Reciprocity and the Hague Judgments Convention

In a prior post, I reported on recent developments that offer a basis for (cautious) optimism that the United States may soon take the necessary steps to ratify the Hague Judgments Convention (HJC). In this post, I explore how the issue of reciprocity might affect the ratification process.

Reciprocity

Reciprocity refers to the mutual recognition of legal provisions across jurisdictions. In the judgments context, it means that one jurisdiction (the United States) will not recognize and enforce a judgment entered by another jurisdiction (Norway) unless it is first shown that a Norwegian court would recognize and enforce a U.S. judgment if the situation were reversed.

Since 1938, the United States has not followed a policy of judgments reciprocity. In 2005, the American Law Institute narrowly voted to include a reciprocity provision in a proposed statute that would have federalized the law of foreign judgments enforcement in the United States. This statute was never enacted by Congress. Over the past few decades, five states (Arizona, Florida, Massachusetts, Ohio, and Texas) have adopted a reciprocity requirement for foreign judgments at the state level. Most states, however, hew closely to the Uniform Foreign-Country Money Judgments Recognition Act promulgated by the Uniform Law Commission (ULC), which does not contain a reciprocity requirement. A number of other countries – including Austria, China, Germany, Turkey, and Saudi Arabia – do require a showing of reciprocity to enforce a foreign judgment.

The Benefits of Reciprocity

There are reasons why a nation might choose to adopt a policy of reciprocity with respect to foreign judgments. First, it accords with some basic notions of fairness among states. The United States should not enforce judgments rendered by courts in other countries, so the argument goes, if those countries refuse to enforce judgments rendered by U.S. courts. Second, adopting a policy of reciprocity might lead other countries to change their behavior. If the United States refuses to enforce Norwegian judgments for lack of reciprocity, for example, then the Norwegian government may change its rules to make U.S. judgments enforceable in Norway because it wants its judgments to be enforceable in the United States. The possibility that reciprocity might lead other states to change their behavior is the most compelling reason for adopting such a policy.

The Costs of Reciprocity

There are also reasons why a nation may choose not to adopt a policy of judgments reciprocity. First, such a policy imposes a heavy burden on judges who are often tasked with administering it. It is not always easy for courts to determine whether a foreign country would enforce a U.S. judgment if the situation were reversed. Second, such a policy effectively punishes private litigants for governmental policies over which they have no control. It seems unfair to tell a plaintiff who invested significant resources in obtaining a Norwegian judgment that it cannot enforce that judgment in the United States until the government of Norway changes its laws. Third, such a policy produces inefficiencies. If a judgment creditor is not able to enforce a foreign judgment for lack of reciprocity, then that judgment creditor will have to relitigate the entire case in the United States.

Does Reciprocity Work?

Would adopting a policy of judgments reciprocity actually motivate other jurisdictions to change their laws to make it easier to enforce U.S. judgments? That, it seems to me, is the essential question.

There is at least one instance where such a policy achieved this end. In the late nineteenth century, Germany enacted legislation directing its courts to refuse to enforce foreign judgments from states that did not enforce German judgments.  The goal was to incentivize foreign states to recognize German judgments.  This law achieved a spectacular success when it prompted California to amend its laws on the enforcement of foreign judgments following the San Francisco earthquake of 1906, thereby allowing U.S. judgment-creditors to seek recognition of U.S. judgments worth millions of dollars against German insurance companies in Germany. The full story can be found here.

Although adopting a policy of judgments reciprocity can lead states to amend their laws, as California did in 1907, there is no empirical evidence that adopting such a policy is consistently effective at generating this outcome. This is because private litigants—not governments—are the ones who feel the sting of reciprocity provisions most keenly. Reciprocity provisions are most effective when they inspire a group of thwarted judgment-creditors holding large judgments to organize and demand that their government change its laws. When a reciprocity provision affects only a few litigants each year, and when the collective dollar value of their unrecognized judgments is small, it is much less likely that the frustrated judgment-creditors will lobby their government to revise its laws on foreign judgments. In such cases, the policy of reciprocity is likely to generate significant costs with little in the way of compensating benefits.

Reciprocity and the Hague Judgments Convention

The possibility that the HJC will be implemented through federal legislation has rekindled the debate about whether that legislation should include a reciprocity provision. This debate is particularly salient given the position recently taken by the Executive Committee of the Uniform Law Commission, which recommended that that organization “endorse ratification of the Hague Judgments Convention as long as the United States preserves the ability of litigants to seek recognition and enforcement of money judgments rendered in another country under existing state law . . . in cases where applying state law would produce results that are consistent with the requirements of the Convention.” This recommendation has significant implications for the reciprocity debate. If foreign judgment-creditors can continue rely on existing state law to enforce foreign judgments in the United States even after the HJC comes into force, then there will be no added incentive for other countries to ratify that treaty in order to obtain enforcement of judgments rendered by their courts in the United States.

To illustrate the problem, consider the following scenario. The United States enacts a federal statute implementing the HJC. That statute contains a provision stating that foreign judgment-creditors can continue to enforce their judgments using state law so long as that law produces results that are consistent with the treaty’s requirements. Indonesia is one of the few countries in the world that refuses to enforce foreign judgments as a matter of national policy. A judgment-creditor holding a judgment rendered by a court in Indonesia seeks to enforce that judgment in North Carolina. Because Indonesia is not a party to the HJC, the judgment would not be eligible for enforcement under the federal statute. The Indonesian judgment is, however, enforceable under the 2005 Uniform Foreign-Country Money Judgments Recognition Act currently on the books in North Carolina. The judgment is enforced. This is good for the foreign judgment-creditor. This result does not, however, give Indonesia any reason to sign on to the HJC or even to revise its national laws to make it easier to enforce U.S. judgments. 

The essential question is whether Indonesia would change its laws if the United States were to adopt a reciprocity requirement. The answer to this question is probably no. First, it is very rare for a judgment-creditor to seek to enforce an Indonesian judgment in the United States. This means that it is unlikely that significant lobbying pressure will be brought to bear on the Indonesian government if Indonesian judgments go unenforced. Second, China has followed a policy of judgments reciprocity for many years. To date, this policy has not led to any change in the laws of Indonesia even though Indonesia and China have a more significant economic relationship than Indonesia and the United States. In 2022, Indonesia’s exports to China totaled $67.7 billion; its exports to the United States totaled $31.6 billion. Third, the HJC has already entered into force for all of the countries in the European Union. If the prospect of being able to enforce Indonesian judgments across Europe has not moved Indonesian policy, then it is debatable whether that policy will change once the United States is added as a treaty party.

Crafting a Policy

As suggested by the discussion above, I am skeptical that adopting a national U.S. policy of judgments reciprocity will lead a significant number of other countries to revise their laws to make it easier to enforce U.S. judgments. The uncertain potential benefits of such a policy are, in my view, dwarfed by its certain costs. I recognize, however, that others may disagree. If the United States should choose to adopt such a policy, it would have to decide on its breadth and scope. The discussion below surveys several possible forms that reciprocity might take.

Treaty Parties Only

The most extreme version of a national reciprocity policy would be to only recognize and enforce foreign judgments from countries that have ratified the HJC. Under this approach, a foreign-judgment creditor seeking to enforce a judgment from any other country would be turned away. While this would bring maximum pressure to bear on other countries to sign on to the HJC, it would likely infuriate important U.S. allies. Neither Canada nor Japan nor Australia has ratified the HJC. Unless the United States is willing to refuse to enforce all judgments from these countries until they sign on, it may want to consider a less stringent approach.

Executive Reciprocity – State Department

Another approach would be to involve the U.S. State Department. Under this approach, the implementing legislation would make the State Department responsible for keeping a list of countries that grant reciprocity to U.S. judgments. Every country that had ratified the HJC would be automatically added to the list. The State Department could then rely on its unparalleled ability to learn more about how foreign legal systems operate to prepare a list of countries for which the new reciprocity requirement was met. This approach would dramatically reduce the costs of litigating the issue of reciprocity. Litigants would no longer need to hire experts to opine on foreign law. Judges would not need to invest time and energy trying to guess how their foreign counterparts would treat a U.S. judgment. This approach would also enhance the salience of the issue. If the end goal of a reciprocity requirement is to incentive other countries to change their laws, this goal is far more likely to be achieved by putting a country on a public list maintained by the U.S. government than by having a state court judge in New Mexico issue a judicial opinion.

Adjudicative Reciprocity – Burden on the Party Seeking Enforcement

Still another approach would require a judge to ascertain whether a particular foreign country would enforce a U.S. judgment if the situation were reversed. This proof would automatically attach with respect to judgments rendered by courts that have ratified the HJC. With respect to all other countries, the party seeking enforcement of the judgment would bear the burden of proving that the rendering court would enforce a similar U.S. judgment. By placing the burden on the party seeking enforcement, this approach would establish a presumption that a foreign judgment is not enforceable in the United States unless the judgment-creditor comes forward with proof that the foreign country would enforce a U.S. judgment. Judges would be required to evaluate evidence relating to reciprocity—or the lack thereof—on a case-by-case basis. The foreign judgment would, however, be presumptively unenforceable in the United States pending proof of reciprocity by the judgment-creditor.

Adjudicative Reciprocity – Burden on the Party Resisting Enforcement

Yet another version of the policy would place the burden of proof on the party resisting enforcement. This is the approach that the American Law Institute adopted in the federal legislation it proposed in 2005. This approach would establish a presumption that a foreign judgment is enforceable in the United States unless the judgment-debtor comes forward with proof that the foreign country would not enforce a U.S. judgment if the situation was reversed. Judges would still be required to evaluate evidence relating to reciprocity—or the lack thereof—on a case-by-case basis. But the foreign judgment would be presumptively enforceable in the United States pending proof of non-reciprocity by the judgment-debtor.

Delegated Reciprocity – Leave it to the States

Finally, the federal government could draft implementing legislation that is silent as to reciprocity and leave the issue to the states. As noted above, five states have already chosen to adopt reciprocity requirements. This approach would obviously create a much weaker incentive for other countries to change their ways. It would, however, allow each state to make its own decision as to whether to adopt a policy of reciprocity rather than deciding this question at the national level.

Conclusion

In light of the upcoming debate in the United States about the ratification of HJC, the stage is set for conversation between those who favor a policy of reciprocity and those who oppose it. This debate may be framed around two questions. First, should the United States adopt a national policy of judgments reciprocity? Second, if the United States were to adopt such a policy, what form should it take take? These questions are likely to be vigorously debated at the next meeting of State Department’s Advisory Committee on Private International Law, which will be held at the Texas A&M University School of Law in Fort Worth, Texas on Thursday and Friday, October 24-25, 2024.