The litigation of international disputes in U.S. Courts is often disfavored for the simple reason that the enforcement of judgments abroad is notoriously difficult. International arbitration is the preferred alternative to litigation because the United States, along with 145 other countries, is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (commonly referred to as the New York Convention), a treaty that provides for the recognition and enforcement of international arbitral awards. Within the next year, the United States is expected to begin implementing a new treaty that will eliminate major obstacles to the enforcement of judgments abroad as to certain civil matters. The implementation of the treaty will give parties to international commercial agreements more flexibility in choosing their preferred method of dispute resolution.
In 2009, the United States signed the Hague Convention on Choice of Court Agreements, a treaty that establishes rules for the enforcement of judgments among the countries party to the Convention. The Convention is the first international agreement the U.S. has entered concerning the reciprocal enforcement of judgments. The Convention applies to cases in which the parties have entered an agreement designating the court(s) of one country as the exclusive forum to hear their disputes. The Convention sets forth three fundamental rules: 1) the court chosen by the parties shall hear their case; 2) any court not chosen by the parties must decline to hear the case; and 3) the courts of other countries must recognize and enforce a judgment rendered by the parties' chosen court. A number of civil matters, including consumer transactions, certain tort actions, employment disputes, family law matters, and intellectual property disputes, are excluded from its scope, regardless of whether they are "international" in nature.
Courts within the United States already liberally enforce foreign judgments. However, judgments rendered here frequently do not receive the same favorable treatment abroad. For example, in many European countries, courts will regularly refuse to enforce U.S. judgments citing lack of jurisdiction, an award of excessive damages, or a violation of the country's public policy. Thus, the main benefit of the Convention is that it will increase the enforcement of U.S. judgments abroad.
This blog entry is based on an article written by Jonathan W. Fitch and Faith A. Hill that appeared in the Massachusetts Lawyers Journal, December 2012.