Response to Ted Folkman
Posted on June 4, 2012
In his various comments on the symposium contributions, our host Ted Folkman makes three points to which I respond here.
Case-Specific Exceptions Generally
First, Ted questions whether case-specific grounds for non-enforcement of foreign judgments are needed, so long as the systemic inadequacy of a foreign judicial system is a ground for non-enforcement. If the foreign system is inadequate, so the argument goes, no judgment emanating from it need be enforceable in the US. Conversely, if the foreign system is adequate, it should be trusted to correct any case-specific problems. Either way, there is no need for a case-specific ground for non-enforcement.
But the world is not that neat. Judicial systems worldwide are not black and white: most do not fall into clearly defined categories of either good enough always to be trusted, or bad enough never to be trusted. At the extremes, yes, such all-or-nothing categories can be defensible. For example, I would support a general rule, or at least a very strong presumption, in favor of enforcing any final judgment from Britain, and against enforcing any final judgment from (today’s) Zimbabwe.
The judiciaries in most countries, however, are not so clearly acceptable or unacceptable. They are mixed bags, often doing a reasonably good job, but with frequent exceptions. In such a world, we should not have to condemn an entire foreign judiciary merely because it might fail to correct serious problems in individual cases. Nor should we be bound to swallow individual judgments contrary to our fundamental principles, on the artificial assumption that since the system of which they are part is deemed adequate in general, therefore every individual judgment it produces must be deemed adequate as well. In the real world, we need not only systemic, but also case-specific, exceptions to enforcement of foreign judgments.
Forum Non Conveniens Cases
Second, Ted argues that whatever the rule on enforcement generally, the grounds for non-enforcement of a foreign judgment resulting from a defendant’s successful forum non conveniens motion should be more limited. Once a defendant vouches for the adequacy of a foreign system for FNC purposes, he argues, the defendant should be barred by a “new kind of estoppel” from a case-specific challenge to any resulting foreign judgment.
The flaw in this suggestion is the same as the flaw in the first: it assumes an all-or-nothing view of the adequacy of a foreign judiciary. More realistic is the approach taken by Texaco (defended by Chevron on appeal) when it agreed to accept jurisdiction in Ecuador: Texaco agreed to be bound by any resulting Ecuadorian judgment—but subject to the grounds for non-enforcement set forth in the New York statute. The implicit representation by Texaco was that it accepted the adequacy of the Ecuadorian judiciary in 2001 in general, but not to the point of extending a carte blanche. Texaco agreed to be sued, not defrauded.
Ted argues that equity “should be flexible enough to deal with new situations.” After all, he adds: “It’s equity, man!” But new or old, the essence of equity is fairness. A defendant which agrees to accept a foreign jurisdiction but only subject to conditions—and whose acceptance on that basis is approved by US courts, as in the Texaco case—should not, in fairness, be held to accept a resulting foreign judgment, no matter how fraudulent and no matter how badly deteriorated the foreign judiciary has subsequently become. (This conclusion is even stronger where the plaintiffs orchestrated or directly participated in the foreign fraud.)
This brings me to Ted’s third point: that Ecuador’s judiciary has never been that good and that Chevron should have assumed the risk that the “political winds in Ecuador” would not continue to “blow its way.” This is a matter of degree. I agree that Texaco should have assumed the risks that the reformist winds of the period when the FNC motion was decided would not continue to blow in Ecuador, and that future political change might even lead to a retrenchment. Such variability was reasonably foreseeable.
But unless one applies a rule of strict liability, there are limits to foreseeable and assumable risk. By contemporary Latin American standards, the subsequent deterioration of Ecuador’s judiciary was so exceptional as not to be reasonably foreseeable. In the decade since Texaco accepted Ecuador’s jurisdiction, no country in Latin America—except Ecuador—has experienced the wholesale, summary dismissal of all the judges of all its top courts (Supreme Court, Constitutional Court, Electoral Tribunal) even once (let alone twice, as in the case of Ecuador’s Supreme Court). No Latin American judiciary—except Ecuador’s—has been left topless with no Supreme Court at all for over half a year. Nor did Ecuador’s exceptionalism result from a single, aberrational change of government: the independence of its judiciary has now plummeted through several consecutive presidents.
I have worked on judicial reform in Latin America for decades. In 2000, around the time Texaco’s FNC motion was litigated, I was elected by the Organization of American States to serve on the Board of the Justice Studies Center of the Americas, which promotes judicial reform throughout the hemisphere. I visited Ecuador during those years. I know of no one at the time who foresaw or predicted anything like the collapse of Ecuadorian judicial independence that began in 2004 and continues to the present.
One measure of Ecuador’s dramatic descent is reflected in the World Bank’s Rule of Law Index. In 2000 Ecuador ranked respectably—with countries such as Mexico, Brazil and Peru—in the middle of the third quartile of nations worldwide. Ecuador then was well ahead of bottom-feeders like Honduras, Guatemala and Paraguay. By 2010, however, Ecuador had fallen to nearly the bottom of the fourth quartile, and was ranked ahead of only one other Latin American nation (Venezuela, where the “rule of law” has been reduced to the “rule of Chavez”). (See the attached table).
As Chris Whytock and Cassandra Robertson document, there exists a serious problem of the use of forum non conveniens motions, not to relocate justice, but to delay and defeat justice. Ted Folkman proposes to deal with the problem at the back end: by imposing estoppel (to an unfair degree in my view) and assumption of risk (even of what seem to me to be not reasonably foreseeable risks)—thus ensuring enforcement of foreign judgments (whether or not they are conscionable).
A better approach would be to deal with the problem at the front end, by raising the bar for granting FNC motions. (This is one part of what Whytock and Robertson recommend.) US courts should be more realistic in assessing the adequacy of foreign fora for FNC purposes. Even this, however, will not solve the problem: as my initial post in the symposium outlined, the US District Court that ruled on Texaco’s FNC motion did in fact conduct a realistic review of the adequacy of Ecuador’s judiciary at the time. So W & R’s further recommendation is also important: US courts granting FNC motions should retain jurisdiction, so that where the foreign judgment in a FNC case is so deficient as to be unenforceable, the US courts can resume proceedings on an expedited basis.