The Issues Surrounding The Enforcement Of A Foreign Court Judgment
By Ngoie Joel Nshisso<br />International Business<br />Ph.D. program<br />Northcentral University<br />December 2010<br />The issues surrounding the enforcement of a foreign court judgment <br />in the United States<br />Introduction<br />Globalization and liberalization have paved a way for trade beyond national territories allowing exchange of goods and services between nations and people from different countries. Even though countries open up their economies, freedom to business is never absolute. The fabric of history in a diverse world, if freedom is valued, is therefore patched together through interactions in which individuals cross borders, have disputes, and resolve disputes.<br />Two ways to look at dispute resolutions are available to parties in conflict: one way is to resolve the conflict themselves. But as difficult as it can be, “the resolution of disputes between citizens of different countries, with business transactions that span continents and cultures, raises many complicated legal and tactical problems” (Schaffer, Agusti & Earle 2009, p. 86). In such instance, Folsom, Gordon, and Spanogle (2004) recommend to parties in dispute “seek access to resolve their dispute through the courts in one or more countries” (p. 299).<br /> Schaffer, Agusti and Earle (2009) warn about a paradox that faces parties from two different nations as they explain that: <br />There are differences in national laws, legal systems, and legal procedures, the role of legislation and case law, the functions of judges, the conduct of trials, the use of legal remedies in civil cases, and punishment in criminal cases. These differences are rooted deep in national culture, politics, and economics and especially history and often are the result of centuries of gradual evolution, combined with rapid change caused by wars, revolution, and political turmoil (p.74).<br />The United States fifth Court of Appeals decision in the case: Southwest Livestock & Trucking Co. v. Ramon 1991 is one of the good examples to illustrate issues surrounding the recognition and enforcement of a foreign court judgment in the United States.<br />Overview of the case Southwest Livestock & Trucking Co. v. Ramon<br />Taking advantage of North American Free Trade Agreement (NAFTA), In 1991, Southwest Livestock entered into a loan arrangement with Reginaldo Ramon and got in dispute during the course of the contract. The essential facts presented to the United States fifth court of appeals (2010) are as follows: <br />Southwest Livestock is a Texas corporation. Ramon is a citizen of Mexico from Southwest Livestock borrowed over $400,000 between 1991 and 1994. This loan took the form of thirty-four successive "pagares," or Mexican promissory notes, payable to Ramon with interest within thirty days. Each month, Southwest Livestock paid the accrued interest and executed a new pagare to cover the outstanding principal. Southwest Livestock repaid $120,000 of the principal during this period, but also borrowed additional money from Ramon. The interest on these pagares was approximately fifty percent. The interest rates were illegal in Texas, but legal in Mexico. In October of 1994, Southwest Livestock defaulted on its loan. Ramon obtained a default judgment from a court in Mexico on the thirty-fourth pagare. The Mexican court awarded Ramon $680,000 and accrued interest. Southwest Livestock filed suit in the United States District Court, alleging that Ramon violated Texas usury laws. Ramon asserted that the Mexican judgment barred Southwest Livestock's suit under principles of res judicata and collateral estoppel. The district court initially refused to recognize the Mexican judgment because of the state of Texas's policy interest in preventing usury. On remand, the district court enforced the Mexican judgment and granted summary judgment to Ramon (p. 1-12).<br /><ul><li>Before to analyze the conflicts between different courts in this case, it is important to define legal terms that help to understand the legal reasoning that led to the verdict. Those concepts are: jurisdiction, conflict of laws, recognition and enforcement of a foreign court judgment.
Analysis of the case Southwest Livestock & Trucking Co. v. Ramon may have lacked a dispute settlement clause that indicate dispute resolution process, either litigation or arbitration. Almost all equipment leases and loan documents contain a choice of law clause setting out which jurisdiction’s law will govern construction and enforcement of the contract. This is especially important when the parties reside in or expect the contract to be performed (or assigned to someone) in multiple jurisdictions or have a nationwide practice.
Schaffer, Agusti and Earle (2009) give a quite clear definition of jurisdiction and its different types in this manner:
Jurisdiction is the power of the court to hear and decide a case. The term has different meanings:
Territorial jurisdiction refers to the power of criminal courts to hear cases involving crimes committed within their territory.
In rem jurisdiction refers to a court’s power over property within its geographical boundaries.
Subject matter jurisdiction refers to the court’s authority to hear certain type of legal matter, such as tort cases or breach of contract (p.91).</li></ul>In the dispute opposing Southwest Livestock & Trucking Co to Ramon, it can be discovered that the two parties to the contract seemed to look at two different subject matter jurisdictions. Ramon sought judgment from a court in Mexico and Southwest Livestock filed suit in the United States District Court of Texas. On remand, “the magistrate judge concluded that, contrary to Southwest Livestock's position, the Mexican court properly acquired personal jurisdiction over Southwest Livestock, and therefore, lack of jurisdiction could not constitute a basis for non-recognition” (United States court of appeals fifth district, 2010 p. 1-12). <br /><ul><li>In regard to the demand of Ramon to have the United States federal court hear the appeals, a correct choice of subject matter jurisdiction was made because when a case involves citizen of the United States and citizen of foreign country, federal courts are the jurisdiction recognized by the law of the land.
When the United States Court of Appeals, Fifth Circuit decided to hear the case it was faced with conflict of laws of Mexico under which the case was judged on basis of breach of contract and of the State of Texas that evoked violation of usury laws. This conflict of law happened because the parties to the contract may have omitted to choose the law which they wished to govern their contract relationship mostly because they were from two different countries.
According to Schaffer, Agusti and Earle (2009) “conflict of law refers to the rules by which courts determine which jurisdiction’s laws apply to a case and how differences between laws will be reconciled” (p.104). Hearings on “diversity citizenship cases for breach of contact or tort actions, the United States federal courts apply the law of the state in which they sit but there are many cases where courts applied laws of foreign country” (p. 104). </li></ul>Suits of Southwest Livestock & Trucking vs. Ramon involve relations between the United States and foreign government. It appears that the fifth district court chose a recognition and enforcement of a foreign court judgment in part because of the reason given above but also because the United States is part to many international agreements such as: “General Agreement on Tariffs and Trade (GATT), North American Free Trade Agreement (NAFTA), China Bilateral Market Access Agreement, Central American Free Trade Agreement (CAFTA-DR), Middle Eastern Free Trade Initiative” (Schaffer, Agusti & Earle 2009, p. 274). This case is significant because it is an example of successful balancing of the United States and Mexican legal systems as something that can be done with high levels of sophistication after the value judgments of a choice of law analysis are made.<br />Recognition and enforcement of a foreign court judgment<br /><ul><li>Trade liberalization and agreements have changed profoundly the United States attitude toward foreign laws. There is no rejection nor full faith and credit in foreign laws. Rather “Courts are free to determine as a matter of law the foreign law is” (Schaffer, Agusti & Earle 2009, p. 105).
In the effort to help understand how the United States recognizes and enforces foreign laws and judgments, Folsom, Gordon, and Spanogle (2004) give following detailed descriptions of how courts proceed:
A court, in determining its own policies, has several options. It may reject the judgment of the foreign court and accord no effect to it, requiring a de novo trial on the merits in its own courts. Alternatively, it may accept the foreign court’s judgment as its own and enforce it in the same manner as a domestic judgment. Or, it may recognize the judgment by deciding that there are issues which do not need to be re-litigated, even though the court will only enforce domestic judgments. Where courts recognize foreign judgment, the party with a foreign court judgment must use it to obtain a domestic court judgment, which can then be enforced in the jurisdiction. Direct enforcement of foreign judgments is unusual; recognition of such judgments is more common.
Finally, there are courts which grant conditional recognition to foreign judgments. The conditions may relate to reciprocity of recognition between the two judicial systems involved, or to comity between nations. Where comity is the criterion, U.S. courts have tended to examine (1) the jurisdiction of the foreign court over both the persons and the subject matter involved, (2) the adequacy of the notice given, (3) the possibility of fraud in the decision, and (4) whether any public policy of the U.S. will be harmed by enforcement of the foreign judgment (Folsom, Gordon, & Spanogle 2004, p.306-307).</li></ul>Conclusion <br />The U.S. courts become a component of a legal network that stretches far beyond the borders of the United States when fact scenarios give rise to litigation about international jurisdictional, and conflict of laws analyses. The cases presented in this study illustrate the flexibility litigants have at the crowded intersection between jurisdiction, commerce, private expectations, and substantive law.<br />As the world economy grows and integrates, parties from more countries will interact with parties from the United States, and more cases will present legal analyses that will challenge traditional legal theories and require courts to balance a broader range of individual expectations.<br />Legal and economic structures, when permitted to serve as the arbitrators and organizers of human experience, hold together the fabric of any history, large or small. <br />The history of the coming era will be developed through case-by-case analyses of actors within this economy guided by legal actors capable of sophisticated decisions that effectively balance the differences between legal systems. <br />References<br />Folsom, R.H., Gordon, M.W., & Spanogle, J.A. (2004). International business transaction in nutshell. West, a Thomas business. St. Paul MN<br />Jones, J.R. (2010). Choice of law: significant relationships and the party autonomy rule. Retrieved December 10, 2010 from http://www.leasecollect.org/cgi-bin/news/news.pl?record=14<br />Schaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment. South-Western Cengage Learning. Mason OH<br />United States court of appeals fifth district. (2010). Southwest Livestock & Trucking Co. v. Ramon. 169 F.3d 317 (5th Cir. 1999). Retrieved December 10, 2010 from http://s3.amazonaws.com/ficheros-historico/1_3/Im_1_3_18389886_in1.CV0.wpd.pdf?AWSAccessKeyId=1V02D0W3KSR4KHZ90B82&Expires=1292211257&Signature=vaHrMq0u4TFt3pO0APvbZb6AuBs%3D<br />Walker, A.J. (2010). Conflict of laws analyses for the era of free. Retrieved December 10, 2010 from http://www.auilr.org/pdf/20/20-6-2.pdf<br />