While it is reasonably easy for Australian companies to enter into contracts and arrangements with overseas entities, it isn’t as easy when things go awry, and the parties end up in dispute. We have previously explained the process for registering judgments under the Commonwealth Foreign Judgments Act 1991 (Cth). This Act applies to countries such as the United Kingdom and New Zealand. Unfortunately, the US and Australia have no bilateral arrangement for the enforcement of each other’s judgments which means US common law governs the enforcement of Australian judgments in the US.
Court Judgments in the US
American judgments are protected by the US’s ‘full faith and credit’ constitutional clause which requires all US courts to honour and enforce each other’s judgments. Foreign judgments in the US are not protected by the full faith and credit clause, which means no federal laws apply, and the relevant state law can only enforce it, and, therefore, may vary depending on the state the defendant is located in.
Theoretically, a simplified method of enforcement for foreign judgments is set out in the Uniform Enforcement of Foreign Judgments Act of the relevant state. The term ‘foreign’ in the Enforcement Act only refers to sister states in the United States. The 1962 Recognition Act provides that a foreign-country judgment is enforceable in the same manner as a sister state foreign judgment. Some states interpret this to mean the procedure set out in the Enforcement Act applies to foreign judgments as well as sister state judgments (for example, Florida). However, many US states still only prefer to interpret ‘foreign’ as US sister states in the Enforcement Act, and separate recognition is first needed.
Process of Registering Judgments
The Foreign-Country Money Judgments Recognition Act 2005 provides a procedure to obtain a foreign-country judgment and have it recognised. First, an action for recognition in a state court must be filed. The judgment must meet the statutory standards:
- Judgment is conclusive, final and enforceable in country of origin; and
- Certain money judgments are excluded (e.g. taxes, fines).
A foreign-country judgment may not be recognised if it comes from a court system that is not impartial, or dishonours due process, or has no personal jurisdiction over the defendant or the subject matter of litigation
It is important to note that the court has the discretion to deny recognition. If it meets the standards, the judgment will generally be recognised and be treated as if it is a judgment of another American state. The judgment creditor can then proceed against the judgment debtor using the Enforcement Act.
The Enforcement Act
The judgment creditor must file suit with the state court in which the enforcement of judgment is being sought. The judgment creditor must file a certified copy of the foreign judgment and a certification that it was not obtained by default or by confession of judgment, it is unsatisfied in whole or in part, that the enforcement has not been stayed and setting forth the name and address of judgment debtor.
Such a foreign judgment will be treated in the same manner as a judgment of the court itself, subject to the same procedures, defences, and proceedings as a local judgment would have. Within 30 days after the filing of the judgment and certificate, the judgment creditor shall mail notice of the filing of the foreign judgment to the judgment debtor.
It can be tedious and complex to enforce a judgment in the US as there is no set general federal law or state law governing the procedure for the enforcement of foreign judgments. Before you commence proceedings against a US entity, you need to bear in mind that if you are successful in the proceedings, you may face a long, costly and challenging process to get the judgment registered and enforced. If you have any questions about enforcing foreign judgments, get in touch with our disputes lawyers.