03. recognition and enforcement

The question

A party who has litigated a cross-border dispute to a successful judgment has not necessarily obtained anything of value, for the judgment is the judgment of one country's courts, and the losing party or its assets may be in another country, beyond the reach of the court that gave the judgment. This sub-unit examines the third of the three questions raised by the cross-border dispute, the question of recognition and enforcement, asking why a foreign judgment does not enforce itself, how it may be given effect in another country, and why the enforcement of arbitral awards is, in this respect, more straightforward than the enforcement of judgments. The answer completes the treatment of the cross-border dispute begun in the previous sub-unit and reveals a striking contrast between the international travel of judgments and of arbitral awards, a contrast that bears upon the choice between litigation and arbitration examined in the next module.

Why a foreign judgment does not enforce itself

The starting point is that a judgment given by the courts of one country does not, of its own force, have any effect in another country, and understanding why illuminates the whole question. A judgment is an exercise of the authority of the state whose courts gave it, and that authority is, as Course 1 explained, territorial: it extends to the territory of the state and not beyond. The courts and enforcement officers of another state are not the agents of the state that gave the judgment and are under no inherent obligation to give effect to its judgments; a foreign judgment is, in the state where enforcement is sought, merely the act of a foreign authority, with no automatic force.

This connects to the territorial nature of state authority and the coexistence of distinct legal systems examined in Course 1. Because each state's judicial authority is territorial, the judgment of one state's courts cannot reach assets in another state without the second state's cooperation, and that cooperation is not automatic. For a foreign judgment to be given effect, the state where enforcement is sought must itself decide to recognise and enforce it, according to its own rules, whether those rules derive from its national law, from a treaty it has concluded, or from a regional regime to which it belongs. The consequence is that a successful litigant who must enforce a judgment abroad faces a further step, distinct from obtaining the judgment, namely persuading the courts of the country where the assets are to give the foreign judgment effect, and the availability and ease of that step vary greatly depending on the countries involved and the arrangements between them.

Consider a party that obtains a judgment in its own country against a foreign defendant whose assets are abroad. The judgment binds the defendant in the country that gave it, but the assets are beyond that country's reach, and the courts of the country where the assets are will not enforce the judgment merely because it has been given. The successful party must seek to have the foreign judgment recognised and enforced in the country of the assets, according to that country's rules. The example shows the foreign judgment lacking automatic force and requiring the cooperation of the state where enforcement is sought.

A foreign judgment therefore does not enforce itself, because the judicial authority of the state that gave it is territorial and the courts of another state are under no inherent obligation to give it effect; a successful litigant who must enforce abroad faces the further step of persuading the foreign state to recognise and enforce the judgment according to its own rules, a step whose ease depends on the countries and arrangements involved.

Recognition and enforcement distinguished

The giving of effect to a foreign judgment involves two related but distinct operations, recognition and enforcement, and distinguishing them clarifies what is involved. Recognition is the acceptance by the courts of one country that a judgment of another country's courts is valid and conclusive of the matter it decided, so that the matter may not be relitigated and the judgment may be relied upon, for example as a defence or as establishing a right. Enforcement is the further step of using the machinery of the state to compel compliance with the judgment, such as by seizing the losing party's assets to satisfy a money judgment.

The distinction connects to the difference between the declaration of a right and its coercive vindication that runs through the law. A judgment may be recognised without being enforced, as where it is relied upon to establish that a matter has already been decided, precluding fresh litigation; and enforcement presupposes recognition, for a court will not lend its coercive machinery to a foreign judgment it does not first recognise as valid. In practice the successful litigant ordinarily seeks both: recognition, so that the foreign judgment is accepted as conclusive, and enforcement, so that the state's machinery is used to compel satisfaction of it. The process by which a foreign judgment is recognised and enforced varies among the systems, ranging from a relatively summary registration of the judgment, where a treaty or regional regime so provides, to a fresh action on the judgment under the national law, but in each case the two operations of recognition and enforcement may be distinguished.

Suppose a party with a foreign money judgment seeks to satisfy it from the losing party's assets in another country. It must first have the judgment recognised in that country, as a valid and conclusive judgment, and then have it enforced, by the seizure and sale of the assets to satisfy the judgment. Were the party merely seeking to rely on the judgment to prevent the matter being relitigated, recognition alone would suffice. The example shows recognition and enforcement as distinct operations, the one accepting the judgment as conclusive and the other compelling compliance with it.

Recognition and enforcement are therefore distinct operations in the giving of effect to a foreign judgment, recognition accepting the judgment as valid and conclusive so that the matter may not be relitigated, and enforcement using the state's machinery to compel compliance, the litigant ordinarily seeking both, with enforcement presupposing recognition.

The grounds for recognition and its refusal

A country does not recognise every foreign judgment, and the grounds on which it recognises a foreign judgment, and those on which it refuses, are central to the question. Although the rules vary among the systems and the treaties, a broadly common pattern may be discerned. A foreign judgment is ordinarily recognised where the foreign court had jurisdiction over the matter according to the standards the recognising country applies, where the judgment is final and conclusive, and where it is for a determinate sum or otherwise of a kind the recognising country will enforce; recognition is, in such a case, the general rule, reflecting the comity that states extend to one another's judgments and the interest of commercial parties in the international effectiveness of judgments.

The grounds on which recognition may be refused connect to the protection of the fundamental standards of the recognising state. Recognition is commonly refused where the foreign court lacked jurisdiction by the recognising country's standards, where the judgment was obtained by fraud, where the proceedings that led to it denied the losing party a fair opportunity to be heard, or where recognition would be contrary to the fundamental public policy of the recognising country; these grounds protect the integrity of the recognising state's legal order and the basic procedural rights of the parties, while stopping short of a review of the merits, for the recognising court does not ordinarily re-examine whether the foreign court decided the case correctly. The result is a regime under which foreign judgments are generally recognised, subject to defined exceptions that guard against judgments tainted by want of jurisdiction, fraud, procedural unfairness, or offence to fundamental policy. The ease and certainty of recognition are greater where the countries involved are bound by a treaty or regional regime providing for it, and the Hague Convention examined in the previous sub-unit is one such arrangement for judgments given under exclusive jurisdiction clauses; absent such an arrangement, recognition depends on the national law of the country where it is sought, and may be less certain.

Imagine a foreign money judgment presented for recognition. If the foreign court had jurisdiction by the recognising country's standards, the judgment is final, and none of the grounds for refusal is present, the judgment will ordinarily be recognised and may be enforced. If, however, the losing party was denied a fair hearing, or the judgment was obtained by fraud, or its recognition would offend the recognising country's fundamental public policy, recognition may be refused. The example shows recognition as the general rule subject to defined grounds of refusal that protect fundamental standards.

The grounds for recognition and its refusal therefore establish a regime under which a foreign judgment is generally recognised where the foreign court had jurisdiction by the recognising country's standards and the judgment is final, subject to refusal on defined grounds such as want of jurisdiction, fraud, procedural unfairness, or offence to fundamental public policy, the recognising court not reviewing the merits, and the certainty of recognition being greater where a treaty or regional regime provides for it.

The contrast with arbitral awards: the New York Convention

The enforcement of foreign judgments, for all the comity that supports it, remains comparatively uneven, depending heavily on the countries involved and the arrangements between them, and this unevenness stands in striking contrast to the enforcement of foreign arbitral awards, which is governed by a widely adopted convention that makes such awards far more readily enforceable across borders. This contrast connects the present sub-unit to the arbitration examined in the next module and explains much of the appeal of arbitration in international commerce.

The contrast rests on the New York Convention, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, a treaty adopted by a very large number of states, which requires the courts of each contracting state to recognise and enforce arbitral awards made in other states, subject only to a limited and defined set of grounds for refusal. Because so many states are party to the convention, an arbitral award rendered in one contracting state can be enforced in the courts of the others with a uniformity and a reliability that foreign judgments, lacking so widely adopted an instrument, do not enjoy. The grounds on which enforcement of an award may be refused under the convention are narrow, concerning such matters as the invalidity of the arbitration agreement, a denial of a fair opportunity to present the case, the award's exceeding the scope of the submission, or conflict with the public policy of the enforcing state, and the enforcing court does not review the merits of the award. The practical consequence is that a party to an international commercial dispute can, by choosing arbitration, obtain an award that is enforceable across borders far more readily than a judgment, and this enforceability is among the principal reasons that arbitration is so widely chosen for international commercial disputes, a point the next module develops. The reader should appreciate the contrast: the international travel of arbitral awards, secured by a near-universal convention, is markedly easier than that of judgments, which depends on a patchwork of national rules and narrower treaties.

Consider a party choosing how to provide for the resolution of disputes under an international contract. If it provides for litigation, any judgment it obtains may be difficult to enforce in the country where the other party's assets lie, depending on that country's rules and any applicable treaty. If it provides for arbitration, any award it obtains may be enforced in the many states party to the New York Convention with relative uniformity and reliability. The greater enforceability of the award weighs in favour of arbitration. The example shows the contrast between the enforcement of judgments and of arbitral awards, and its bearing on the choice of dispute-resolution method.

The enforcement of foreign arbitral awards is therefore far more uniform and reliable than that of foreign judgments, because the New York Convention of 1958, adopted by a very large number of states, requires the courts of each to recognise and enforce awards made in the others subject only to narrow grounds of refusal, a contrast that makes the arbitral award travel across borders more readily than the judgment and that is among the principal reasons for the prevalence of arbitration in international commerce, as the next module examines.