ENFORCING A FOREIGN COMMERCIAL MONEY JUDGMENT
Marcia B. Haffmans*

Introduction

Prior to executing an international business agreement, Dutch companies doing business with United States enterprises should address pertinent legal issues that are unique to international contracting parties. One of those issues involves a determination of the judicial forum for future disputes that may arise under the contract. Even though choosing a forum may not seem important when entering into a promising business venture, that may change dramatically in the event of an unforeseen conflict. At that time, either party may be practically precluded from a court review, or the national judgment obtained may be unenforceable in the foreign country.

Before entering into the international agreement with your Dutch respectively United States contracting party, one must understand the ramifications of electing the Dutch versus the United States forum dispute provision in the written agreement. Prior to discussing the recognition and enforcement of the United States judgment in the Netherlands and the Dutch judgment in the United States, this article will review the validity of a contractual forum choice under the laws of the referenced countries. Arbitration is briefly addressed in the conclusion section as an alternative to the judicial forum choice.

Validity of a Contractual Forum Choice Clause

United States and Dutch contracting parties may, among other options, choose either American or Dutch law to apply to disputes arising under their international agreement. Should the parties decide that American law applies, they may also contractually designate a United States court to hear future disputes arising under the contract. Similarly, if the parties opt for Dutch law to govern the contract, they may agree that the Dutch courts are the forums of choice for disputes.

Under Dutch law, such an explicit contractual forum choice in favor of a United States court is valid and binding, unless the parties have no reasonable interest in that jurisdiction.¹ A reasonable interest may be based upon the expertise of the court, the presence of assets in the Netherlands or the enforceability of the Dutch judgment in other jurisdictions.²

Like their Dutch counterparts, United States courts have found that forum selection clauses are generally valid, unless it can be shown that enforcement would be unfair, unreasonable or unjust. The courts reason that freely negotiated international contracts, unaffected by fraud, undue influence or unequal bargaining power should be given full effect.³

Absence of Treaty That Assures Enforcement of Foreign Judgments

When evaluating the enforceability of your international commercial agreement, one should first determine whether there is an applicable treaty to which the countries involved are signatories. There is no bilateral treaty between the Netherlands and the United States regarding the recognition and enforcement of foreign country money judgments. As of March 2009, only Mexico has ratified the 2005 Hague Convention on Choice of Court Agreements, which Convention aims to improve global recognition and enforcement of judgments.⁴ In the absence of a treaty, recognition and enforcement of the foreign judgment is governed by each country's domestic laws and by their general principles of private international law or conflicts of law.

Recognition and Enforcement of a United States Judgment in the Netherlands

Dutch law generally provides that to enforce the United States judgment in the Netherlands, one must re-litigate the claim before a Dutch court.⁵ This costly rule has been softened by case law, which holds that the Dutch courts may recognize a foreign judgment if at least two conditions are met. Firstly, the judgment must have resulted from proceedings compatible with Dutch concepts of due process, such as fair notice and a fair hearing.⁶ Secondly, the United States judgment may not be contrary to Dutch public policy (openbare orde).⁷

If a Dutch court recognizes a United States money judgment, the Dutch court may grant the same relief without re-litigation of the merits. A Dutch court would in that situation enforce the United States judgment while the creditor avoids the need and cost of a full-blown trial overseas.

A few cases have been reported in which foreign judgments were refused recognition. For example, the Amsterdam District Court refused recognition of a Venezuelan judgment obtained as a result of fraud.⁸ Likewise, a French judgment with a high damage award and without a proper motivation violated Dutch public policy and was refused recognition by the District Court of The Hague.⁹ Possibly, a Dutch court would view a United States judgment awarding excessive punitive damages also in violation of Dutch public policy, barring recognition and enforcement in the Netherlands.¹⁰ That attitude would reflect deeply engrained cultural and socio-economic differences between the countries, with a much greater reliance in the United States on private litigation to channel hazardous conduct.

Recognition and Enforcement of a Dutch Judgment in the United States

The majority of the states here have adopted the 1962 Uniform Foreign Money-Judgments Recognition Act (the "Act").¹¹ If the United States judgment creditor is located in a state that has adopted the Act, said statute governs the recognition and enforcement of the Dutch judgment.

The Act provides for recognition of a Dutch money judgment that is final, conclusive and enforceable where rendered.¹² It lists mandatory and discretionary grounds for non-recognition. The mandatory grounds include for example failure to provide impartial tribunals or procedures compatible with the requirements of due process of law. The discretionary grounds include things such as lack of notice, fraud and violation of public policy. The American court must thus recognize the Dutch money judgment unless one of the statutory exceptions applies.

In 2005 the Act was revised not through amendments but with an entirely new Act with a name clarification: the Uniform Foreign-Country Money Judgments Recognition Act. This new Act has been adopted in 2008 by California, Colorado, Idaho, Michigan and Nevada. It has been introduced to at least another 10 state legislators in 2009, including Minnesota. The new Act clarifies some definitions, tightens its scope, provides additional procedural rules and, most importantly, adds new grounds for non-recognition of a judgment. Non-recognition may be found if the judgment or the cause of action or claim for relief on which the judgment is based is repugnant to the public policy of the state involved or of the United States. The provision has thus been expanded in terms of the matter that can offend public policy and the source of the policy that may be offended. Non-recognition is further authorized if the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering court with respect to the judgment, another change from the 1962 Act, which provided for non-recognition only if the entire legal system could be challenged as not impartial.

Conclusion and Alternatives

Due to the absence of a treaty, a judgment obtained in the contracting party's local jurisdiction will not automatically be recognized and enforced by the United States or Dutch courts. However, case law and statutory law that has been developed in both the United States and the Netherlands may allow for recognition and enforcement of the foreign judgment, thus often, but not always, avoiding a re-litigation of the merits. The standards that have been developed in both countries bear resemblance. However, the enforcement evaluation process is very fact specific and would require consultation with a specialist.

When drafting a dispute resolution clause, it may be more efficient for the offensive United States or Dutch side to agree to a legal action in the foreign country jurisdiction where the debtor has most likely sufficient assets to satisfy a judgment. Depending on the circumstances, the future claimant may decide that it is too cumbersome to obtain a domestic judgment, which it must subsequently enforce in the judgment debtor's jurisdiction. From a defense perspective, difficulties in enforcement would be favorable.

Alternatively, familiarity with and convenience of the home court may outweigh the uncertainties of enforcing the national judgment in the foreign contracting party's jurisdiction. In certain instances, the possible concerns over recognition and enforcement of foreign court judgments provide a reason to resort to international arbitration. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards makes it relatively easy to enforce a foreign arbitral award in the United States or the Netherlands.¹³ Arbitration may be cheaper and faster, and, if the alternative would be an American jury, arbitrators often render smaller damage awards. At the same time, litigation has been viewed as advantageous because it offers greater predictability and allows for an appeal to correct erroneous decisions. This article explains that if the specific circumstances of a given transaction favor litigation, one must pay close attention to the judicial forum choice clause in the commercial agreement. Once both the Netherlands and the United States have ratified the 2005 Hague Convention on Choice of Court Agreements, the enforcement issue will not favor arbitration and the comparison of both mechanisms will be more evenly distributed.

* © 2000, updated in 2009, Marcia B. Haffmans.All rights reserved.First published in Holland USA, a publication of The Netherlands Chamber of Commerce in the United States, Inc.Ms. Haffmans is a Dutch native who practiced law in The Netherlands.She has been a practicing attorney in Minneapolis, Minnesota for a significant number of years and focuses on international, contract and general business law.Phone: 612-377-0391.E-mail: marcia@haffmanslaw.com.

The information in this article is not intended as legal advice. Readers should not act upon the information herein without seeking the advice of an attorney.

1. Judgment of Feb. 1, 1985, HR, NJ 1985-698; Judgment of Oct. 28, 1988, HR, NJ 1989-765.
2. Supra n. 1.
3. The Bremen v. Zapata OffShore Company, 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).
4. For the text of the Convention go to http://www.hcch.net/index_en.php?act=conventions.text&cid=98.
5. Artikel 431 of the Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering).
6. Judgment of Mar. 20, 1970, HR, NJ 1971-275, 3 Neth. Yb. Int'l L. 299 (1972).
7. Supra n. 6. See also Judgment of Jan. 8, 1952, Hof Den Bosch, NJ 1952-616.
8. Judgment of Oct. 17, 1967, Rb. Amsterdam, NJ 1968-255.
9. Judgment of Jan. 14, 1960, Rb. Den Haag, VR 1961-42.
10. A German Appeals Court has ruled that a United States judgment awarding lump sum punitive damages of a considerable amount in addition to an award for damages for material and non-material injury, cannot, as a rule, be held to be enforceable in Germany. The California judgment was enforced for compensatory damages but not for punitive damages. BGH, June 4, 1992, BGHZ 118, 312, English translation in 32 ILM 1320 (1993).
11. Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, U.S. Virgin Islands, Virginia, Washington.
12. See, e.g., Minn. Stat. § 548.35.
13. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, June 10, 1958; 21 U.S.T. 2518, T.I.A.S. No. 6997, 330 U.N.T.S. 38 (1958), No. 4739, implemented in the United States by 9 U.S.C.A. §§ 201-208.