The Access To Justice Gap In Transnational Litigation

HT to Jacob Katz Cogan for a pointer to a new paper by Christopher A. Whytock and Cassandra Burke Robertson, Forum Non Conveniens & The Enforcement of Foreign Judgments, now available on SSRN. Those of you who are following the Lago Agrio litigation will know that when the Ecuadorian plaintiffs first sued Texaco, they sued in the United States, and Texaco persuaded the court to dismiss the case on forum non conveniens grounds, arguing for the adequacy of the Ecuadorian courts as a forum. But after a massive verdict against it, Texaco and its successor, Chevron, returned to the US courts with a different argument, this time asserting that the judgment could not be recognized and enforced in the United States (or anywhere else, for that matter) because of the poor quality of the Ecuadorian justice system. Even if there are reasons for thinking that both of these arguments can be correct at the same time, they create what the authors call a “transnational access to justice gap.” I agree with the authors that this is a serious problem, at least because it creates the appearance that justice is not being done, and perhaps because in fact justice is not being done. We see this reaction among some of the judges involved in these cases, too. Here, for example, is an excerpt of the NY Law Journal’s report on a hearing in the Second Circuit:

Judge Pooler also pressed Mr. Mastro on his denigration of the Ecuadoran judicial system, especially given the origins of the litigation.

* * *

“You were the ones who wanted to try it in Ecuador,” Judge Pooler said. “You wanted to get the case out of the Southern District and into Ecuador.”

Judge Parker said he was sitting in White Plains as a district judge at the time and “I recall Texaco was in my court trying to get this case” to Ecuador.

Mr. Mastro said that “we did believe at the time” Ecuador was the better forum but “times have changed.”

“You think times have changed that much in Ecuador?” Judge Parker asked.

“Absolutely,” Mr. Mastro said, “The quality of justice in Ecuador is among the lowest in the world.”

And here is an excerpt from a recent Third Circuit decision in the Lago Agrio case:

Chevron’s responses to what it plainly regarded as unpalatable proceedings in Ecuador did not stop with it taking steps in that country, as it obviously, and ironically in view of its contentions on its forum non conveniens application that resulted in the dismissal of the Southern District of New York litigation, had lost faith in the Ecuadorian courts.

The authors propose some common-sense solutions for the forum non conveniens stage (I have rearranged the authors’ ordering of their points somewhat):

  1. The courts should judge the adequacy of a foreign forum using the same standards at the forum non conveniens stage as they will apply at the recognition and enforcement stage.
  2. At the forum non conveniens stage, the court should ask not just whether the foreign forum is adequate for the plaintiffs, but whether it is adequate for the defendants.
  3. The court should give more weight to what is already one of the factors in the forum non conveniens analysis, namely, the enforceability of the prospective foreign judgment.
  4. Defendants should have to certify that they have investigated the adequacy of the foreign forum for purposes of deciding whether a judgment will be entitled to recognition and enforcement in the US, and that they have found it adequate and have no reason to think that it will become inadequate. (I question the usefulness of such a certification: in the Lago Agrio case, Texaco was effusive in its praises of the Ecuadorian courts). Defendants should be required to certify that they will pay the foreign judgment unless they can show, at the recognition stage, that the foreign judiciary is systematically inadequate.
  5. An order of dismissal on forum non conveniens grounds should allow the plaintiffs to reinstitute the litigation, without having to relitigate the convenience of the US forum, if they win a judgment that ultimately is not recognized in the US.

The also propose solutions for the recognition and enforcement stage:

  1. Defendants should be estopped to argue inadequacy unless there had been a change in the foreign legal system that could not reasonably have been foreseen at the time of dismissal.
  2. Defendants should not be permitted to argue against recognition and enforcement on case-specific grounds, i.e., they should be required to rely only on arguments about the systematic adequacy of the foreign judiciary. (This is the one suggestion that I question the most strongly, because it seems to me perhaps inconsistent with notions of comity to require a party to impeach a foreign state’s entire legal system where there may be grounds for avoiding recognition and enforcement that would do less insult to the foreign state).
  3. The US court should decide challenges to recognition and enforcement of foreign judgments on an expedited basis.

I think all of this is highly sensible. I would, though, favor a more categorical approach, namely, estoppel in any case where the defendant argued for the adequacy of the foreign legal system, regardless whether the legal system had an unforeseeable change in the interim. This is not a law review article, so I think it is okay to give my reasons for my view very briefly. If you open a 10-K for a major multinational corporation, you will see a long list of risk factors, including political risk. Here is a link, just by way of example, to Chevron’s most recent 10-K. These sophisticated parties take a calculated risk when they seek a forum non conveniens dismissal, and courts should not relieve them of the risk they make a business judgment to assume when they move for dismissal, or bail them out when the risk goes sour.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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