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WHY INTERNATIONAL BUSINESS CONTRACTS SHOULD CONTAIN PROVISIONS REQUIRING THE APPLICATION OF UNITED STATES LAW

     More than two hundred years after its birth, the United States of America is still a magnet for immigrants.  All over Europe and Asia, people still wish to immigrate here to obtain the best possible education, the greatest business opportunities and to succeed.      The other reason is that the United States Constitution is, in reality, only second to the Tenth Commandments as one of the greatest sets of legal regulations ever created.   Even though the Constitution can be vague in places, the framework it sets out has established a legal system in the United States that is second to none.   The legal systems of foreign countries which which do not have the protections of our Constitution often involve laws which would shock many Americans.   Here are some good reasons to stipulate in your business contracts to the laws of one of the states of the United States[1].

1.            Service of Process.

     In the United States, service of process is accomplished by a process server who is generally required to hand you the paper reflecting a lawsuit.   Sometimes there is a possibility for posting the process on your door, or handing it to a relative who lives with you.   However, it is the rare circumstance that process can simply be accomplished by publication without prior efforts to effectuate service.   Nonetheless, service by publication, and posting outside of the courthouse is often the norm in foreign countries.   Imagine if the only way that you could learn about a potential lawsuit is if you are lucky enough to be walking past the courthouse and see your name on the bulletin board.   To Americans, this may seem ridiculous but it is, in fact, reality in many countries.

2.            Jurisdiction.

            In many countries, whether the Court can obtain jurisdiction can be based on citizenship.   Here, in the United States, jurisdiction is most often based upon “minimum contacts” – – the idea that you must have some connection to the forum state before you are sued there.   There is a stark contrast between countries who apply jurisdiction based upon citizenship than the United States in which it is based upon “minimum contacts.”   In sum, for countries that apply a citizenship analysis, there is no reason for there to be minimum contacts.  In fact, it doesn’t matter whether the individual and/or corporation has been present in that particular jurisdiction for many years since citizenship is the test.   This leads to the anomalous result that two citizens of a foreign country, living in the United States, who have a child can make that child subject to jurisdiction of a foreign country even when the child has never even been to that country !   To American lawyers, this may seem silly but it is, in fact, the norm in many countries.

 

3.            Ex Parte Hearings.

     Most of the time, in the United States, the law requires that both sides be present at a hearing.   Not so in other countries.   In certain foreign countries there is ample opportunity for one side to approach the Judge alone.   This is often done informally in the courthouse or even on the street.   What may seem preposterous to Americans, can be routine in other countries.    

4.            Access to Court Files.

     In the United States, anyone can pull up an internet website and search court files.   Sometimes, files are protected for privacy reasons, particularly in family law cases.   However, most of the litigation in the United States Federal courts is available for review by anyone.   Do you think that this is the case in every country in the world?   It is not.   In many countries, the court file is not open to a review by anyone.   In fact, if you wish to inspect the court file, often you must file a motion with the court which has the discretion to deny you access.  So much for free speech! 

5.            Discovery.

     In the United States, in the typical lawsuit both parties are allowed to discover facts about the other party’s case.   That is often done with depositions, interrogatories and document requests.   Parties are required to produce documents and show them to the other side prior to trial.   You would think that this practice would be routine.   This is not the case either.  In fact, in many countries there is no such thing as discovery.   There are countries in which the Judge conducts discovery if there is discovery conducted at all.   And, guess what?   If the Judge is conducting the discovery, there is no opportunity to complain about it.   You just have to presume that the Judge conducted adequate discovery procedures and that the information that the Judge discovered was accurate.  There is no such thing as a “Motion to Compel.”   

6.            Restrictions on Speech.

     In some countries, you are not allowed to mention the names of your clients or witnesses.   Thus, at a deposition or similar proceeding it is entirely permissible for the witness to decline to answer certain questions on the grounds of “privacy.”   There is simply no way to get around this and the person being questioned may, in certain instances, be subject to criminal penalties.   Imagine being subject to criminal penalties for saying the wrong thing!   This is a concept that is totally foreign to Americans.

7.            Conclusion.

  Companies which do business abroad would be well-advised to include provisions in their agreements which provide for the application of American law and jurisdiction in the United States.   Otherwise, there is a possibility that the company could be subject to jurisdiction in a foreign country, with foreign laws, which do not contain the familiar concepts of the United States Constitution.  


[1] The actual state chosen is dependent upon the type of contracts and the lawyers involved. 

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Contesting Judgments From Abroad

Imagine that your long time international business client calls you one day, in a panic, to tell you that a foreign court has entered a judgment against his company.  Now, some local lawyer is attempting to “domesticate” that judgment and enforce it against your client in the United States.  The judgment is for a large dollar amount and the stakes are high.  But the case is already over, isn’t it?  Your client has already lost, hasn’t it?

Of course not.

This is because foreign legal systems do not always comport with our notions of “due process” and substantial justice.  Look carefully at the foreign judgment and the proceedings and circumstances which gave rise to it.  There may be ample reason/opportunity for you to poke holes in it and, ultimately, defeat the entry of the judgment.

Foreign country judgments in Florida are governed by F.S. § 55.605.  That Statute provides several reasons upon which you can contest the entry of a foreign judgment.  A sampling of those reasons are set forth below.

  1. A.           The Foreign Legal System Where The Judgment Was Entered Was Not Impartial And Did Not Have Procedures Reflecting Due Process.

 

As Dorothy said in the Wizard of Oz, “there is no place like home.”  American lawyers sometimes take for granted the wonderful procedures that we have for notice, an opportunity to be heard and other due process provisions.  The best thing that ever happened to the American legal system was the United States Constitution.  Remember, however, that the United States Constitution applies only in the United States.  Foreign countries do not usually have such a document.  Accordingly, foreign legal systems tend to work differently and do not have built in protections which ensure fairness.

You should research the mechanics of the foreign civil procedure system when your client is contesting the entry of a foreign judgment.  You can do this by consulting Martindale-Hubbell or by contacting counsel abroad and questioning them about how their system operates.  You would be surprised how different foreign legal systems can be from the American system sometimes dispensing with the concept of service of process, notices of hearings and even allowing trials to proceed based only upon publication notices.  Countries which employ these procedures open up their judgments to collateral attack in the United States.

  1. B.   Jurisdiction Over The Defendant

You should evaluate whether the foreign court had jurisdiction over your client by making the same type of due process/minimum contacts analysis you would perform in the United States.  Did your client actually do business in the foreign jurisdiction?  Did your client maintain an office, have a bank account or employees in the foreign jurisdiction?  What gave rise to the basis for the judgment?  All of these things are issues which can be attacked, based upon section 55.605, in the event that recognition is sought for a foreign judgment in the United States.

  1. C.   Notice Of The Foreign Proceedings

It is amazing how many jurisdictions allow notice by publication or through letters sent in the mail.  American-style process service is the exception rather than the rule.  Accordingly, ask your client how he learned about the foreign proceeding.  Did he read about it in the newspaper?  Did a notice appear in the mail?  Did a process server serve the notice?

Just like any litigation, these are important questions to ask when dealing with the domestication of a foreign judgment against your client.  American courts will re-visit the manner in which service of process was made when the issue is whether a foreign judgment should be domesticated.

  1. D.   The Judgment Was Obtained By Fraud

Not every country in the world has a fair legal system.  Many countries operate under concepts of patronage, baksheesh[1] and outright bribery.  Moreover, a plaintiff who sues in a foreign country often misdescribes or omits certain key facts.  This can also give rise to a fraudulent judgment which may not recognized in the United States.  Thus, look carefully into the foreign judgment and how it was obtained in order to determine whether it was obtained by fraud.

  1. E.   The Judgment Violates Public Policy

There are all sorts of reasons why a foreign judgment might violate public policy of the State where domestication and enforcement is sought.  In divorce cases, the rights of women are often overlooked in foreign countries.  Some foreign countries do not have statutes providing for equitable distribution or alimony.  Sometimes, everything goes to the husband.

In business cases, in certain instances, liquidated damages penalties, which might not be enforceable in the United States, have been found enforceable in foreign countries.  Foreign courts also sometimes ignore the terms of the parties’ contract and, instead, enter a judgment based upon the court’s perception of “fairness.”

The courts have denied recognition to foreign judgments where a wrongdoer seeks to enforce a judgment for damages which is related to the wrongdoing.  For example, a bail jumper, who is later captured, cannot sue for injuries relating to his capture.

Foreign libel judgments are particularly susceptible to attack.  The libel laws in foreign countries differ vastly from those in the United States.  England is one such country which has completely different libel laws insofar as a defendant in an English libel proceeding may be held responsible based upon “strict liability” theories without any regard to the First Amendment or other due process concepts (remember that England does not have our Constitution).  Freedom of speech and of the press is a uniquely American concept which many countries ignore.  Foreign judgments which do not take these factors into account can also be subject to collateral attack.

  1. F.    Forum Non Conveniens

Foreign judgments may also be attacked on the grounds that the country in which the lawsuit was brought originally is not a convenient forum in cases where jurisdiction is based only upon personal service.  Courts in these circumstances may engage in a typical forum non conveniens analysis – determining where the witnesses, documents and the transaction took place.  It is unlikely that a Florida court will uphold a foreign judgment where only one of several witnesses is located in the foreign country and the majority of the witnesses and documents are located in the United States.  These types of tactics are usually frowned upon by American courts and, as a result, foreign judgments obtained under these circumstances can be highly suspect.

In sum, be wary of foreign judgments when representing individuals and/or companies who may want to defend against those judgments. There are plenty of reasons that such judgments may be subject to collateral attack.


[1] Baksheesh (from Persian: بخشش‎ bakhshesh[1]) is a term used to describe tippingcharitable giving, and certain forms of political corruption and bribery in the Middle East and South Asia. Leo Deuel[who?] sardonically described baksheesh as “lavish remuneration and bribes, rudely demanded but ever so graciously accepted by the natives in return for little or no services rendered.”[2] http://en.wikipedia.org/wiki/Baksheesh.

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