Report on Three Private International Law Treaties

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SUMMARY

The City Bar’s Working Group on Three Private International Law Treaties, along with our International Commercial Disputes Committee, Council on International Affairs, and Commercial Law and Uniform State Laws Committee issued a report on The Hague Convention of 30 June 2005 on Choice of Court Agreements (the “COCA Convention”); The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Judgments Convention”); and The United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention”). The COCA Convention addresses contracts in international cases containing a choice of court agreement, and provides that the parties’ agreement to resolve their disputes before a chosen court must be enforced, subject to certain limited exceptions, by the chosen forum and honored by all other COCA Convention states, and further provides that a judgment rendered by the chosen court must be recognized and enforced in other Contracting States, subject to certain limited grounds for non-recognition. The Judgments Convention is similar to the COCA Convention’s second part in identifying those commercial and international court judgments that must be recognized in the courts of other Contracting States, subject to an exhaustive list of grounds that a requested court may rely upon to refuse recognition of the foreign judgment. The Singapore Convention facilitates the enforcement of international mediated settlement agreements by requiring Contracting States to enforce such agreements except on limited, enumerated grounds and allows a party to invoke such an agreement to prove a matter has already been resolved. The report recommends ratification of all three treaties and that they should be implemented under a stand-alone federal law akin to Chapter II of the Federal Arbitration Act which implements the Convention on the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). This implementation model would create the most predictability for litigants by ensuring the creation of transparent and accessible legal regimes that apply the relevant treaty obligations uniformly and transparently throughout the United States.

REPORT

I. Executive Summary

The United States State Department (the “U.S. State Department”) Office of the Legal Adviser of Private International Law (“L/PIL”) requested the views of the New York City Bar Association (“NYCBA”) with respect to three private international law treaties:

1. The Hague Convention of 30 June 2005 on Choice of Court Agreements (the “COCA Convention”);
2. The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Judgments Convention”); and
3. The United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention”).

Specifically, L/PIL has solicited the views of the NYCBA on two questions: (1) whether the United States should pursue adoption and ratification of the three private international law treaties at issue (the “Three Treaties”), and if so, (2) how they should be implemented in the United States.  To date, the United States has signed, but not ratified, each of the Three Treaties.

L/PIL’s outreach to the New York City Bar Association for guidance on issues affecting practicing lawyers and their clients and the preparation of this Report continue a tradition of consultation by the Executive Branch with the organized bar on comparable issues that dates back over two decades.  In 2000, the U.S. State Department, as part of its ongoing negotiations of the then-proposed Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, requested that the Committee on Foreign and Comparative Law of the NYCBA conduct a survey of foreign jurisdictions “for the purpose of determining what practical obstacles exist to obtaining recognition of money judgments obtained in United States courts in the domestic courts of selected trading partners of the United States.”[1]

This report reflects the collective assessment and recommendation of NYCBA members from various NYCBA committees and councils listed on the signature page of this report (the “Working Group”) who analyzed the benefits and consequences of the COCA Convention, the Judgments Convention, and the Singapore Convention, as well as potential paths for implementation in the United States.[2]

Because the Three Treaties involve the recognition and/or enforcement of a court judgment or mediated settlement agreement concluded in another country, it is important to define both terms at the outset.  “By recognizing a judgment, ‘the forum court accepts the determination of the legal rights and obligations made by the rendering court in the foreign country.’”[3]

Enforcement, with respect to a (recognized) judgment, refers to the means by which “the legal procedures of the state . . . ensure that the judgment debtor obeys the foreign-country judgment,”[4] which effectively means that a U.S. court will treat a foreign judgment as a U.S. court judgment. “Recognition ‘is a prerequisite to enforcement of the foreign-country judgment.’”[5]  Enforcement, with respect to a mediated settlement agreement, refers to the means by which a party to the agreement can bring an action (usually) in a court in the enforcing jurisdiction to compel a recalcitrant party to comply with the agreement.

A. Summary of Three Treaties

The COCA Convention addresses contracts in international cases[6] containing a choice of court agreement in two respects:  (1) it provides that the parties’ agreement to resolve their disputes before a chosen court  must be enforced, subject to certain limited exceptions, by the chosen forum and honored by all other COCA Convention states, and (2) further provides that a judgment rendered by the chosen court must be recognized and enforced in other Contracting States, subject to certain limited grounds for non-recognition.

The Judgments Convention is similar to the COCA Convention’s second part in identifying those commercial and international court judgments that must be recognized in the courts of other Contracting States, subject to an exhaustive list of grounds that a requested court may rely upon to refuse recognition of the foreign judgment.

The Singapore Convention facilitates the enforcement of international mediated settlement agreements by requiring Contracting States to enforce such agreements except on limited, enumerated grounds and allows a party to invoke such an agreement to prove a matter has already been resolved.

B. Current State of U.S. Law

Under current practice in the United States, federal and state courts readily enforce choice of court agreements that choose a U.S. forum, as well as those that choose a foreign one.  As to foreign court judgments, for decades, courts in the United States have relied on state law to recognize and enforce foreign country money judgments that are conclusive, final, and enforceable in the country of origin subject to a limited set of defenses with respect to the underlying judgment.  Importantly, the vast majority of jurisdictions in the United States have for many years been willing to recognize foreign court judgments without any requirement of “reciprocity,” i.e., that the issuing country would enforce a similar U.S. court judgment.  Because there has never been a “bilateral treaty or multilateral convention in force between the United States and any other country on reciprocal recognition and enforcement of judgments”[7] to date, many foreign countries, particularly civil law jurisdictions, historically have been reluctant to recognize U.S. court money judgments despite U.S. courts’ willingness to recognize foreign judgments.  Thus, from the perspective of the United States, the widespread adoption of the COCA Convention and the Judgments Convention would alter the status quo primarily by having foreign courts enforce agreements choosing a U.S. court as the exclusive forum for resolution of disputes and by making U.S. federal and state court judgments much more readily and predictably enforced in those other States joining these two conventions.

As Prof. Linda Silberman has written, “the U.S. interest in this [Judgments] Convention is not about harmonizing U.S. law on recognition/enforcement but rather about ensuring that U.S. judgments are enforced in other countries that have had significantly more restrictive regimes on recognition generally and/or are hostile to U.S. judgments in particular.”[8]  The COCA Convention and Judgments Convention are intended to provide increased certainty for litigants, thereby reducing certain obstacles to international trade.  Due to the reciprocity requirement embedded in both the COCA Convention and the Judgments Convention, as multilateral instruments binding only on Contracting States, the efficacy of both treaties in facilitating the enforcement of U.S. judgments abroad hinges on how widespread adoption of these two conventions turns out to be.

With respect to the Singapore Convention, the majority of jurisdictions in the United States and abroad currently treat a mediated settlement agreement as a contract to be enforced like other contracts by proceedings in a court.  Those proceedings and procedures vary substantially from jurisdiction to jurisdiction, creating obstacles for parties seeking to enforce mediated settlement agreements in jurisdictions outside of where such agreements were concluded.  Adoption of the Singapore Convention would provide clarity and uniformity to the process of enforcing international mediated settlement agreements where there are now significant variations.  By making international mediated settlement agreements easier to enforce, the Singapore Convention will elevate the stature of mediated settlements in the international business and legal communities and is expected to lead to an increase of mediation as a tool to resolve cross border disputes.

C. Ratification Recommendations

In formulating its recommendations, the Working Group adopted two guiding principles in its assessment of the Three Treaties:  First, because all Three Treaties have been finalized after many years of deliberation and are open for adoption and implementation, the Working Group saw its mandate as providing an assessment and recommendation with respect to each of the Three Treaties as they are, rather than as offering suggestions on how they could be modified or improved.

Second, because the United States already has well-developed jurisprudence on enforcing choice of court agreements, as well as recognizing and enforcing foreign country money judgments, the test applied by the Working Group in formulating its recommendation is whether the adoption and implementation of the Three Treaties would result in a net benefit to U.S. national interests in having choice of court agreements and the judgments of U.S. courts more readily enforceable abroad relative to the burdens such adoption would impose on U.S. practice and principles.

As to mediated settlement agreements, the United States has well-developed jurisprudence on enforcing settlement agreements as contracts.  The test applied by the Working Group in formulating its recommendation as to the Singapore Convention primarily is whether the adoption and implementation of that treaty would result in a net benefit to U.S. national interests in having mediated settlement agreements of U.S. nationals more readily enforceable abroad and whether it would promote greater use of mediation internationally.  The Working Group has also noted, where appropriate, the impact that the Singapore Convention would have on U.S. practice and principles.

1. COCA Convention

In September 2006, following the COCA Convention’s approval by the Hague Conference on Private International Law, the International Commercial Disputes Committee of the NYCBA submitted a report to the Legal Adviser to the Secretary of State (the “ICDC Report”) supportive of the COCA Convention on the grounds that U.S. ratification “would serve the interests of litigants in U.S. courts and U.S. businesses engaged in international trade.”  The ICDC Report concluded that adoption of COCA:

would significantly enhance the enforceability abroad of choice-of-U.S. court agreements and, even more significantly, U.S. judgments based on such choice-of-U.S. court clauses, which currently is unpredictable at best. The Convention would thus ‘level the playing field’ as between U.S. enforcement of foreign judgments, which currently are relatively liberally enforced, and foreign enforcement of U.S. judgments, whose enforcement currently is unpredictable.  In the Committee’s view, this alone justifies U.S. ratification of the Convention, as it would significantly enhance the enforcement of U.S. judgments obtained by U.S. litigants and, in particular, by U.S. businesses engaged in international trade that have obtained U.S. judgments against their foreign counterparties.[9]

The ICDC Report mirrored the view adopted in 2006 by the American Bar Association.[10]

Since 2006, the Judgments Convention has been negotiated, finalized, and signed by the United States, developments that were not anticipated when the COCA Convention was adopted in 2005.[11]  The COCA Convention and the Judgments Convention have largely been viewed as a “package,”[12] designed to serve complementary functions, although their language with respect to the grounds on which a court can refuse enforcement are not identical.[13]  Recently, however, criticisms and concerns have been raised as to the COCA Convention, which are addressed below in Section IV(A)(i)(3).  In short, those concerns derive from the common concern that the COCA Convention is not sufficiently protective of procedural rights, and therefore could result in requiring U.S. courts to recognize and enforce judgments of a corrupt judicial system or that otherwise do not provide a “full and fair trial” in a legal system that “secure[s] an impartial administration of justice” for foreign parties.^[14]

Despite these criticisms, a majority of the Working Group has adopted the view that the benefits of ratification of both the COCA Convention and Judgments Convention (as further discussed below), warrant pursuit, and the concerns raised with respect to the COCA Convention can be largely mitigated by the inclusion of guiding language in federal implementing legislation (as further discussed below) that articulates the proper judicial interpretation of the COCA Convention consistent with the Judgments Convention.  Therefore, a majority of the Working Group recommends—consistent with the view first adopted in the 2006 ICDC Report—that the United States should pursue ratification of the COCA Convention, provided that the language recommended in Section V(b) and Appendix 8 is included in federal implementing legislation.  Such language seeks to provide judicial guidance as to certain treaty terms, including the “public policy” exceptions in Articles 6(c) and 9(e) of the COCA Convention, by specifying that U.S. courts are not bound to either decline jurisdiction as a nonchosen court or recognize or enforce a foreign judgment if (i) there was no proper consent to the putatively chosen court’s exercise of jurisdiction; (ii) the chosen court sits within a judicial system that is systemically unfair, biased or corrupt; or (iii) the specific proceedings before the chosen court were not compatible with due process of law.

2. Judgments Convention

A majority of the Working Group recommends that the United States pursue ratification of the Judgments Convention, as doing so would improve efficiency and predictability with respect to the recognition and enforcement of court judgments in other fora and increase the likelihood that U.S. judgments are predictably and efficiently recognized and enforced abroad, without materially affecting existing U.S. practice.  Further, the Judgments Convention includes procedural safeguards not found in the COCA Convention, thereby avoiding perceived shortcomings of the COCA Convention.

For example, Article 5(a) of the Judgments Convention permits the requested court to assess whether the “jurisdictional filter” claimed by the party seeking recognition was met in the issuing court, and, therefore, the determination by the issuing court of its jurisdiction is not dispositive on the requested court.  Moreover, Article 29 of the Judgments Convention allows a Contracting State to suspend the effect of the treaty with respect to other Contracting States within 12 months of ratification if it finds any concerns about the fairness or corruption of that country’s legal and judicial system.  Finally, Article 7(1)(b) ameliorates concerns with the COCA Convention’s limitation on non-recognition solely with respect to judgments procured by deliberately fraudulent conduct, as the Judgments Convention contains no such limitation to the type of fraud that would mandate non-recognition.

The Working Group also recommends that when adopting and implementing the Judgments Convention, the United States should make the Article 19 reservation, under which the United States would not apply the Judgments Convention to any foreign court judgment against the United States, any agency of the United States, or any person acting for the United States or its agencies.[15]

3. Singapore Convention

The Working Group unanimously recommends that the United States ratify the Singapore Convention.  The Singapore Convention will make mediation a more attractive option for resolving cross-border disputes.  It will also make enforcement of international mediated settlement agreements easier abroad and in the United States, and the trade-off will benefit U.S. interests because, unlike many foreign jurisdictions, the process for enforcing such agreements in most U.S. states is not substantially different from the regime that would be created under the Singapore Convention.  The Singapore Convention would also elevate the stature of mediation settlements in the international business and legal communities and lead to the increased use of mediation as a dispute resolution tool in international disputes.  Therefore, the Working Group recommends that the United States adopt and implement the Singapore Convention, but it is not recommended that the United States adopt either of the two reservations authorized by the Singapore Convention, which permit states to exclude settlements involving them or their government agencies, or to agree to apply the Singapore Convention only to the extent that disputing parties have agreed to its application.  Both reservations would undermine the central purpose of the Singapore Convention, i.e., encouraging wider use of mediation.

D. Implementation Recommendations

The Working Group is of the view, after considering various alternatives, that the Three Treaties should be implemented under a stand-alone federal law akin to Chapter II of the Federal Arbitration Act which implements the Convention on the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).  This implementation model would create the most ex ante predictability for litigants by ensuring the creation of transparent and accessible legal regimes that apply the relevant treaty obligations uniformly and transparently throughout the United States, including with respect to matters left to be addressed by a Contracting State’s domestic law.  For this reason, to the extent that any of the Three Treaties are self-executing, the Working Group nevertheless considers it advisable to enact implementing federal legislation.  Federal legislation is also less likely to be inadvertently overlooked by courts than a self-executing treaty, which will further encourage uniform application.

With respect to the COCA Convention and the Judgments Convention, we have concluded that they should be implemented via coordinated and complementary federal statutes that ensure consistent interpretation of both treaties.  The federal law approach could allow for the express requirement that U.S. courts recognize choice of court agreements and foreign judgments that have already been recognized and enforced by another U.S. court.  This will help to guard against forum-shopping by reducing the risk of different and inconsistent outcomes across U.S. states and reduce transactional costs for litigants.  This federal legislation should also provide for federal subject matter jurisdiction, which would mitigate the risk of discordant state-court interpretations of the same rules, and at the same time allow for the development of federal court expertise and a robust body of precedent that would contribute to the uniform interpretation of the COCA Convention and Judgments Convention.  The implementing legislation for the COCA Convention and the Judgments Convention should include the protective language that the Working Group has proposed in order to increase the likelihood that the COCA Convention and the Judgments Convention are applied consistently by U.S. courts to ensure that if a party did not receive due process in the foreign court, the U.S. court has the discretion to deny recognition and enforcement of such judgments.

As it relates to the Singapore Convention, the American Bar Association (“ABA”) and some commentators have argued that the Singapore Convention is a self-executing treaty, and therefore that the Singapore Convention may be considered U.S. law.  However, without federal law clarifying certain areas that the Singapore Convention leaves to be filled by domestic law, adopting this approach could lead to the significant risk that the Singapore Convention would be applied in an inconsistent manner by states, and therefore, the stand-alone short form model—which ameliorates this concern by ensuring uniform application throughout the United States, including what matters are left to state law—is likely the best approach for the implementation of the Singapore Convention.

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