Forum Non Conveniens and the Enforcement of Foreign Judgments
Posted on May 30, 2012
Christopher A. Whytock is Assistant Professor of Law and Acting Professor of Political Science at the University of California, Irvine.
The proper relationship between the forum non conveniens (“FNC”) doctrine and the enforcement of foreign judgments is debatable—but it seems quite clear that the status quo isn’t optimal. 1
Here’s the problem. Based on the widespread belief that the US legal system is more favorable to plaintiffs than other countries’ legal systems, defendants file FNC motions to dismiss transnational suits filed against them in the United States in favor of foreign judicial systems. When they do so, they argue—as the FNC doctrine requires—that their preferred foreign judiciary is an adequate alternative forum.
Sometimes, however, defendants experience what legal journalist Michael Goldhaber has called “forum shopper’s remorse” 2: having obtained what they wished for—a dismissal in favor of a foreign judiciary with a supposedly more pro-defendant legal environment—they face an unexpectedly pro-plaintiff judgment. The plaintiff may then seek enforcement of the foreign judgment in the United States. At that point, the defendant sometimes argues that the foreign judiciary is inadequate and that enforcement should therefore be denied, even though the defendant argued at the FNC stage that the same foreign judiciary was adequate. Should defendants be allowed to do this?
Plaintiffs and some scholars have taken the position that defendants should be estopped from arguing inadequacy at the enforcement stage in these circumstances. The position is intuitive and straightforward. To argue adequacy and then inadequacy seems inconsistent, and it seems unfair for a defendant to argue in favor of a foreign judicial system, for the plaintiff to expend resources to litigate the case there, but for the defendant to then refuse to abide by a resulting judgment. It seems that the defendant should bear the risks of its preferred forum, just as a plaintiff bears the risks of litigating in its preferred forum.
But under current doctrine estoppel doesn’t work because the foreign judicial adequacy standards at the FNC and enforcement stages are different. Among other differences, the standard at the FNC stage is more lenient than the standard at the enforcement stage. As the US Supreme Court put it in Piper Aircraft Co. v. Reyno, for FNC purposes the defendant’s proposed alternative forum is adequate except in the “rare circumstance” that the potential remedy it offers is “so clearly inadequate … that it is no remedy at all”—such as “where the alternative forum does not permit litigation of the subject matter of the dispute.” 3 In contrast, under the foreign judgment enforcement legislation adopted in most US states, a foreign judiciary is inadequate for enforcement purposes if it “does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” 4 Because a foreign judiciary that is adequate for FNC purposes may be inadequate for enforcement purposes, a defendant can argue adequacy at the FNC stage and not be estopped from arguing inadequacy at the enforcement stage.
The problem is that in such cases the plaintiff may be denied both US court access (based on the FNC doctrine and its lenient foreign judicial adequacy standard) and a remedy based on the foreign judgment (because of the stricter foreign judicial adequacy standard at the enforcement stage). This can amount to a denial of meaningful access to justice. In addition to access-to-justice concerns, it is highly inefficient for a suit to be dismissed in favor of a foreign judicial system when it will be unable to produce an enforceable judgment—for example, when the defendant’s assets are in the United States but the foreign judicial system does not satisfy the enforcement-stage foreign judicial adequacy standard.
A Proposed Solution
In our recent Columbia Law Review article, Forum Non Conveniens and the Enforcement of Foreign Judgments, 5 Cassandra Burke Robertson and I propose several solutions, two of which I’ll briefly highlight. First, at the FNC stage, US courts should apply the same foreign judicial adequacy standard that they apply at the judgment enforcement stage. In other words, they should not grant a defendant’s FNC motion to dismiss if the defendant’s proposed foreign judiciary “does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” This change would protect both plaintiffs and defendants by reducing the likelihood that a suit will be dismissed in favor of a foreign judiciary that is unlikely to protect the parties’ respective rights, and make it less likely that a plaintiff will be denied both US court access and a remedy based on the foreign judgment. Moreover, the change would help avoid the inefficiency of litigating a suit in a foreign judiciary when it is known at the FNC stage that the foreign judiciary does not satisfy the enforcement-stage adequacy standard.
Second, if the defendant argues at the FNC stage that a foreign judiciary is adequate, the defendant should be estopped from arguing at the enforcement stage that the same foreign judiciary is inadequate—unless the foreign judiciary becomes inadequate after the FNC dismissal due to developments that were not reasonably foreseeable at the time of dismissal. If our first proposal is adopted, estoppel ordinarily would be appropriate. It would no longer be possible to argue consistently both FNC stage adequacy and enforcement stage inadequacy because the adequacy standards would be the same. But estoppel would not apply in the event of unforeseeable changes, because even with a uniform adequacy standard it isn’t inconsistent to argue that a foreign judiciary was previously adequate but has since become inadequate. In the case of reasonably foreseeable change, it would seem more appropriate for the defendant who sought dismissal in favor of the foreign judiciary to bear the risk of change than for the plaintiff who opposed the foreign judiciary to bear that risk.
While our proposal is motivated by access-to-justice concerns, it does not elevate court access for plaintiffs above due process for defendants. Although our proposal would make it more difficult to establish the adequacy of a foreign judiciary for FNC dismissal purposes, we do not propose any limits on the ability of a defendant to move to dismiss a suit for lack of personal jurisdiction. If there is no personal jurisdiction over the defendant, then the plaintiff will be denied U.S. court access regardless of foreign judicial adequacy. Moreover, our proposal would help protect defendants’ due process rights along with plaintiffs’ due process rights by barring FNC dismissals in the first place if the foreign judicial system “does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” On the other hand, our proposal does prioritize court access over convenience, as assessed under the FNC doctrine’s private and public interest factors. But this is nothing new. Even under current law, the FNC doctrine does not allow dismissal—even in favor of a more convenient forum—unless that forum is an available and adequate alternative.
What does our proposal mean for the Lago Agrio litigation? Because our proposal was not in effect at the time of the defendants’ initial FNC motion, it should not be applied to the Lago Agrio case. But if our proposal had been in effect, the defendants’ FNC motion to dismiss in favor of Ecuador probably would not have been granted in the first place—already at that point, the Ecuadorian judiciary probably did not provide “impartial tribunals or procedures compatible with the requirements of due process of law.” If the case nevertheless was dismissed in favor of Ecuador, the defendants would be estopped from arguing systemic inadequacy at the enforcement stage—unless they could show that the Ecuadorian judiciary was no longer systemically adequate due to changes that were not reasonably foreseeable at the time of dismissal.
But Chevron also alleges that plaintiffs’ lawyers submitted fabricated evidence to the Ecuadorian trial court and used other improper means to influence the trial court judge. 6 In most U.S. states, foreign judgment enforcement legislation not only requires a court to deny enforcement if the foreign judiciary is systemically inadequate (according to the standard described above), but also permits a court to deny enforcement if “the judgment was obtained by fraud.” 7 Based on its allegations, Chevron argues that this fraud exception allows non-enforcement of the Ecuadorian judgment against it.
In principle, a foreign judiciary that is systemically adequate should be able to detect and remedy case-specific fraud or other misconduct through its own appellate or other review procedures. Of course, a defendant should not be forced to bear the risk of a plaintiff’s misconduct in foreign judicial proceedings, and a plaintiff should not be allowed to profit from that misconduct. But if the defendant selects a foreign judicial system in its FNC motion, and that system does indeed “provide impartial tribunals or procedures compatible with the requirements of due process of law,” then it would seem that the defendant should accept that system’s own determination of the veracity of its allegations of fraud in the particular trial proceedings and of the legal implications for those proceedings if the allegations are found to be accurate.
It is unclear how to apply this principle to the Lago Agrio case given how hotly the facts are contested. But regardless of fraud or corruption involving particular Ecuadorian trial proceedings and a particular Ecuadorian judge, if the Ecuadorian judiciary is systemically adequate, it should be capable of detecting and remedying such misconduct through its own appellate and other review procedures and there should be no need to re-litigate these issues in a U.S. court at the enforcement stage. On the other hand, if the Ecuadorian judiciary is not systemically adequate, either the suit should not have been dismissed in favor of Ecuador in the first place, or if unforeseeable changes subsequently occurred that rendered the Ecuadorian judiciary systemically inadequate, then enforcement will be denied based on the systemic due process exception without any need to resort to the fraud exception. 8
Many thanks to Ted Folkman—it is an honor to be part of Letters Blogatory’s inaugural symposium, and I look forward to the discussion!
- These comments draw heavily on Christopher A. Whytock & Cassandra Burke Robertson, Forum Non Conveniens and the Enforcement of Foreign Judgments, 111 Colum. L. Rev. 1444 (2011). ↩
- Michael D. Goldhaber, Forum Shopper’s Remorse, Corporate Counsel, Apr. 2012, at 63. ↩
- Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 & n.22 (1981). ↩
- Uniform Foreign Money-Judgments Recognition Act § 4(a)(1) (1962); Uniform Foreign-Country Money Judgments Recognition Act § 4(b)(1) (2005). ↩
- See supra note 1. ↩
- Chevron Corp. v. Naranjo, 667 F.3d 232 (2d Cir. 2012). ↩
- Uniform Foreign Money-Judgments Recognition Act § 4(b)(2) (1962); Uniform Foreign-Country Money Judgments Recognition Act § 4(c)(2) (2005); N.Y. C.P.L.R. § 5304(b)(3) (based on the 1962 Uniform Act). ↩
- In any event, the type of fraud alleged by Chevron seems to be intrinsic fraud, which generally is not a basis for non-enforcement, rather than extrinsic fraud, which can be a ground for non-enforcement. See Uniform Foreign-Country Money Judgments Recognition Act § 4, cmt. 7 (2005). ↩