The role of the reciprocity requirement in the harmonization of standards for the recognition and enforcement of foreign judgments

Chapter II: Description of the ALI's Project: Non-Reciprocity as a Defense

While negotiation were undergoing under the auspices of The Hague Conference on Private International Law since 1996, The American Law Institute (ALI) started in 1999 - with the encouragement of the State Department of the United States - the preparation of a draft legislation on judgments recognition to implement the Hague Convention if it is successfully drafted and ratified^330(*). This initially corresponded to the «Plan A» suggested by the ALI's reporters^331(*). However, since negotiations in the Hague Conference were taking time more than expected and finally stalled, the ALI moved forward to discussing the possibility of «Plan B» which is intended to draft a federal statute on the recognition and enforcement of foreign judgments in the United States^332(*).

The essence of this project is basically to provide solution to the problem of the non-acceptance of American judgments abroad. It addresses «a national problem with a national solution^333(*)» which consists basically in making the foreign-country judgments recognition uniform throughout the United States^334(*). «The most controversial issue in this effort has been whether to require reciprocity from countries whose judgments come before American courts for enforcement»^335(*).

Despite the fact that reciprocity has almost disappeared from the landscape of the recognition and enforcement of foreign judgments in the United States, the vote among the membership of the ALI favoured the inclusion of the reciprocity requirement in the proposed federal legislation^336(*).

The reciprocity in the ALI's proposed federal statute presents a new breadth of the reciprocity. It has different goals and rationale i.e. reciprocity is no longer a device to protect sovereignty, but it has a more pragmatic objective: to secure the recognition and enforcement of American judgments abroad. From this point, it is worth analysing reciprocity as included in the ALI's proposed federal statute (Section I) before addressing the question of its potential impact on the judgments recognition practice in and outside the United States (Section II).

Section I: The Reciprocity Requirement in the ALI Project

It is widely agreed that the United States has a unique situation with regard to the recognition and enforcement of foreign judgments. It is also agreed that while the United States is committed to a liberal judgments recognition practice and give effect to foreign judgments on the basis of comity, American judgments continue to face non-recognition outside. As it was mentioned in the Reporters' Notes provided with the proposed final draft, «the rationale behind this section is that the interest of the United States to having its judgments recognized in foreign countries, as well as to recognizing and enforcing judgments of foreign courts»^337(*).

Therefore, it is worth the trouble showing the manifestation of reciprocity within the ALI's proposed federal statute (Paragraph A) before discussing its method of application (Paragraph II).

Paragraph A - the Manifestation of Reciprocity in the Proposal Federal Statute

The ALI voted for the reintroduction of the reciprocity requirement in the landscape of the recognition and enforcement of foreign judgments in the United States. Addressing the problem of ensuring the recognition and enforcement of American judgments abroad, the ALI made from reciprocity requirement a fundamental condition through which foreign judgments would have effect in the United States. As such, reciprocity appears in four provisions of the proposed federal statute^338(*), but it is in its section 7 where the ALI established the principle of reciprocity as a ground for non recognition in the proposed federal statute. Therefore, it is paramount to address the question of the operation of the reciprocity requirement in the proposed federal statute as to improve the recognition and enforcement of American judgments abroad (I) prior to addressing its operation as incentive to enter into bilateral agreement (II).

I - The Operation of Reciprocity as to Improve the Recognition of American Judgments Abroad

Section 7 of the proposed federal statute have not only introduces reciprocity as a mandatory requirement for the recognition and enforcement of foreign judgments (A), it has also the merit of clarifying its application (B)

A - Reciprocity as a Mandatory Requirement for the Recognition and Enforcement of Foreign Judgments

As it was already mentioned, there is no general consensus about whether to need a reciprocity requirement in the law of the recognition and enforcement of foreign judgments in the United States. In effect, among the thirty one states which have adopted the UFMJRA; only eight states have included a reciprocity requirement in their version. The disagreement is not only limited to the necessity of the reciprocity requirement, but also to its nature. Among the eight states which have included the reciprocity requirement in their version of the Uniform Act, six states give a discretionary effect to the reciprocity requirement in their act and allow the dismissal of the foreign judgment on the basis of the reciprocity requirement; whereas the two other states have made from the lack of reciprocity a mandatory basis for denying recognition and enforcement of foreign judgments in the United States.

The new approach of the ALI in their proposed federal statute is not only to include reciprocity as a ground for non-recognition, but also to require it as a mandatory requirement for foreign judgments recognition. The section 7 provides «A foreign judgment shall not be recognized and enforced in the United States if the court finds that comparable judgments of courts in the United States would not be recognized or enforced in the courts of the state of origin»^339(*). As a result, courts in the United States will, if the proposed federal statute is enacted by Congress, deny effect of foreign judgments on the sole reason that foreign judgments lack reciprocity whenever the requirement fails to be shown.

It is important to point out thus far to the few differences between the reciprocity requirement in the proposed federal statute and the Hilton's reciprocity. On the one hand, the Supreme Court in Hilton and the ALI ask courts (federal and state courts) in the United States to refuse recognition and enforcement of foreign judgments on the unique ground of reciprocity. This means that the lack reciprocal recognition and enforcement from foreign states alone is sufficient to strike down the foreign judgment and deny its effect in the United States^340(*).

On the other hand, where the Supreme Court established a limited scope for the application of the reciprocity requirement, since it applies only in certain matters where an American is a defendant, the ALI made from reciprocity a general requirement applicable to a wide range of judgments against any foreign judgment holder despite the criteria of nationality. In other words, where the Hilton's reciprocity seems to protect American nationals from un-reciprocal treatment abroad, the ALI's reciprocity focus is only on enforceability of American judgments abroad regardless the criteria of the nationality^341(*). This means that reciprocity would be applied even against American nationals who succeeded to gain cause of action in foreign countries which do not grant effect to American judgments.

Finally, where the Supreme Court allowed the rejection of foreign judgments on the ground lack of reciprocity, the ALI made from the lack of reciprocity a mandatory ground for non recognition. In fact, although the Supreme Court in Hilton asked American courts to reject the foreign judgment where reciprocity is not proved, the failure to satisfy the requirement of reciprocity would result in an outright rejection of the foreign judgment. The judgment would be qualified as «Prima facie» evidence in American trial courts^342(*). Unlike the Hilton's reciprocity, the ALI proposed federal statute requires from federal and state courts to be bound by the reciprocity requirement and reject effect of foreign judgments whenever the lack of reciprocity is proved. However, it does not give any answer concerning the use of the foreign judgment that was rejected conclusive effect^343(*).

Including the reciprocity requirement as a mandatory ground for non recognition aims to send a message to the world that the United States is going to break its long history of liberal recognition practice the judgments recognition practice. The ALI justifies mandatory aspect of reciprocity as a tool providing unification of the recognition system in the United States. They argue that leaving the question of whether to require reciprocity or not and its effect as discretionary or mandatory as a matter of discretion has led disparate judgments recognition practices in the United States and has led to a forum shopping. Therefore, «the act, designated to achieve uniformity in the United States, rejects discretion in this context»^344(*). It is a clear message addressed to those countries which refuse to give effect to American judgments that their judgments will be unwelcome if the American judgments are not recognized abroad.

* ³³⁰. Katherine R. Miller, Playground Politics: Assessing the Wisdom of Writing a Reciprocity Requirement into U.S International Recognition and Enforcement Law, Georgetown Journal of International Law, winter 2004, p262 available at www.westlaw.com; see also Luther L. McDougal, III, Robert L. Felix and Ralph U. Whitten, American Conflicts law - Fifth Edition, Transnational Publishers, Inc, 2001 p. 323

* ³³¹. Susan L. Stevens, Commending International Judicial Respect: Reciprocity and the Recognition and Enforcement of Foreign Judgments, 26 Hasting International and Comparative Law Review, 2002-2003, p.130 available at www.heinonline.com.

* ³³². Linda J. Silberman and Andreas F. Lowenfeld, A Different Challenge for the ALI: Herein of Foreign Country Judgments, An International Treaty and An American Statute, Indian Law Journal, 2000 available at www.weslaw.com.

* ³³³. The American Law Institute, Recognition and Enforcement of Foreign Judgments: Analysis and Proposal Federal Statute - Proposed Final Draft (April 11, 2005), available at www.ali.org

* ³³⁴. Franklin O. Ballard, Turnabout Is Fair Play: Why a Reciprocity Requirement Should Be Included in the American Law Institute's Federal Statute, Houston Journal of International Law, Vol 28:1, 2006, p.212

* ³³⁵. The American Law Institute, Recognition and Enforcement of Foreign Judgments: Analysis and Proposal Federal Statute - Proposed Final Draft (April 11, 2005), available at www.ali.org

* ³³⁶. The American Law Institute, Recognition and Enforcement of Foreign Judgments: Analysis and Proposal Federal Statute - Proposed Final Draft (April 11, 2005), available at www.ali.org

* ³³⁷. Id, section 7 - Reporters' Notes, 1. Rationale, p. 97 available at www.ali.org

* ³³⁸. The reciprocity requirement appears in the section2 entitled «Recognition and Enforcement Generally» where «judgments for taxes, fine, and penalties may, but need not, be recognized and enforced provided they meet the criteria of this Act, including reciprocity in accordance with section7». It appears also in the section3 entitled «Effect of Foreign Judgment in the United States» which allows the recognition and enforcement of default judgments under the fulfilment of some conditions. At the end of the section3 (b), it is states that «the party resisting recognition or enforcement may raise the defences set out in sectionsection5 [related to the non-recognition of foreign judgment] and 7 [related to the fulfilment of the condition of reciprocity». The third appearance in that is the most important because it established the principle of reciprocity in the act (section7). The last appearance of the reciprocity requirement is in the section10 entitled «Registration of Foreign Money Judgments in Federal Courts». The section10 provides in its first paragraph (a) that «Except as provided hereafter, a foreign judgment [ issued by the court of a state that has entered into an agreement with the United States for reciprocal recognition of judgments pursuant to section7 (e) of this Act] may be registered in accordance with this section in any United States court for a district in which the judgment debtor has property when the debtor (if an individual) is domiciled in the state or (if a judicial entity) has an establishment in the state».

* ³³⁹. The American Law Institute, Recognition and Enforcement of Foreign Judgments: Analysis and Proposal Federal Statute - Proposed Final Draft (April 11, 2005), section7 (a) - Reciprocal Recognition and Enforcement of Foreign Judgments, available at www.ali.org

* ³⁴⁰. In this context, there are no similar cases, except Hilton, where a court in the United States has refused to grant recognition and enforcement of foreign judgment on the sole ground of reciprocity. See William G. Southard, The Reciprocity Rule and Enforcement of Foreign Judgments, Columbia Journal of Transnational Law, 16:327 p. 335-344, where he argued that «Most importantly, this author could find non case other than Hilton which denied conclusive recognition to a foreign judgment solely on the ground of reciprocity consideration». He continued by stating that «[courts] have manifested no reluctance to use the rule when they are able to conclude that the foreign forum would grant conclusive effect to American judicial decisions...The rule is also often cited approvingly in instances where a court rejects a foreign judgment on the basis of other aspects of the comity inquiry, such as fraud, public policy or jurisdiction». To summarize, the author concluded that «courts cite reciprocity rule approvingly only in instances where it does not serve as the sole obstacle to recognition of foreign judgments».

* ³⁴¹. Katherine R. Miller, Playground Politics: Assessing the Wisdom of Writing a Reciprocity Requirement into U.S International Recognition and Enforcement Law, Georgetown Journal of International Law, winter 2004, p296 available at w as ww.westlaw.com. The author states «Indeed, even the now defunct Hilton decision does not establish a precedent for such a far-reaching reciprocity doctrine, insofar as Hilton was limited by dictum to actions where the judgment abroad was against a U.S. citizen and in favour of a foreign plaintiff, whereas section 7 of the Act applies to all foreign judgments irrespective of the nationality of the parties.»

* ³⁴². William G. Southard, The Reciprocity Rule and Enforcement of Foreign Judgments, Columbia Journal of Transnational Law, 16:327 p. 335-344,

* ³⁴³. It is important to note that the question was raised during debates between the ALI's members, and the solution appears to allow the use of foreign judgments as evidence, ALI's minutes of Tuesday Morning Session, May 18, 2004 p, 146 available at www.ali.org

* ³⁴⁴. The American Law Institute, Recognition and Enforcement of Foreign Judgments: Analysis and Proposal Federal Statute - Proposed Final Draft (April 11, 2005), section 7 - Reporters' Notes, 4.Discretion to recognize judgments in absence of reciprocity rejected, p. 100-101 available at www.ali.org