This article was originally published in the April 2019 issue of Asset Recovery Magazine, KNect365. The original can be viewed here.
Having a foreign money judgment recognized and enforced has always been a fairly straightforward task for judgment creditors in New York. However, New York’s First Department Court of Appeals recently raised some new issues and laid the foundation for a significant change in how New York courts recognize and enforce money judgments of foreign countries by requiring personal jurisdiction over a judgment debtor when substantive defenses are made under the recognition act. AlbaniaBEG Ambient Sh.p.k. v Enel S.p.A., 160 A.D.3d 93 (N.Y. 1st Dep’t 2018).
Prior to Enel, personal jurisdiction over the judgment debtor or its property was not a prerequisite to recognition in New York. In other words, the judgment debtor did not need to have a connection to, or property in (quasi in rem jurisdiction), New York for the recognition of a judgment, and to survive a motion to dismiss. Abu Dhabi Commercial Bank PJSC v Saad Trading, Contr. & Fin. Servs. Co., 117 A.D. 3d 609 (N.Y. 1st Dep’t 2014). Thus, judgment creditors could rather easily have their judgments recognized and then take discovery and execute on assets—especially deposits and securities—held by the many financial institutions found in New York.
The court in Enel faced a unique fact pattern and procedural posture that included significant prior litigation and arbitration in multiple foreign jurisdictions over a decade-plus period, resulting in a favorable judgment for the plaintiff. The court in New York, relying on federal due process law, held that personal jurisdiction was required to recognize a foreign judgment in New York if the judgment debtor raises non-frivolous, substantive challenges to recognition. Without delving into the details of the reasoning in Enel, the ruling was based on the judgment debtor’s multiple credible defenses to the underlying award, and the court finding that to force the defendant to litigate such substantive defenses, without an adequate basis for personal jurisdiction, would violate U.S. Constitutional due process.
After some of the dust has now settled, an important question to ask is how future courts will interpret Enel: will it be viewed as a broad holding where anytime a judgment debtor raises any substantive challenge the judgment creditor will be required to establish personal jurisdiction? Or, will it be of minimal relevance and only applicable to judgments from questionable jurisdictions and/or with a complex and significant history of foreign due process? Of course, with New York being the global financial hub that it is, the stakes are high for global foreign money judgment holders.
In May 2018, a New York trial court heard a case where a plaintiff sought to have a Venezuelan judgment recognized. The debtor put forth no substantive challenges to the procedure, but moved to dismiss the case on the grounds that the debtor had inadequate “contacts” with New York, depriving the court of jurisdiction. Diaz v. Galopy Corp. Intl., N.V., 61 Misc. 3d 429 (Sup. Ct. N.Y. Co. 2018). In citing Enel, the court accepted the judgment noting that only when a judgment debtor “asserts substantive statutory grounds for denying recognition, must there be either in personam or in rem jurisdiction in New York.” Because no substantive challenges were raised, the Venezuelan judgment was accepted.
A few months later, in November 2018, New York’s First Department Appellate Division evaluated, among other things, the weight of a challenge to a foreign tribunal’s application of due process standards in deciding whether to recognize a judgment from the Czech Republic. Harvardsky Prumyslovy Holding, A.S. v. Kozeny, 166 A.D.3d 494 (1st Dep’t 2018). There, the debtor defendant challenged recognition on the grounds that the Czech court—which found the defendant guilty of fraud and embezzlement and awarded the plaintiff $400 million in damages—did not provide procedures compatible with New York’s due process requirements because the Czech court never had custody of the defendant and he was tried in absentia. The court determined that if the foreign tribunal’s procedures are compatible with due process, even if they are not strictly followed, it is insufficient for the court to deny the recognition request.
Thus, while there’s been limited interpretation of Enel since it was decided, New York continues—at least for the moment—to remain a favorable jurisdiction for foreign judgment creditors.
In sum, while practitioners and creditors of foreign judgments remain optimistic one-year after Enel, a healthy dose of skepticism may be appropriate—especially where the underlying proceedings involve multiple prior suits, nuanced procedural postures, or emanate from jurisdictions with dubious legal systems. As always, interested stakeholders should continue to monitor how courts manage the evolving landscape.
M. Zachary Bluestone
Bluestone Law Ltd., Washington, DC
Bluestone continues to be at the forefront of creditor’s rights, and asset/debt recovery law in the U.S. and abroad. In addition to representing leading government agencies worldwide, the Bluestone team advises creditors and judgment/award holders of all types.
 (a) No Recognition. A foreign country judgment is not conclusive if:
- the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law;
- the foreign court did not have personal jurisdiction over the defendant.
(b) Other Grounds for Non-Recognition. A foreign country judgment need not be recognized if:
- the foreign court did not have jurisdiction over the subject matter;
- the defendant in the proceedings in the foreign court did not receive notice of the proceedings in sufficient time to enable him to defend;
- the judgment was obtained by fraud;
- the cause of action on which the judgment is based is repugnant to the public policy of this state;
- the judgment conflicts with another final and conclusive judgment;
- the proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court;
- in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action; or
- the cause of action resulted in a defamation judgment obtained in a jurisdiction outside the United States, unless the court before which the matter is brought sitting in this state first determines that the defamation law applied in the foreign court’s adjudication provided at least as much protection for freedom of speech and press in that case as would be provided by both the United States and New York constitutions.
N.Y. CPLR § 5304.