Alan Van Praag
Recognition of foreign country money judgements in the United States: Recent decision holds that personal jurisdiction is not required
A recent decision by a trial court in the State of Rhode Island has strengthened the proposition that courts in the United States should not require creditors to establish personal jurisdiction over debtors before such courts recognize and enforce money judgments issued in foreign countries (i.e., “foreign country money judgments”).
This decision is significant because often times, as businesses engaged in international trade are well aware, obtaining a judgment is only half the battle. That is particularly so in the global context since debtors can force creditors to chase assets around the world and they can even attempt to hide – or fraudulently transfer – assets in order to hinder enforcement efforts. However, many such judgment debtors have property interests, including accounts receivable, located in the US which can be seized for
judgment enforcement purposes. It is therefore important that parties holding foreign country money judgements can have those judgments readily domesticated in the US.
Unfortunately though, when creditors attempt to domesticate such foreign judgments, debtors routinely contend that the concerned courts in the US lack personal jurisdiction over them and that the domestication proceedings should thus be dismissed.
In the recent case of Hyundai Merchant Marine Co. Ltd. v. Americas Bulk Transport
Limited (No. 2014-0006), the Rhode Island Superior Court agreed with EVW attorney
Edward W. Floyd’s argument that the existence of personal jurisdiction over a judgment
debtor is not a requirement for the recognition and enforcement of a foreign country money
judgment. In doing so, the Hyundai Court rejected the defendant’s numerous arguments
to the contrary and adopted a rationale which had originally been set forth by a New York
State appellate court in Lenchyshyn v. Pelko Elec., Inc., 281 A.D.2d 42 (N.Y. App. Div. 4th
Dept. 2001).
In that respect, the Hyundai Court cited Lenchyshyn for the proposition that:
Considerations of logic, fairness, and practicality dictate that a judgment
creditor be permitted to obtain recognition and enforcement of a foreign
country money judgment without any showing that the judgment debtor
is subject to personal jurisdiction in [the forum where recognition is
sought] because the judgment creditor does not seek any new relief
against the judgment debtor, but instead merely asks the court to
perform its ministerial function of recognizing the foreign country money
judgment and converting it into a [domestic] judgment.
Creditors holding foreign judgments should keep that consideration in mind
because, even if they have not yet located a debtor’s assets in the United States,
merely domesticating a foreign judgment in a US court can be beneficial for several
reasons.
First, a creditor may gain the benefit of an extended statute of limitations for
enforcing a judgment. For instance, New York State law essentially provides that
money judgments can remain valid for enforcement purposes for twenty years. NY
CPLR § 211.
Second, the rate of post-judgment interest in the concerned US state may be
substantially higher than that provided for in the original, foreign judgment. For
instance, New York State law generally sets the rate of post-judgment interest at 9%
per annum. NY CPLR § 5004.
Lastly, but very significantly, a creditor can utilize extensive, US-style
discovery to locate a debtor’s assets. Creditors might thereby serve discovery
demands on a debtor’s known counter-parties (including banks, owners, agents, and
trade partners) to identify property subject to seizure.
In light of the foregoing, persons holding outstanding, foreign country money
judgments should consider discussing a US (or global) enforcement strategy with
attorneys experienced in the international recognition and enforcement of judgments.
If you have related questions, please feel free to contact the authors of this EVW
Advisory Report (Edward W. Floyd and Alan Van Praag), any members of our
Litigation & Arbitration Group, or your regular EVW attorney.
