder has the burden showing that neither of these grounds for denial exist. That means demonstrating to the court that the opposite is the case. Though there may be exceptions, the first above ground will normally not present a problem for a money judgment rendered in a European country. The second ground----the foreign court did not have personal jurisdiction over the defendant----is definitively one that can present serious obstacles for recognition. We will discuss it below in more detail. (ii) Discretionary Non-Recognition Grounds The NY Act lists seven grounds on which recognition can be denied, namely: 1. The foreign court lacked jurisdiction over the subject matter. 2. The defendant did not receive notice of the foreign court proceedings in sufficient time to allow him to defend. 3. The judgment was obtained by fraud. 4. The cause of action on which the judgment is based is repugnant to the public policy of New York State. 5. The judgment conflicts with another final and conclusive judgment. 6. The proceeding in the foreign court violated an agreement between the parties that the dispute was to be settled otherwise than by proceedings in that foreign court. 7. Where the foreign court=s jurisdiction was based solely on local service of process on the defendant, the foreign court was a seriously inconvenient forum for the trial of the action. While these seven are stated to be discretionary grounds for non-recognition, some of them really are treated as being mandatory ones. In most cases, grounds 1., 3., 4., 5., and 7. will not come into play. Regarding ground 1., it is unlikely that the foreign court, under its own laws, {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 9 10 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}10 would have rendered a judgment if it did not have had jurisdiction to decide the type of matter concerned. In the papers to be prepared by U.S. counsel seeking recognition of the foreign judgment, the legal basis for such exercise of jurisdiction by the foreign court should be pleaded and supported by proof. In connection with a seller=s GTS, we have indirectly touched on ground 6: the existence of an Aagreement@ between the parties that some court or tribunal was to decide the particular dispute. As to ground 7., it is quite unlikely that a foreign court=s exercise of jurisdiction over the defendant would be based solely on service of process on the defendant within the foreign country. In most European countries and many others, service of process effected within the court=s territorial realm is not an independent basis for the exercise of jurisdiction (as it is in the USA), but only provides notice to the defendant of the legal action. C. Jurisdictional Criteria for Recognition under the NY Act The issue that tends to arise the most, over which there has been fairly substantial litigation, is whether the foreign court had jurisdiction (compétence, Zuständigkeit) over the defendant. In U.S. law, the term is Apersonal jurisdiction@. A New York court will look to see if, and the plaintiff seeking recognition of its foreign money judgment should plead and prove, that the foreign court had Apersonal jurisdiction@ over the defendant. However, that does not mean only showing that the foreign court, under its law, had personal jurisdiction. It means also convincing the New York court that under New York law=s own jurisdictional criteria, the defendant had a sufficient jurisdictional link with that foreign country to justify its court=s exercise of jurisdiction over it in the case. The NY Act lists, in effect, seven bases of Apersonal jurisdiction@ stating that if any are met, the foreign country money judgment will not be refused recognition for lack of personal jurisdiction over the defendant: 1. The defendant was served with process personally within the foreign country -- --but that is subject to the exception mentioned above that if that is the only basis for the foreign court=s jurisdiction, recognition could be denied if the defendant convinces the court that it was a seriously inconvenient forum. 2. The defendant voluntarily appeared in the foreign proceeding other than to protect property seized or threatened with seizure, or to contest the foreign court=s jurisdiction over it. 3. Before the proceedings started, the defendant agreed to submit to the foreign court=s jurisdiction with respect to the subject matter of the particular case. 10 4. The defendant was domiciled in the foreign country or, if a legal entity, had its principal place of business, was formed or had otherwise acquired legal entity status, in the foreign state. 5. Defendant had a business office in the foreign state and the foreign court proceedings involved a legal claim arising out of business done through that office. 6. Defendant operated a motor vehicle or airplane in the foreign state and the proceedings involved a legal claim arising from that operation. 7. There is another basis for the foreign court=s exercise of personal jurisdiction over the defendant that New York State recognizes. D. A Hypothetical Case: The APersonal Jurisdiction@ Issue (i) The Hypothetical Situation A West European company (AWECo@) has sold and delivered goods to a company located somewhere in New York State (ANYCo@), with an agreed invoice price of US$400,000. NYCo does not pay WECo. WECo sues NYCo in its West European home country. It serves the process papers on NYCo in a manner permitted by its home country (but not by serving them on a NYCo representative physically within the home country). NYCo does not appear in the home country lawsuit (other than, possibly, to contest that court=s jurisdiction over it or to safeguard property seized or subject to seizure). WECo obtains a final judgment against NYCo for the US$400,000 plus interest. It hires a New York law firm to render an opinion on whether it is possible to secure recognition and enforcement of that foreign money judgment in New York State. We will not discuss all of the issues that might be involved. Rather, we will focus on what we have stated is often Aa@, if not Athe@ key issue in cases such as this, Apersonal jurisdiction@ over the defendant, here, NYCo. (ii) The Jurisdictional Issues To obtain recognition in New York State of that judgment, it must be established that the foreign court had Ajurisdiction@ to render that judgment. That has two components or prongs: ! under the foreign country=s own jurisdictional rules, 1. the foreign court must have had jurisdiction over the subje matter of the litigation; {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 11 12 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}12 2. service of process of the foreign lawsuit must have been properly made on the defendant; 3. the foreign court must have had personal jurisdiction over the defendant, and ! under New York State=s own jurisdictional criteria, 2. and 3. above must be demonstrated to the New York court. Regarding 2. of both prongs, the USA and nearly all European countries (western and eastern), along with many others, have adopted the 1965 Hague Convention of the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. Some have done so with certain reservations. If service of the foreign lawsuit process has been properly made pursuant to the applicable provisions of that Convention, then a New York court would recognize the service as valid provided that the defendant received notice of the foreign proceedings in sufficient time to allow it to defend. A treaty (as the Convention is) adopted by the USA is part of the law of its individual states, e.g., New York State. It is 3. above that merits particular attention. In our hypothetical case, it must be shown that NYCo had what New York regards as sufficient Aminimum contacts@ with the foreign country in which the judgment was issued. Merely placing a few orders, from New York (or anywhere else outside of WECo=s country) and thereby purchasing from WECo a relatively small amount, in quantity and value, of goods, will normally not be sufficient. If, prior to the lawsuit in WECo=s country, the parties agreed in writing that the particular court in that country that thereafter rendered the judgment was competent to decide disputes arising from their transactions, that would normally be valid and resolve that point. However, as remarked above, a provision in the seller=s (e.g., WECo=s) GTS to that effect that the buyer (e.g., NYCo) did not accept in writing, would not normally be enforceable in New York State and elsewhere in the U.S.A. If the defendant (e.g., NYCo) was, at the time of the foreign action, formally registered to do business in WECo=s country, or had a principal place of business there or had a business office or perhaps even a warehouse there that was involved in facilitating the particularly purchases from WECo, then that would normally be sufficient. If not, then the foreign judgment holder, WECo, must show that NYCo had Apurposefully directed@ one or more other material acts or activities at WECo=s country. They could be one or more of the following, by way of example: ! having one or more NYCo employees stationed in that country; 12 ! having an NYCo agent or distributor in that country, or otherwise solicits business within that country; ! NYCo having a bank account or other property in that country; ! NYCo employees or officers traveling to that country and meeting with WECo personnel for business purposes; ! a NYCo representative having negotiated the terms of the pertinent sales contract(s), supply contract, distribution contract or similar agreement with WECo within that particular foreign country. New York courts may accepted other contacts with the judgment rendering country as being sufficient. For example, if the total volume of the U.S. party=s purchase-sale transactions, in number and/or currency value, with the judgment holder is substantial and continuous, that might be persuasive. If the U.S. party committed or participated in a tort perpetrated within the foreign country concerned and that was the basis for the foreign money judgment rendered there, that might be sufficient. If the U.S. debtor has a company in the foreign country concerned that it owns and controls, and which was involved in the underlying transactions of the dispute or claim, that might satisfy New York State?s jurisdictional criteria. The more ?contacts? of the U.S. party with the foreign country of the type New York State law looks for, the better. The stronger, more enduring and pervasive of the contacts, even if only one or few in number, is even more important than the total number. This writer is simplifying and generalizing the actual process that New York courts will go through to determine if, under New York law standards for personal jurisdiction, the foreign court had personal jurisdiction over the U.S. defendant. By and large, New York case law has shown a distinct inclination to be somewhat lenient as regards the Aforeign country contact criteria@ it will find acceptable for recognition of a foreign judgment. But, to repeat, making one or a few purchases of a relatively small quantity of goods from a foreign seller, without more, will usually not be sufficient for recognition, if the defendant decides to put up a recognition fight. That means that for the U.S. lawyer involved with giving an opinion on whether recognition will be accorded the foreign judgment, there is a considerable amount of information and documentation to obtain and review. See the next section. If the decision is made to go forward with a recognition proceeding in the USA, e.g., in New York State, putting together the necessary documents for court will require considerable time and effort. Should the judgment {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 13 14 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}14 holder want to attach property of the debtor pending a ruling on recognition of the foreign money judgment, that too will take lawyer time. If the defendant should contest the recognition by filing opposing papers, the volume of work will be even greater, perhaps very much so depending on the particular situation. To repeat and emphasize: Under New York State law and the law of essentially all U.S. states, a plaintiff, including a foreign country money judgment holder seeking recognition, cannot recover from the defendant its legal fees connected with any U.S. lawsuit (action) or proceeding. That is so, regarding a proceeding for recognition of a foreign country money judgment, even if the court accords recognition. The only exception would be if the parties agreed in writing that the losing party would pay the winner=s legal fees, that agreement extended to recognition and enforcement proceedings, and were correctly drafted to comply with American requisites. In the U.S. legal context, court costs and fees are rather small, legal fees being the potential big ticket item. (iii) Examples of Documents and Information Needed By U.S. Lawyer to Render Opinion on whether Foreign Money Judgment will be Recognized The U.S. lawyer will normally be requesting documents and information from the overseas lawyer that handled the foreign lawsuit, though he might also be dealing with the client, the foreign judgment holder, itself. Among the documents and information that are likely to be required by the U.S. lawyer in order to render such an opinion---and eventually, to proceed with recognition proceedings--- are: 1. a copy of the final foreign court judgment (and, if the lawyer is not very proficient in the language in which that judgment is rendered, an English translation thereof). Eventually, if it is decide to proceed with recognition and enforcement, that judgment will have to be a certified one, and an official translation will have to be obtained. 2. Copies of the foreign law provisions showing the type of proceeding it was and that it constitutes a final, conclusive judgment and how that type of legal proceeding functions. For example, some West European countries have particular types of legal actions on which suits for money can be based. 3. copies of the foreign country=s legal provisions showing that the particular foreign court had jurisdiction over the subject matter of the action----that is, that is was competent under its laws to hear and decide that type of case. 4. copies of all of the services of process documents in the foreign action sent to defendant, including any accompanying English translations thereof. 5. copies of any documents filed by the defendant in the foreign action. 14 6. A letter or memorandum from the lawyer that handled the foreign action explaining 1-5 above, and other points, for example: A. how the foreign legal action or proceeding functions, citing pertinent provisions of law, including time limits; whether the defendant appeared and filed any documents in it; what the effect is if the defendant did not respond or appear in the foreign action or proceeding; when and how the foreign judgment order became a final judgment not subject to being Areopened@; B. how and when service of process in the foreign action was made on defendant and the legal basis under that country=s law for making service in that manner; {Comment: In the U.S. recognition action, the judgment holder will have to allege and prove that the foreign court procedure was a regular proceeding conducted under a system providing fair and impartial tribunals and procedures compatible with Adue process@ of law; that service of process on defendant in the foreign action was proper; and that the defendant received fair and adequate notice to permit the interposing of a defense in that action.} C. whether the foreign money judgment is final and if yes, as of what date; and whether it has been appealed or is still capable of being appealed; D. Regarding the sale of goods between WECo (seller) and NYCo (buyer) underlying the money judgment: (i) copies of the corresponding written orders from NYCo, including, if any, any printed General Terms of Purchase of NYCo that may be attached to or accompany those orders forms or sent to WECo earlierCadvising if there were any, where they were located and how and when they were sent to WECo, and if WECo ever accepted them in writing or otherwise or commented on them to NYCo. (ii) copies of the corresponding order acknowledgments or order acceptance documents of WECoCif any; and of WECo=s General Terms of Sale (AGTS@), if any, advising if WECo=s GTS were attached to or part of each order acknowledgment or acceptance or sent separately to NYCo (and if so, when), and if NYCo ever accepted WECo=s GTS in writing or otherwise, or commented on them. (iii) copies of WECo=s corresponding invoices----advising if WECo=s GTS were part of or attached to each such invoice, or were sent separately to NYCo (and if so, when). {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 15 16 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}16 (iv) if, in connection with any other, earlier purchases-sales between the parties, one or the other sent General Terms of Purchase or GTS to the other, copies of the pertinent documents, including advising whether any written acceptance thereof occurred. {Comments: If NYCo did use General Terms of Purchase which WECo did accept in writing, and which stated, for example, that a particular court or tribunal (e.g., arbitral tribunal) other than the foreign judgment-rendering court had exclusive jurisdiction to decide disputes and claims arising from their purchase-sale transactions, that could make it very difficult, if not impossible, to obtain recognition in New York State of the foreign judgment. If, under that scenario, the defendant voluntarily made a general appearance in the foreign action, that would presumably eliminate that problem. If WECo did use GTS which NYCo accepted in writing and which stated, for example, that the particular foreign court that actually rendered the money judgment had jurisdiction to do so, that would facilitate considerably the New York court=s recognition of that judgment}. (v) copies of any contracts between WECo and NYCo of any kind, in any written form, that might be pertinent to this matter. For example, a supply agreement, a distribution agreement, a requirements contract, etc., whether in formal contract form or by letter or fax or email. (vi) copies of any any correspondence between WECo and NYCo that might be pertinent to this matter. E. Type of Goods: (i) Regarding the sales underlying the foreign money judgment, provide a general description of the specific types of goods that WECo sold to NYCo and NYCo purchased. (ii) Were those goods Aspecially manufactured@ for NYCo? If yes, provide a detailed explanation (with appropriate supporting documents), including what party Aspecially manufactured@ them. In other words, did NYCo give particular specifications for the goods requiring that either the client or some third party engaged by the client produce those goods specially for the client, rather than the goods being standard production-run type goods? (i) Regarding sales prior to those mentioned in E.(i) above between WECo (seller) and NYCo (buyer), a general description of the type of WECo goods that were involved; whether they were Aspecially manufactured@ for NYCo; and if yes, providing an explanation of the details with supporting documents. 16 F. Where Sales Contracts Formed Regarding the sales of goods underlying the foreign judgment, where were those contracts actually formed? Where did the Aacceptance@ occur, in the WECo=s country, or in New York State? {Comments: To repeat, New York courts require not only that the foreign court, under its own legal norms, have subject matter jurisdiction and that the plaintiff have made proper service of process on the defendant, but that ! the exercise of personal jurisdiction by the foreign court meets New York=s legal criteria for that exercise. That means, leaving aside a situation where by contract the US defendant has accepted the jurisdiction of the particular foreign court or has appeared in the foreign court action other than to just challenge its jurisdiction or to protect property seized or subject to seizure, that the US defendant must have certain Aminimum contacts@ with the forum foreign jurisdiction that relate directly---and even possibly indirectly---to the transaction(s) that underlie the foreign jurisdiction lawsuit. Just ordering relatively small amounts of goods by mail, e-mail, fax or phone from a location outside of the seller?s country on one isolation occasion, or even a couple of times that way, will probably not be enough. If the sales transactions underlying the foreign lawsuit were made (formed) in the seller=s home country, that may help a little. If one can point to more substantial NYCo contacts with the seller=s home country, and those contacts relate to the purchase/sale transactions underlying the foreign judgment, that would be much better. That Aminimum contacts@ principle is very similar to what a New York court would require if NYCo were trying to sue WECo in a New York court. In the papers the judgment creditor=s lawyer will file with the New York court, the jurisdictional contacts with the foreign country must be clearly and properly alleged, with supporting documents. ! under New York legal standards, the service of the foreign process was proper. This too must be pleaded and proved, with supporting documents, in the papers the judgment creditor=s lawyer will file with the New York court. The questions that follow relate mainly to the personal jurisdiction points in the first bullet above. G. Did NYCo ever send any of its employees or representatives to WECo=s country (i) to discuss its business relationship with WECo, and/or (ii) to negotiate purchase/sales contracts with WECo or any third party; and/or (iii) to examine WECo=s facilities and/or get to know its people; and/or {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 17 18 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}18 (iv) for any other purpose? If yes, a description should be provided of the purpose and what occurred, the date(s), who from NYCo went to Italy and did and/or negotiated what with whom of WECo. H. Does or did NYCo have: (i) any office, subsidiary, JV company or the like in WECo=s country, and if so, explain where, when, and its role. {Comment: A search of corresponding registry(ies) in WECo=s country would be in order to see if NYCo has registered itself to do business or formed a branch office there.} (ii) any agent, representative, employee, distributor, or the like physically located or stationed in WECo=s country, and if so, please explain the details and if that agent, representative etc. played any role in a. the sales underlying the foreign country judgment? b. any other sales made by WECo to NYCo? c. any other transactions between WECo and NYCo; d. any transactions between NYCo and any third party(ies). (iii) any bank account or the like in WECo=s country? (iv) any listing in any phone directory in WECo=s country? (v) any warehouse for goods, apartment or other facility in WECo=s country owned or rented by NYCo? (vi) any other significant assets in WECo=s country? (vi) any other significant activities or contacts with WE=s country. I. Regarding all purchases of goods by NYCo from WECo overall from the beginning to date, including the ones underlying the foreign money judgment against NYCo, a breakdown of (i) the type of goods purchased by NYCo from WECo. (ii) the total volume of each type of goods purchased, the number of transactions, and the US$ value thereof (whether the purchases/sales were 18 made in dollars, Euros or other currency), and the time period during which they were made. J. What were the commercial terms (e.g., ex supplier=s works, FOB particular European port; CIF US port of destination)Cand that governed the purchase and sale between WECo (as seller) and NYCo (as buyer), in terms of where title (ownership) to the goods passed to NYCo: (i) of the goods underlying the foreign money judgment? (ii) of other goods sold by WECo to NYCo? And, to what location were the goods physically delivered to NYCo? K. Other than the purchase/sale (WECo as seller, NYCo as buyer) of the type of goods WECo has been selling to NYCo, have there ever been any other types of commercial or business transactions between WECo and NYCo? If so, a detailed description should be provided, including time periods. The idea, as explained above, is to show NYCo has had regular business contacts and connections of a significant nature with WECo, and with WECo=s country. L. With respect to questions G. through K. above, (i) has any subsidiary or affiliated company of NYCo been involved in any of such transactions or activities? (ii) has any subsidiary or affiliated company of WECo been involved in any such transactions or activities? M. Has NYCo or any of its subsidiaries or affiliated companies: (i) done any advertising or promotion in WECo=s country, of its products and/services or of itself? (ii) in that same connection, used the internet (e.g., its own website or another party=s) to advertise or promote its products, services, or itself in WECo=s country? (iii) attended trade shows, trade fairs, expositions or the like in WECo=s country and if so, did it have a booth or display there? (iv) joined any trade organizations or other business-related organizations located in WECo=s country? {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 19 20 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}20 If so, full details should be provided, including as to whether it was NYCo itself or a subsidiary or affiliate, and if so, which (name etc.). N. Has NYCo ever raised any objection or claims as to the products it purchased from WECo that underlie the foreign money judgment, such as product defects, quality, customer complaints or lawsuits against NYCo, wrong products shipped? Has NYCo ever said it has any claim or counterclaim of any kind against WECo? {Comment: If, in the recognition proceeding, a New York court finds the foreign country money judgment to be final, conclusive and enforceable in the foreign state concerned, it will not allow the defendant to raise any defenses or claims that relate to the merits of the foreign country action. Nevertheless, one never knows and the American lawyer handling the matter will want to have that information. It may also become relevant if recognition is denied and the client decides to start a completely new action in New York against NYCo (in which case the foreign judgment could be used as evidence). The defendant may be able to raise them in that new action, especially if the foreign judgment were a default judgment.} N. GFIL=s U.S. Bank Account(s): If the foreign money judgment holder has, in its records, information as to NYCo=s bank(s) (name, address etc.) and bank account number(s) in the USA, particularly, in New York, that should be provided. O. Searches/Investigations regarding NYCo=s Solvency, etc.: The U.S. lawyer would typically explain the types of searches and investigations that we could obtain to indicate whether NYCos exists, is solvent, whether it is in a bankruptcy proceeding, whether there are secured creditors holding liens on NYCo=s assets, and the like. If the client so directs, the search reports would be obtained and reviewed, and factored into the U.S. lawyer=s opinion as to whether it makes sense to pursue recognition and enforcement proceedings. (iv) Recognition and Enforcement Proceedings in New York State; The NY Act authorizes two alternative routes to obtain recognition and enforcement: (i) filing a motion for summary judgment in lieu of complaint; or (ii) starting an action on the foreign country money judgment. The first method will normally be quicker and more expedient. Among the many documents that will be needed are Affidavits, for example: of one or more representatives of the foreign judgment holder knowledgeable about the facts; of a foreign lawyer on the various points of the foreign country law; possibly, of any third party(ies) with knowledge of acts and activities of the defendant (e.g., NYCo) in its country; and of the U.S. lawyer handling the recognition proceeding. 20 In addition, the U.S. law firm will, at some point (depending on the route chosen), have to research, prepare and submit to the court a memorandum of law in support of its position. The judgment holder can apply for and, if the requisites are met, obtain an order of attachment of the judgment debtor=s assets, such as its bank account(s), prior to or contemporaneously with, the filing of the petition to enforce the foreign country money judgment. The judgment holder may also wish to obtain a court order requiring the debtor to disclose information concerning its bank and/or other assets. New York State law permits and the judgment holder will often want, an ex parte order of attachment. However, within a very short time after levy is made on any of the debtor=s assets, the judgment holder must apply, with supporting papers, for an order from that court confirming the ex parte attachment. Failure to file apply on time will result in the ex parte attachment order becoming void. The debtor can contest the attachment in the confirmation proceeding. Alternatively, the judgment holder can petition (by a Amotion@) the court, with notice to defendant (thus, opportunity for defendant to oppose), for an order of attachment; and seek a temporary restraining order freezing the debtor=s assets until the motion is decided. Under either alternative, to obtain the attachment, the holder will have to post a bond in an amount fixed by the judge to satisfy damages and costs, including reasonable attorney=s fees, that the defendant sustains if the court finally decides that the attachment was not justified or that the foreign country judgment should not be given recognition. If such liability arises and the bond amount is not cover it all, judgment holder is liable for the balance. At the attachment confirmation proceeding or the hearing of the attachment motion, the judgment holder will have satisfy the court that, among other things, there is grounds for the attachment and that it is probable that it will succeed on the merits----that is, obtain a judgment from the court recognizing the foreign country money judgment. V. RECOGNITION AND ENFORCEMENT OF FOREIGN COUNTRY MONEY JUDGMENTS IN U.S. STATES OTHER THAN NEW YORK In those U.S. states that have adopted the Act, albeit with some variations among them, the law and procedure for recognition and enforcement will, for the most part, be similar to New York State=s approach under the NY Act. There are likely to be some differences, but not particularly substantial ones for the most part. The main reasons are that (i) the Act is a model uniform act, and the intent is that there be uniformity of interpretation; and (ii) New York State, even before its adoption of the Act, has accumulated a considerable body of case law on recognition and enforcement of foreign judgments, which other states have looked to as authority. One possible difference among those states may be what each views as sufficient {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 21 22 {Guide: Enfformoneyjdgmts--Wd (W:\09999\19\gdexfjwd\00083074.WPD;1)}22 ?minimum contacts? by the U.S. based defendant with the foreign judgment-rendering state for purposes of ?personal jurisdiction. The ?long arm? statute of individual U.S. states may differ and affect that determination.4 As to those U.S. states that have not adopted the Act, one looks primarily to the case law of the particular state, then to case law of sister states. If certain requisites are met, their courts will, on the basis of Acomity@, grant recognition and enforce foreign country money judgments. Many of the principles contained in the NY Act will come into play in those states even though the Act is not in force there. Thus, while the preceding analysis of the NY Act cannot be treated as a true Ablueprint@, it can be viewed as a general guide. VI. RECOGNITION AND ENFORCEMENT OF FOREIGN COUNTRY MONEY JUDGMENTS OF THE TYPE EXCLUDED FROM THE ACT=S COVERAGE AND NON-MONEY FOREIGN COUNTRY JUDGMENTS Repeating an earlier comment, just because the Act, as enacted by a particular U.S. State, excludes from its scope certain types of foreign country money judgments, does not mean that they cannot be accorded recognition and enforcement. For example, the NY Act excludes foreign money judgments for taxes, fines and penalties, and for support in matrimonial and family matters. There is a small trend, at least in New York State, toward the recognition of foreign country tax judgments. Regarding foreign country judgments for support, New York State law remains fairly generous insofar as their recognition and enforcement is concerned. The courts of certain other U.S. states have moved in the same direction in recent years. No specific comment will be offered about the recognition and enforcement of foreign non-money judgments in any particular U.S. state, except to say that the general trend has been toward recognition even of those. Many, if not most, of the criteria for recognition discussed above in connection with the NY Act will applyCalbeit, perhaps, with nuances--- to these types of foreign country judgments. VII. FOREIGN STATE AS JUDGMENT DEBTOR If a foreign country money judgment is rendered against a Aforeign state@ (or a unit, agency, or instrumentality of a foreign state@, such as a foreign state owned legal entity), and recognition and enforcement is sought in the USA, several potential problems can arise. In those U.S. states that have adopted the Act, like New York State, it will apply to money judgments against a foreign state. However, a U.S. federal law, the Foreign Sovereign Immunities Act (AFSIA@) sets jurisdictional limitations on matters regarding which U.S. courts can entertain litigation brought against foreign states. The FSIA also limits the assets of foreign states against which execution and enforcement of judgments may be made. The foreign state might, for example, challenge recognition and enforcement of a foreign country default judgment on the grounds that because the FSIA would have prohibited the foreign state from being sued if the suit were originally brought in the USA, recognition and enforcement of the foreign judgment against it should be denied. 4 The subject of state long arm statutes and their relationship to this issue is too intricate to explain in this guide. 22 VIII. EFFECTS OF RECOGNITION OF FOREIGN COUNTRY JUDGMENT Once a foreign country judgment is granted recognition by a state or federal court of a particular U.S. State, that foreign judgment becomes an enforceable judgment of that court. It is entitled to what is termed Afull faith and credit@ by all other U.S. states, and the procedure for it formally acquiring that status in any other U.S. state is a simplified one. IX. RECOGNITION AND ENFORCEMENT IN THE USA OF FOREIGN ARBITRAL AWARDS This is not the principal topic of this guide and we will not discuss it in detail. We note, however, that obtaining the recognition and enforcement in the USA of an arbitral award rendered in another country will often be somewhat easier and lest costly than the counterpart procedures for foreign country judgments. International conventions to which the USA and many other countries are parties facilitate those procedures. Where a foreign arbitral award is rendered against a Aforeign state@ (or unit, agency or instrumentality thereof), FSIA problems can arise. Also, if the transactions and events underlying the foreign award have no Aminimum contacts@ to the USA, even if the foreign state has assets there, a U.S. court may refuse recognition and enforcement based on the doctrine of inconvenient forum (Aforum non conveniens@); and possibly, lack of jurisdiction. IX. CONCLUSIONS A. The process for obtaining recognition of foreign country judgments in the USA is perhaps easier than in some foreign countries, but not necessarily an easy one. In those U.S. states that have adopted the Act, the road map is somewhat clearer than in U.S. states that have not. B. However, as with legal matters generally in the U.S.A., the legal fees connected with the recognition procedure will not be insubstantial due mainly to the amount of work required to collect the necessary data and documents, and prepare certain others required to do the job properly. If the U.S. side should actively defend in the U.S. enforcement proceeding, the costs, particular the legal fees, can mount up. In effect, by actively defending, the matter turns into a trial, and U.S. trials are not inexpensive items. Very few competent U.S. lawyers will take on foreign country money judgment recognition/enforcement case on a Acontingency basis@, meaning, a fee based on the amount actually collected. They will want to work on an hourly basis. Estimating in advance with any degree of accuracy the costs of such a proceeding will, in many instances, be difficult for the U.S. lawyer. Before suing in the foreign country, the foreign claim holder---the potential plaintiff and/or its foreign lawyer--- should consult with and obtain an opinion from U.S. counsel to determine the best way of proceeding, and, to the extent possible, a rough estimate the eventual costs of a U.S. proceeding, etc. In many instances, that will mean supplying to the U.S. {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} 23 lawyer many of the documents and information described above in connection with obtaining an opinion from the U.S. lawyer as to the feasibility of obtaining recognition of a foreign country money judgment. It may also mean having the U.S. lawyer obtaining the search reports on the U.S. debtor referred to above. The potential difficulties and expense of trying to enforce a foreign country money judgment in the U.S.A. may make that route impractical, especially for smaller money claims. Commencing a lawsuit on the merits in the U.S.A. may be the better option, with the idea of reaching an out-of-court settlement fairly quickly before costs get out of hand. Both options should be evaluated. Still another milder option that can be tried first, is for U.S. counsel to write a demand letter and perhaps also make phone contact with the debtor, thereby trying to provoke payment of the debt or a reasonable out-of-court settlement. C. If, at a much earlier stage, the foreign party can, by contract, its GTS, a letter or other written means, obtain the U.S. party=s written agreement that a particular court or arbitral tribunal reasonably favorable to the foreign party will have jurisdiction to decide disputes and claims, that the losing party pays the winner=s legal fees in all legal proceedings relating to the transaction(s), and perhaps other key clauses, then the foreign party=s chances of success increase markedly should an unpaid U.S. party debt arise. Of course, if the U.S. side is bankrupt or insolvent or disappears at the time payment of the debt is sought, even the best prior planning may not yield positive results. You can=t squeeze blood from a stone. D. But, if payment obligations of the U.S. side to the foreign party will be involved, then, as part of the initial contracting process, the foreign side should strongly consider trying to negotiate relatively strong security for payment. Payment by irrevocable letter of credit or cash against documents (e.g., for the purchase-sale of the foreign party=s goods) may not be accepted by the U.S. side. A personal guaranty by the owner(s) of the U.S. company may also be refused, and even if accepted, may not be worth much of anything. There is a U.S. legal mechanism called the Asecurity interest@ that can, in many situations, provide the seller of goods, the licensor of technology and computer software, the lessor of machinery and equipment, the provider of services, and other potential creditor types, with relatively strong security for payment. The security interest is in very frequent use throughout the USA and can be used by foreign creditors. If properly implemented, it will give the creditor a Apriority@ (secured creditor) status over other creditors of the U.S. debtor in the agreed Acollateral@ (the pledged assets of the debtor). Where the sale of goods is involved, the Acollateral@ could, for example, be----if the U.S. buyer agrees----the seller=s own goods as delivered to the buyer, the buyer=s accounts receivable arising from the buyer=s resale of those goods, and the proceeds thereof. Or the collateral could be less than all three of those, or more. Essentially any present and future (after-acquired) assets of the buyer, tangible or intangible, that are not real property (land, buildings etc.) can be the collateral for purposes of a security interest. A U.S. lawyer would first search what, if any, security interests in what assets of the U.S. party it has already granted to third parties, for that will affect whether the foreign seller can obtain a {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)} Afirst priority position@ in the proposed collateral. The Asecurity interest@ functions like a mortgage on real property. There must be one or more eventual debts to be secured, a security agreement (which can be part of or an annex to another contract, like a distribution or supply contract, or incorporated into the seller=s GTS, if agreed to in writing by the buyer), and a particular form, a UCC financing statement, must be completed and filed in one or more registries. At the very least, if the U.S. buyer agrees and the proper procedure is followed, it should be legally possible for the seller to name its own goods as collateral and recover them in case of non-payment, if any are remaining in the buyer=s possession. The Asecurity interest@ is not an absolute guaranty of getting paid or recovering anything from the U.S. side. It is, however, a very useful tool for a potential creditor in many instances, which can be implemented at a reasonable cost. {Guide: Enfformoneyjdgmts--Wd (W:\09999\019\gdenfmjw\00104859.DOC;1)}
Posted: 15 June 2010

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