Trial Gymnastics: Enforcement of Foreign Judgments and Arbitration Awards in the US

Perhaps you represent a US company that is entering into a contract with an entity abroad, or vice versa. You are considering whether the contract should provide for arbitration or litigation in the event of a dispute. To decide this question, you might ask yourself: If your client wins the proceeding against the other party, is it easier to enforce a non-US court judgment or non-US arbitral award in the United States?

As a result, each scenario presents unique challenges. There is no uniform US law governing the recognition of non-US judgments, but rather a patchwork of different state laws, which can complicate recognition. On the other hand, confirmation of non-US arbitral awards is governed by a single, uniform federal statute in the United States. However, US proceedings to confirm an arbitral award must be conducted on a shorter schedule than proceedings to recognize a non-US award, and confirmation of arbitral awards can raise other complicated issues.

Dispute resolution provisions in contracts are often treated as “dishes,” but the choice between arbitration and litigation can be important. Lawyers drafting contracts with US and non-US parties should think carefully about the differences between the enforcement of judgments and arbitral awards in the US in deciding whether court or arbitration proceedings are the right choice for your customers.

Enforcement of Non-US Judgments in the United States

In the United States, enforcing a judgment from a non-US court can be complicated. The United States signed the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters in March 2022, but has not yet ratified it or passed any legislation implementing the Hague Convention . There is also no uniform law at the federal level that addresses the recognition and enforcement of foreign judgments. Instead, the recognition and enforcement of foreign judgments are matters of state law or common law developed by the courts. As one court put it, “no federal law in the absence of a federal treaty or statute governs the recognition or enforcement in the United States of judgments of foreign countries. Therefore, the recognition of such judgments is governed by state law applicable … even when such recognition is sought in federal court.” (1)

A total of 38 of the 50 US states have enacted the Uniform Foreign Money Judgments Recognition Act of 1962 or the Uniform Foreign Money Judgments Recognition Act of 2005.(2) Nine of these states use the oldest 1962 uniform: Massachusetts, Connecticut, New Jersey, Pennsylvania, Maryland, Ohio, Missouri, Florida, and Alaska.(3) 29 states, plus the District of Columbia, have enacted the most recent 2005 Uniform Act, including New York , California, Texas, and Delaware.(4) The remaining 12 states either have their own statutory schemes or rely on court-made common law, as articulated by the US Supreme Court or described in the Restatement (Second) of Conflicts of laws or the (third) reaffirmation of foreign relations. US law

As a result, there are significant differences from state to state. There are even some variations among states that have apparently enacted the same uniform acts, including different time limits for filing an action to recognize and enforce a non-US judgment. Generally, however, U.S. courts will recognize and enforce non-U.S. judgments unless, among other things: (1) the defendant in the foreign proceeding has not received notice in sufficient time to enable him to defend the proceeding or the foreign court would not otherwise have jurisdiction. about the accused; (2) the judgment was obtained by fraud; (3) the underlying cause of action on which the judgment is based is “repugnant” to public policy; (4) the judgment conflicts with another final and conclusive judgment; (5) an agreement by the parties that provides for their dispute to be resolved by other means; or (6) the foreign court was not impartial. (5) US courts in all states prohibit attempts to relitigate issues decided in the non-US proceeding and limit their refusal to recognize a judgment non-American for the reasons listed. above or other reasons articulated by the statutes or courts of a given state. However, assuming these grounds do not exist, US courts will recognize and enforce the non-US judgment.

If the United States ever ratifies and implements the Hague Convention, there will likely be greater uniformity in recognizing and enforcing non-US judgments. Until then, however, the patchwork of laws in the United States can make recognition and enforcement somewhat complicated.

Enforcement of Non-US Arbitral Awards

The recognition of arbitral awards abroad is governed by a treaty, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention. Unlike the Hague Convention on Foreign Judgments, the United States ratified the New York Convention in 1970 and enacted statutory provisions to implement this treaty in the Federal Arbitration Act (“FAA “). The relevant provisions of the FAA govern arbitrations that are “commercial” in nature, such as those involving “a transaction, contract, or agreement,” and arbitrations that do not involve only US citizens, except that the US-only arbitration -Americans is related to “property located abroad,” “performance or execution abroad,” or “has another reasonable relationship to one or more foreign states.”(6) Federal courts have jurisdiction over proceedings for recognize and confirm these prizes regardless of the amount at stake.(7)

The FAA provides that as long as a proceeding to confirm an arbitral award is commenced within three years after the award is entered, the federal court may confirm the award “unless it finds one of the grounds for denial or deferral of the recognition or enforcement of the award specified in the Convention (New York).”(8) These reasons include, among other things, whether one of the parties to the arbitration was “under some incapacity” when he signed the ‘agreement; the party did not receive adequate notice of the arbitration; the arbitrator was not constituted in accordance with the relevant agreement; or the award is contrary to public policy .(9)

Thus, a party with a non-US arbitral award can avoid the patchwork of US state laws on the recognition of non-US judgments and instead obtain the benefit of the New York Convention and the FAA. However, the FAA has some drawbacks, such as the three-year time limit for bringing proceedings under the New York Convention is much shorter than the time limit for seeking recognition of a non-US judgment, which typically ranges from between 10 and 20 years.

Other wrinkles may arise in connection with the confirmation of non-US arbitral awards. In an interesting case, the US Court of Appeal for the Second Circuit was faced with a situation where the claimant had an arbitral award rendered in Malaysia by two courts: one in New York and later one in the UK , which based its confirmation order largely on the New York confirmation order. After the award was confirmed by the UK court, the claimant sought recognition of this UK judgment in New York. Before the New York court ruled on that request, however, a Malaysian court set aside the arbitration award. The New York court then reversed its earlier decision upholding the arbitral award and refused to recognize the UK award. The Second Circuit affirmed.(10) The Second Circuit held that the lower court was entitled to consider the Malaysian judgment setting aside the arbitral award, as the Malaysian court was the court of primary jurisdiction.(11) The Second Circuit then held that the lower court was justified in refusing to recognize the UK judgment, in part because “equity favors giving more weight to the Malaysian judgment – the decision of the primary jurisdiction – on English’, especially since this UK ruling was based on a New York confirmation. order that was now vacant.(12)

In short, there are advantages for the FAA, but you have to act relatively quickly (within three years) and the award may be vulnerable to vacatur in a non-US jurisdiction, which could undermine the judgment of the US or even another non-US ruling. confirming this award.

conclusion

The recognition and enforcement of non-U.S. judgments in the United States is a complex issue due to variation from state to state. Confirmation of non-US arbitral awards has the advantage of uniform law, but the time limit for filing a confirmation proceeding is significantly shorter and things can get complicated when a non-US court is considering whether to set aside the award Parties drafting contracts should carefully weigh the choice between resolving disputes through litigation or arbitration, taking into account any unique factual circumstances that may make recognition or confirmation even more complex.

(1) Societe d’Amenagement et de Gestion de l’Abri Nautique v. Marine Travelift, Inc.324 F. Supp. 3d 1004, 1008 (E.D. Wisc. 2018).

(2) States that have not enacted either the 1962 Uniform Act or the 2005 Uniform Act are New Hampshire, Vermont, Wisconsin, South Dakota, Wyoming, Kansas, Kentucky, West Virginia, South Carolina, Mississippi, and Arkansas and Louisiana. https://www.uniformlaws.org/committees/community-home?communitykey=ae280c30-094a-4d8f-b722-8dcd614a8f3e.

(3) View ID

(4) View ID

(5) See, for example, 42 Pa. CS § 22004; 10 of the C. § 4803; NY CPLR 5304; Texas Civ. practice & Rem. Code § 36A.004; Hilton v. Guyot159 US 113, 166-69 (1895).

(6) 9 USC § 202.

(7) Id. Section 203.

(8) Id. Section 207.

(9) New York Convention, Article V, https://www.newyorkconvention.org/english.

(10) Thai-Lao Lignite (Thailand) Co. against the Government of the People’s Democratic Republic of Laos864 F.3d 172 (2d. Cir. 2017).

(11) Id. at 182-89.

(12) Id. at 190-91.