December 17 2015 Martin Aquilina, Business Lawyer
Having obtained judgement, the victorious party will naturally want to enforce it in order to obtain the award owed by the losing party. But what if this party’s assets are located in another country? True enough, the judgments rendered by a court of one nation have no standing on their own when it comes to their recognition and enforcement by the courts of another nation, but parties do not want to relitigate the issue before another court. In the best case scenario, there exists a mutual recognition statute between the country of the court that rendered the judgement and the country of the court where enforcement is sought. In the more usual scenario though, the process to have foreign judgments recognized and enforced against property in the local jurisdiction is somewhat uncertain and opaque.
The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, is a robust aid in ensuring that arbitral awards are recognized and enforced among member countries. However, when it comes to the recognition and enforcement of judgments on a global scale, there really is no equivalent. While there exists a Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (the “1971 Convention”), it has been adopted by five countries only.[i]
Faced with the lukewarm endorsement of the 1971 Convention by the international community, the Hague Conference has valiantly sustained its efforts to put together a set of rules that would be more palatable for member states. In the course of these efforts, the 2005 Hague Convention on Choice of Court Agreements (the “2005 Convention”) was born. While the EU Member States as well as the U.S.A. are parties to the 2005 Convention, Canada is not. This is unfortunate because the certainty of forum selection clauses in Canadian law would be enhanced if Canada adopted the Convention (see our forthcoming article on this topic).
The Judgments Project
A renewed effort to put in place a set of global rules on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, known as the “Judgments Project” began in 2011. In February 2015, a Working Group comprised of representatives from 15 member countries, namely Australia, Brazil, Canada, China, Cyprus, the European Union, Germany, India, Japan, the Republic of Korea, the Russian Federation, Spain, Switzerland, the United Kingdom, and the United States of America, presented a preliminary draft (the “Preliminary Draft”) of proposed provisions for a future Convention on the Recognition and Enforcement of Judgments the (“New Convention”).
Reaching consensus will be no small feat. As one author has perspicaciously put it, “any effort to co-ordinate judgments (sic) recognition rules necessarily requires consideration of the jurisdictional bases of authority of the court from which the judgment originates.” [ii] The problem is that not all countries take the same approach to this issue. For instance, certain countries are more focused on the plaintiff’s rights, some more so on those of the defendant. Even the 2005 Convention, “which enshrined the single most acceptable basis of jurisdiction – consent by the parties”,[iii] has been far from universally adopted.
Provisions of the Preliminary Draft
Articles 1 and 2 of the Preliminary Draft confirm that the scope of the New Convention will be limited to the recognition and enforcement between contracting States of judgments in civil and commercial matters only. The New Convention does not apply to contracts relating to consumer goods, employment contracts and family law and insolvency matters, amongst others. The New Convention does not apply to any arbitral proceedings and does not affect any privileges and immunities afforded to States or international organizations.
Articles 3 and 7 narrow the scope of judgments that are subject to the New Convention to decisions on the merits given by a court, and to a determination of costs or expenses by the court relating to such decisions. Interim measures such as preservation orders and injunctions are excluded from the scope of the New Convention.
Article 4 focuses on the broad concept of recognition and enforcement of judgments between contracting States. It confirms that contracting States must recognize and enforce judgments from another contracting State, subject to a limited number of grounds for refusing recognition and enforcement. In so doing, a court may not review the merits of the judgment given by the court of origin and it is bound by the findings of fact on which the court of origin based its jurisdiction, unless the judgment was given by default. Only final judgments can be recognized and enforced.
Article 5 sets out the grounds for a court of a contracting State to refuse the recognition of a judgment issued by a court of another contracting State. Non-recognition is inter alia permitted if the judgment was obtained by fraud, if the defendant was not notified and given sufficient time to prepare its defense in the original proceedings, if the recognition and enforcement of the judgment would offend the public policy of the enforcing State, if the judgment is incompatible with a judgment given by the enforcing State to the same parties, and if the judgment is incompatible with a previously rendered judgment by another State between the same parties on the same cause of action.
Article 6 provides that when there is a judgment made on the registration or validity of patents, trademarks, designs, amongst other similar rights, that judgment may only be enforced if the state of origin is the State in which the registration has been proposed or has taken place or if the registration has taken place under an international or regional instrument. Additionally, if a judgment has been made in respect of immovable property, that judgment will only be recognized and enforced if the contracting State is the one where the property is situated.
Article 8 sets out the rule that a court of a contracting State may refuse the recognition or enforcement of a judgment to the extent it awards punitive or exemplary damages.
Article 9 extends the New Convention’s regime to court-approved settlements, which are to be enforced under the New Convention in the same way as judgments.
Article 10 describes the documents that must be produced by a party seeking the enforcement and recognition in a contracting State.
Article 11 provides that the procedures for obtaining the recognition and enforcement of a judgement are governed by the law of the State in which recognition and/or enforcement is sought.
Lastly, Article 12 allows a judgment to be severed, thus permitting partial enforcement and recognition.
Update on the New Convention
The Council on General Affairs and Policy of the Conference met in March of 2015. The Council noted that the Working Group would address matters within the mandate of the Experts’ Group in order to make additional recommendations. The reported findings and recommendations will be made to the Council in 2016.
[i] These are: Albania, Cyprus, the Netherlands and Portugal.
[ii] R.A. Brand, Jurisdictional Developments and the New Hague Judgments Project, in A Commitment to Private International Law – Essays to Honour Hans van Loon, Intersentia, 2013, pp. 89-99.
[iii] Id. at p. 89
This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Martin today. 613-747-2459 ext.308, [email protected]