Perspectives on the 2019 Hague Judgments Convention from the United States and Canada
September 12, 2022
On August 29, 2022, the European Union and Ukraine became Contracting Parties to the 2019 HCCH Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, commonly known as the Hague Judgments Convention, thus triggering its entry into force on September 1, 2023. Our article recently posted to SSRN, The 2019 Hague Judgments Convention: Perspectives from the United States and Canada, is a contribution to the emerging body of scholarship on the Convention. It is one chapter of a forthcoming book entitled The HCCH 2019 Judgments Convention: Cornerstones, Prospects, Outlook that addresses the most important aspects of the Convention in general and in different regions of the world. The book will be the focus of an international conference in June 2023, organized by the Hague Conference on Private International Law and the University of Bonn.
In the article, we examine the Convention from the perspectives of the United States and Canada. The United State has signed the Convention but not yet ratified it. Canada has not yet signaled its intentions regarding the Convention. While both are federal systems and for the most part share a common law tradition, the impact of the Convention is somewhat different in the two countries due to the way recognition and enforcement is treated with respect to both outgoing and incoming judgments. Moreover, the path to treaty implementation raises distinct issues in each country.
The primary interest of the United States in having an international convention on the recognition and enforcement of foreign judgments is to ensure that U.S. judgments are recognized and enforced abroad. The United States has no bilateral or multilateral treaties with other countries dealing with recognition and enforcement of judgments, and many countries are hostile to U.S. judgments in particular. Although Canada has only one bilateral convention (with the UK.), there is little reported evidence of resistance to the enforcement of Canadian judgments abroad. However, for both countries the international playing field is not level, since courts in both the United States and Canada liberally recognize and enforce foreign country judgments (including each others), without imposing a reciprocity requirement.
The Convention will, of course, create reciprocity as to those judgments covered by the Convention, although it leaves to national law the possibility of a more liberal recognition and enforcement regime than that provided for in the Convention. Although not so broad as to encompass all of the jurisdictional bases on which U.S. and Canadian judgments may rest, Article 5 of the Convention provides for a sufficient number of grounds of indirect jurisdiction to make many U.S. and Canadian judgments “eligible” for recognition and enforcement. The permissible grounds for non-recognition of a judgment (in Article 7) under the Convention are also consistent with the existing grounds under the law of most countries. Moreover, the Convention sets a high threshold for nonrecognition based on “public policy” by requiring that recognition and enforcement be “manifestly incompatible with the public policy of the requested State.” Finally, the Convention includes a provision on severability to permit recognition or enforcement for any part of the judgment entitled to recognition or enforcement. Thus, recognition and enforcement of judgments from the United States and Canada in other countries is likely to be enhanced if the United States and Canada join the Convention as Contracting Parties.
As to the issues of recognition and enforcement by the United States and Canada with respect to incoming judgments from abroad, the Convention changes little in relation to national law in each country. The reason, as noted above, is that the Convention is by and large consistent with recognition and enforcement practice in the United States and Canada. In both countries, recognition and enforcement is generally treated as a matter of state or provincial law. In the United States, a majority of states have adopted one of two Uniform Acts, with other states enacting their own statutes or relying on common law principles. In Canada, there is a patchwork of statutory and common law regimes across jurisdictions, aided by the Canadian Supreme Court’s liberal interpretation of the requirements. Although recognition and enforcement practice in both countries is more generous than that required by the Convention, both with respect to the types of judgments covered and the jurisdictional grounds upon which a foreign judgment rests, the Convention provides a floor rather than a ceiling and permits broader recognition and enforcement under national law.
The jurisdictional filters in Article 5 of the Convention were potentially a concern for the United States since case law in the United States suggests that the bases for indirect jurisdiction in the recognition and enforcement context must satisfy the same constitutional due process standard as required for direct jurisdiction. If that view is correct, then the jurisdictional filters in Article 5 would need to meet U.S. due process standards in order for the United States to be in a position to ratify the Convention. For example, in the United States, the place of injury alone without additional purposeful conduct by the defendant does not meet the U.S. constitutional standard for direct jurisdiction. Fortunately, however, the eligibility provision of the Convention for a tort case looks to the place where the act or omission directly causing the harm occurred, irrespective of where the harm occurred. Moreover, the other jurisdictional filters also appear to be consistent with U.S. due process standards and with equivalent constitutional requirements in Canada.
The jurisdiction filter in Article 5(1)(f) on implied submission did generate substantial discussion in the negotiations. That filter is consistent with the law in both the United States and Canada in so far as it makes clear that a defendant who proceeds to the merits without contesting jurisdiction submits (“impliedly consents”) to jurisdiction. However, the provision goes further and provides that there is no implied consent under the Convention if a defendant makes and loses an objection to jurisdiction but then proceeds to defend on the merits. Unless some other jurisdictional filter in Article 5 is satisfied, the judgment does not circulate under the Convention. That position is at odds with a recent decision in the Supreme Court of Canada, which held that defending on the merits is conclusive of submission, even if done under protest as to jurisdiction. On this particular point, the law in the United States remains unclear. One important exception to the “implied consent” filter provides that there is no implied submission if an objection to jurisdiction or its exercise would have been futile under the law of the State of origin.
There is one notable and important difference between current U.S. law and the Judgments Convention that potentially could create an inconsistency with existing law on recognition and enforcement in the United States and perhaps raise a constitutional obstacle to ratification. The Convention does not include mandatory grounds for non-recognition (other than a narrow rule in Article 6 for cases involving real property), whereas existing law in the United States mandates non-recognition in certain circumstances.
One of these mandatory grounds—systemic unfairness in the foreign legal system—presents potential tension with respect to U.S. ratification of the Convention. A court in the United States is required to refuse recognition or enforcement to a foreign judgment that results from a proceeding in an unfair and/or biased legal system. The Convention ground for non-recognition in Article 7 (1)(c) refers to a situation where “recognition or enforcement would be manifestly incompatible with the public policy of the requested State, including situations where the specific proceedings leading to the judgment were incompatible with fundamental principles of procedural fairness of that State and situations involving infringement of security or sovereignty of that State.” But it is unclear whether that provision extends to a situation where a court entertaining a judgment seeking recognition or enforcement determines that the legal system as a whole and the tribunals in the particular country rendering the judgment are inconsistent with norms of fair process.
Because the public policy defense specifically refers to the “public policy of the requested State,” it can be argued that a court should be able to refuse recognition or enforcement when there is a systemic violation of such norms and still comply with the Convention. Moreover, to the extent that the non-recognition grounds in Article 7 are directed at States, not courts, it is possible that when implementing the Convention into national law, States can decide to make all of the defenses to non-recognition mandatory grounds for their courts. Finally, concerns about the fairness of another country’s legal system may be addressed at the time of ratification. Article 29 provides that a Contracting State may issue a declaration to opt out of the Convention with respect to a particular State.
Path to Ratification
For both the United States and Canada, ratification of the Judgments Convention appears to have substantial benefits and is largely consistent with existing law in both countries. However, federalism concerns – albeit different in the two countries – may complicate the ratification process. The Convention does contain a so-called “federal-state” clause (Article 25) that allows ratification with respect to individual territorial units in States with non-unified legal systems, which has been important for Canada because constitutionally the treaty-making and treaty-implementing power in Canada is divided between federal and provincial authority. Thus, although Canada could ratify the Convention without all of the provinces and territories prepared to implement it, that approach is not desirable for political reasons and, in any event, would not be an ideal situation in terms of uniformity.
The situation in the United States is quite different. An international treaty must be operational throughout the United States under the Supremacy Clause of the Constitution, and thus the federal-state clause is irrelevant. Accordingly, in the United States the obvious method for implementation of an international treaty such as the Judgments Convention would be the enactment of a federal statute. However, some stakeholders—notably the Uniform Law Commission—have urged implementation that would rest substantially on a revised Uniform state law. They argue that foreign judgment recognition and enforcement has traditionally been a matter of state law and that courts already have substantial familiarity with the Uniform Acts. However, recognizing the need for a role by the federal government to secure national compliance with an international treaty, they suggest implementation through a method of “cooperative federalism.” That approach would involve parallel legislation at the state and federal levels, where states promulgate uniform legislation and Congress passes federal legislation that provides guidance and incentives for states to adopt similar legislation.
The drawbacks to this approach should be apparent: duplicative costs in passing nearly identical legislation and accompanying administrative burdens in monitoring and ensuring compliance. Such a two-tiered system is also likely to cause confusion for litigants, particularly foreign litigants attempting to navigate the federalism aspects of U.S. courts and U.S. law.
The Judgments Convention provides a cooperative mechanism for facilitating and harmonizing the recognition and enforcement of foreign country judgments. The Convention should be particularly attractive to the United States and Canada, which both have quite liberal regimes for the recognition and enforcement of other countries’ judgments. The Convention, by removing certain substantive and procedural hurdles in connection with the recognition of foreign country judgments, will help to remedy the imbalance that has often existed with respect to the recognition and enforcement of United States and Canadian judgments abroad. Moreover, the standards adopted in the Convention’s comprehensive framework are largely consistent with existing law in the United States and Canada, and at the same time leave substantial flexibility for national law to adopt more generous recognition and enforcement standards. Whether these reasons will be sufficient to overcome federalism hurdles to ratification in both countries remains to be seen.