Enforcement of arbitration awards and foreign judgments generally
In selecting an international forum in which to do business, one of the most important legal factors for parties to consider is the recognition and enforcement of judgments rendered by a foreign judiciary. Countries handle the enforcement of foreign judgments and arbitral awards in a wide variety of ways. Some countries, like Germany, require some proof of reciprocity for recognition of judgments from the country of the party seeking to enforce the foreign judgment, while others like France, do not. Other countries, like Belgium, reserve the right to review the merits of the case, while other states, like the Netherlands, refuse to enforce judgments unless a treaty exists which requires it to do so. In addition, countries vary in their enforcement of judgments depending on the type of case and award. For example, the U.S., which is the most willing to enforce sister-state judgments, even though the U.S. is not a party to any treaties mandating the enforcement of foreign judgments, will recognize and enforce both default and contested foreign judgments; and Great Britain will enforce default judgments in limited circumstances. However, no country recognizes foreign judgments where the adjudicating country had no jurisdiction over the judgment-debtor.
Local courts handle the issue in various ways, thus it behooves parties to research each locale in which they may have to ask for enforcement because there is no universal procedure for enforcement of arbitral awards. However, there are several multilateral and bilateral treaties that attempt to address the subject. The most important of these treaties is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards otherwise known as the New York Convention. Currently, over 90 countries have ratified the New York Convention and over 100 countries have signed it. While previous Conventions attempting to legislate in this area only applied to commercial matters, the New York Convention applies to both commercial and non-commercial judgments.
The New York Convention also allows signatories two reservations: reciprocity and commercial. The reciprocity reservation simply states that a signatory may choose to only recognize and enforce arbitral awards from arbitrations with other signatories or their citizens, while the commercial reservation permits a signatory to apply the New York Convention only to those disputes of a commercial nature. Over one-half of the contracting parties to the New York Convention have opted for the reciprocity reservation and one-third have chosen the commercial reservation. Nonetheless, most countries construe these reservations very narrowly so they are of little import. The existence of the New York Convention means that binding foreign arbitral awards are routinely enforced, but as mentioned earlier the same can not be said for foreign court judgments. Both Mexico and the United States are signatories to the New York Convention, but it only addresses awards from arbitration proceedings.
Enforcement of arbitration awards and foreign judgments in Mexico
Prior to 1988, the Mexican Federal Code of Civil Procedure totaled approximately 577 articles, but only three of those articles were devoted to conflicts of law between Mexico and other countries.
Mexico is a party to the Inter-American Convention on International Commercial Arbitration, also known as the Panama Convention and is almost a perfect mirror image of the New York Convention, but is limited to application in the Americas. Nonetheless, Mexico does not treat judgments from countries that are signatories to the Conventions differently than judgments from those who are not. There are no special time limits, exequatur in the issuing country, reciprocity, or letters rogatory required for recognition and enforcement of an arbitral award. Chapter IX of the Mexican Commercial Code provides an exclusive, accelerated, non-appealable procedure for the recognition and enforcement of all foreign and domestic arbitral awards. The Mexican law closely follows the UNCITRAL Model Law.
Mexico allows foreign judgments to be recognized if they are not contrary to the internal public order according to the code, applicable laws, treaties and conventions to which Mexico is a signatory. If the judgment or arbitral award is subject to any international instrument, the Mexican judge must act in strict compliance with the applicable international document unless there is an omission, which makes the judgment inadequate.
Enforcement of arbitration awards and foreign judgments in the United States
The enforcement of foreign judgments is a matter of state and not federal law. Therefore, it is imperative for foreign parties to determine in which state that their judgments will be enforced as individual state law vastly differs. State law applies in this circumstance because as the enforcement of a foreign judgment will possibly require liens on property or garnishment which are controlled by individual state procedures.
The tension in determining enforceability of foreign judgments lies in the balance between the interest in allowing litigation to end even in a non-U.S. forum and the interest in securing justice for U.S. citizens in foreign forums. Failure to enforce a judgment rendered in a non-U.S. court against a U.S. citizen either allows a U.S. citizen to shirk his or her obligations or forces the disputants to pay to re-litigate.
Nonetheless, the differences in state law typically do not affect the general enforceability of arbitration awards. U.S. states do, however, place certain restrictions on the enforcement of awards stemming from foreign judgments, even those from other U.S. states. For example in Arizona, judgments from other U.S. states are generally treated like any other Arizona judgment but, they may be subject to a four year statute of limitations for initial enforcement of the judgment in Arizona instead of the normal five years allowed for judgments rendered in Arizona. In addition, an Arizona court may refuse to enforce an arbitral award if it falls within the public policy exception. Essentially, the public policy exception states that if an arbitral award falls outside well-defined and dominant public policy within Arizona, then the court may refuse to enforce it.