Under what circumstances will U.S. courts enforce a monetary judgment rendered by a foreign court? The answer turns in large part on where the judgment holder seeks to have the judgment recognized in the United States.
The current law on recognition of foreign judgments in this country is governed by a patchwork of state statutes and common law principles. Despite the clear federal interest in regulating how U.S. courts treat judgments issued outside the United States, no federal law or treaty governs the conditions under which U.S. courts should—and should not—give full effect to foreign judgments, outside of the narrow category of foreign defamation judgments.
The time has come to rethink our country’s fractured approach to foreign judgment recognition. The past few decades have seen a significant increase in the number of actions seeking recognition and enforcement of foreign judgments in the United States. In an increasingly globalized world where billions of dollars of foreign investment flow across borders daily, individuals and multinational businesses deserve consistency and predictability under a unified and modernized federal law.
As explained in Taming Tort Tourism—The Case for a Federal Solution to Foreign Judgment Recognition, the present patchwork of state laws creates unnecessary challenges for U.S. citizens and businesses facing litigation abroad. These challenges include a real risk of forum shopping among states and an inability to contest abusive foreign judgments before they are recognized in the United States. Legal uncertainty also harms judgment creditors, who deserve prompt and dependable recognition of their legitimate foreign judgments. Those who have secured valid foreign judgments should be able to enforce those judgments promptly in the United States under federal law. But individuals and businesses that have been subjected to fraudulent or legally suspect judgments abroad should be able to contest enforcement vigorously under federal law.
Foreign plaintiffs and their counsel have begun to exploit the current system of foreign judgment recognition to circumvent legal limitations that would otherwise preclude recovery under U.S. law. Tort lawsuits are pressed abroad in weak or corruptible foreign courts in order to secure large awards, after which the plaintiffs try to collect upon those judgments in countries with liberal rules favoring recognition of foreign judgments—effectively laundering a foreign judgment by enforcing it in another country that would have rejected it in the first place. This form of “tort tourism” makes the lack of uniformity among state laws even more problematic and underscores the need for congressional action.
The current patchwork of state laws has puzzled scholars and frustrated practitioners for decades. The treatment of foreign judgments undoubtedly implicates unique federal interests, and litigants seeking to recognize or challenge foreign judgments in this country should not have to navigate 50 different state laws, especially where no state interest is at stake. But the present need for legislative attention is spurred by the fact that existing state laws are increasingly ill-equipped to deal with the challenges presented by tort tourism.
While U.S. courts should continue to respect and enforce the decisions of foreign courts in appropriate cases, Congress also must ensure that judges have the necessary tools to protect American interests. As the Supreme Court explained in Hilton v. Guyot (1895), “If a civilized nation seeks to have the sentences of its own courts held of any validity elsewhere, they ought to have a just regard to the rights and usages of other civilized nations and the principles of public and national law in the administration of justice.” In upholding our end of the international bargain, the United States should speak with one voice.