The State Department web site below is a permanent electronic archive of information released prior to January 20, 2001.  Please see www.state.gov for material released since President George W. Bush took office on that date.  This site is not updated so external links may no longer function.  Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.

Note on the Recognition and Enforcement of Decisions in the Perspective of a Double Convention With Special Regard to Foreign Judgments Awarding Punitive or Excessive Damages

drawn up by the Permanent Bureau

[note: This document was reformatted for HTML. This text remains the same.]

At the meeting of the Special Commission in June 1994, the problem of recognition and enforcement of decisions was discussed in a general manner only (see Conclusions Nos 33-40). It may therefore be useful to examine a few aspects of this problem in more detail. One of the principal advantages of a new convention on this topic would be to provide a framework for the removal of obstacles to the international circulation of judgments in a field where there is, with the exception of the Brussels/Lugano Conventions (and the potential exception of the Inter-American Conventions of 1979 and 1984 as they become more widely ratified) no governing multilateral convention and few bilateral instruments. The defects of the present situation, characterized by a kaleidoscopic variety of predominantly national regimes for recognition and enforcement, and the need for such a multilateral framework will only be accentuated as international contacts and trade increase -- which is likely to be the case in the decades ahead.

i -- Review by the requested court of the original court's jurisdiction

The Special Commission in June 1994 developed a consensus "in favour of the institution of verification by the requested judge of the original judge's jurisdiction" (see Conclusions, No 34). Upon reflection, this conclusion raises a number of questions which the Special Commission may wish to examine. There is no doubt that, in most if not all legal systems, the question whether the original court had jurisdiction to render a decision is a condition for recognition and enforcement by the requested court.¹ This review may take different forms, however.

i -- Criteria for reviewing the original court's jurisdiction

In some countries (for example, India -- except for jurisdiction in respect for immovable property situated in India - Nigeria, Turkey -- except when Turkish courts have exclusive jurisdiction), the criteria for reviewing the original court's jurisdiction are to be found exclusively in the law of the country of origin. In most other systems, however, the requested court will apply its own rules of private international law -- in some cases, after having verified whether the court of origin had jurisdiction according to that court of origin's law. The requested court will then generally apply the same criteria which it applies directly to determine its own jurisdiction to determine indirectly whether the original court had jurisdiction. In this approach, the fact that the judgment is valid according to the rules of the court of origin does not suffice: the recognizing court reviews the original court's jurisdiction according to its own conceptions of a just distribution of jurisdiction among States. As a result, the same judgment, validly rendered in State A, may or may not be recognized and enforced in States X, Y or Z depending on varying criteria for international jurisdiction applying in those States, notwithstanding the fact that the original court, in most cases, could not possibly have been aware of those differing criteria.

The rigidity of this approach, in particular in those instances where the rules of jurisdiction of the requested State do not confer exclusive jurisdiction upon the courts of that State (for example, jurisdiction relating to immovables, nationality, trademarks, employment contracts), has recently been criticized in some countries. This criticism has led the French Cour de cassation in its famous judgment Simitch of 6 February 1985² to rule that whenever the French rule for resolving conflicts of jurisdiction does not attribute exclusive jurisdiction on the French courts, the foreign court should be recognized as having jurisdiction if the litigation is linked sufficiently (se rattache de manière caractérisée) to the country whose court has been seised and if the choice of the jurisdiction is not fraudulent. Instead of applying the French criteria for direct jurisdiction to verify whether the foreign court had jurisdiction, the Cour de cassation has thus established a special, more flexible, but less foreseeable rule of indirect jurisdiction.³ One of the effects of this rule is, rather than operating as a preliminary condition for recognition and enforcement -- to be substantiated by the requesting party -- it tends to operate as a ground for refusal on the initiative of the requested party. This takes us to the second aspect.

ii -- Condition for recognition or ground for refusal?

The rule most commonly found in the various national systems concerning recognition and enforcement of judgments is that review of the jurisdiction of the original court is a condition for the enforceability of the judgment, proof of which has in principle to be established by the requesting party. However, in some systems (for example, Australia, Spain -- except where the foreign judgment violates the exclusive jurisdiction of the Spanish courts, or violates the Spanish ordre public), the assumption is that the foreign court has jurisdiction unless the opposing party proves the contrary. In other words, the foreign judgment is -- as far as the jurisdiction of the court of origin is concerned -- presumed to be entitled to "full faith and credit" (a rebuttable prescription). Obviously, this puts the party seeking recognition in a more advantageous position and facilitates the recognition and enforceability of the decision. iii -- Single convention

One of the benefits of a single convention such as the Hague Convention of 1971 -- which addresses directly only recognition and enforcement of foreign decisions and does not effect the question of assumption of jurisdiction by the original court -- is that it ensures uniformity of the criteria for reviewing indirectly the jurisdiction of the original court. Thus, the Hague Convention, in Articles 10 and 11, establishes a list of indirect bases of jurisdiction and it is these criteria, and these only, which the court in the requested State must apply. The disadvantages of the system set out above (supra, i) are thus avoided. The logic of this system implies that the recognizing court may not apply its own criteria for indirect jurisdiction, even if they are more liberal than those of the Convention,⁴ and it is in principle up to the party seeking recognition and enforcement to furnish proof that the foreign court had jurisdiction.

iv -- Double convention

A double convention not only provides for uniform recognition and enforcement of judgments, but also sets out the bases on which jurisdiction may be assumed by the court of origin. In the Brussels/Lugano Conventions, the basis for assumption of jurisdiction is even exclusive: the courts of States Parties to the Convention can exercise jurisdiction in matters within the Convention only if a Convention basis is present. In such a framework, in which the criteria for jurisdiction are defined in a strict manner so that the original court can determine without ambiguity whether it has jurisdiction or not, review of the original court's jurisdiction by the requested court (except for special heads of jurisdiction such as consumer contracts, or exclusive heads of jurisdiction) tends to become a paradox. What is the purpose of establishing direct bases of jurisdiction if they are to be systematically reviewed by the requested court -- why not then simply draw up a list of indirect bases of jurisdiction? Is not the idea behind a catalogue of direct bases of jurisdiction that one can have confidence in the integrity and professionalism of the courts of the Contracting States? Moreover, how should one explain the systematic review of the jurisdiction of the original court in a treaty system which prohibits the review of the judgment as to its substance? Such considerations inspired the negotiators of the Brussels Convention to abandon in principle the review of the jurisdiction of the original court.

At the Special Commission meeting in June 1994, a tendency appeared to rule out the possibility of a convention allowing each Contracting State to utilize bases for assuming jurisdiction which would be neither accepted nor prohibited by the convention, and to favour the preparation of a double convention, limiting itself, as do the Conventions of Brussels and Lugano, to bases for assuming jurisdiction which are accepted (and those which are rejected).⁵ In light of this inclination of the Special Commission, it would seem that the question would need to be further discussed as to whether the review of the court of origin's jurisdiction is compatible with the idea of a complete double convention. What justification is there for such a review if the basic assumption is the same as in Brussels/Lugano, i.e. that Contracting States should basically trust each other's courts' integrity and professionalism in the application of the bases for assuming jurisdiction? If there is reason not to have such confidence, would that lack of confidence not have deeper ramifications and require to be dealt with more specifically (see infra ii i)? More generally, what is the relative weight of the verification of the original court's jurisdiction in comparison to other forms of review of the judgment, in particular as to respect by a foreign court of the rights of the defendant and as to the substance of the judgment? Is it conceivable to apply a more flexible test, such as the French Cour de cassation developed in Simitch (see supra, i), or should the list of accepted direct bases of jurisdiction (the "white list") automatically provide the criteria for reviewing, indirectly, the court of origin's jurisdiction? Should the review of the court of origin's jurisdiction necessarily be a preliminary condition for recognition, or could the court of origin's jurisdiction be presumed to be acceptable prima facie, so that it would be up to the opposing party to bring lack of jurisdiction as a ground for refusal (see supra, ii)?

v -- A special problem: review of jurisdiction of courts in a federal system

Although of a rather technical and special character, the question of the review of jurisdiction of the court of origin, when that court is part of a non-unified judicial system, is of considerable practical importance and the Special Commission may wish to address this briefly. The question arises in particular in respect of decisions originating in the state courts of the United States of America. In the United States, state court systems are in principle independent from the federal court system (as well as from each other) and have jurisdiction to deal with civil and commercial matters, except in so far as the federal courts have been specifically given overriding jurisdiction.⁶ An example will illustrate the problem: suppose a state court, for example in California, has rendered a judgment whose enforcement is subsequently sought in Germany or Japan. The Californian court has based its jurisdiction on a long-arm statute which, in the eyes of the German or Japanese courts would definitely appear exorbitant if those courts were only to look at the links between the Californian court's jurisdiction and the state of origin, California, but not if they were to look at the link with the United States as a whole (e.g. because the defendant, at the time of the litigation, had his or her domicile in another state of the United States). Should the requested court in Germany or Japan, in order to review the jurisdiction of the Californian court, consider only the state of California or should it consider the United States as a whole? The consequences of either point of view are obvious, but the courts and the doctrine have been divided.⁷ A preliminary discussion of this question, which is bound to reappear during later negotiations, may be useful in the context of a general discussion on the review of jurisdiction of the court of origin.

ii -- Grounds for refusal of recognition and enforcement

At the meeting of the Special Commission in June 1994, the grounds for refusal of recognition or enforcement of decisions known in the general law or appearing in the international conventions were not discussed. A consensus, however, emerged to accept that a convention ought to contain grounds for a refusal of recognition or enforcement and that it would be necessary to go further than had the Conventions of Brussels and Lugano. "Fraud in the procedural sense", as listed in the 1971 Convention (Article 5, paragraph 1(2)) was mentioned as an example. A further discussion of this question appears desirable. The following aspects, in particular, may perhaps be discussed in more depth:

i -- Independence and impartiality of the court of origin

Recognition and enforcement of foreign judgments within a convention system presupposes a minimum of confidence of each Contracting State in the quality of the judiciary of the other Contracting States. This is obviously a delicate question, which also touches upon the more general political issue of whether or not a future convention should be based on some sort of system of bilateralization. There may, however, be other less drastic ways to deal with this problem. A comparison of the general laws on civil procedure among various countries suggests that specific provisions dealing in a systematic way with the independence or impartiality of the court of origin as a condition for recognition or enforcement of a judgment rendered by that court are rare.⁸ It would seem that, at least in civil or commercial matters, countries tend to accept that their courts, when faced with a question concerning the independence or impartiality of a foreign court, are capable of dealing with such questions on a case-by-case basis, utilizing where necessary the public policy, due process or fraud exceptions to refuse recognition or enforcement of a judgment rendered by a dubious tribunal.

One possible way of dealing with this question would be to include in a convention a definition of the term "court" for purposes of the convention and include in that definition a requirement as to independence and impartiality.⁹ Such a definition may in any case be desirable in view of the large variety of courts, tribunals and other institutions (including civil juries - see infra iii) which may render decisions in the various countries of the world. While in the context of the Brussels/Lugano Conventions it suffices to provide that these instruments "shall apply in civil and commercial matters whatever the nature of the court or tribunal" (Article 1), this may not be sufficient in instruments of worldwide application.

Parallel to this definition, or even in the absence of such a definition, inclusion among the grounds for non-recognition of lack of impartiality or independence of the court of origin may also be considered as an option.

ii -- Review of the foreign judgment as to its substance; review of the law applied

It should be noted that with the exception of only a few systems (for example, Belgium), the general law of most countries prohibits a review of the merits of the foreign judgment. The general absence of a requirement to review foreign judgments as to their substance is a strong indication of the relative openness and confidence that reigns in the field of recognition and enforcement of foreign judgments. A more limited and abstract requirement of review of the merits is known in France, as well as in some other States, in the context of exequatur proceedings. In order for a foreign judgment to be declared enforceable in France, the foreign court must have applied the law designated by the French conflict of law rules, or at least rendered a decision with an equivalent result (Cour de cassation, arrêt Munzer, of 6 January 1964).¹⁰ As a general theory, this review of the compétence législative has been criticized in France itself and nowadays finds little echo in other countries. In a more limited manner, however, restricted to a decision on a preliminary question concerning the status or legal capacity of a party and other matters concerning family law and the law of succession, the review appears as a ground of refusal of recognition and enforcement in both Article 7, paragraph 2, of the 1971 Convention and Article 27, paragraph 4, of the Brussels Convention.¹¹ The exact meaning of the latter provision, and in particular the manner in which it should operate in countries which, unlike France, do not in their general law provide for any review of the applicable law, is a matter for debate.¹² The article, it would seem, is not relied upon frequently in practice, but it may as a security device have a certain role to play in a worldwide convention. A preliminary discussion within the Special Commission might be useful in order to gain the thoughts of the experts on this question.

iii -- Public policy; fairness of the proceedings; fraud

Under the general laws of most systems a foreign judgment will not be recognized or enforced if that judgment, or rather, in a more refined manner, the recognition of that judgment, would violate the requested State's public order. The same notion appears in many conventions including the Hague Convention (Article 5(1)) and Brussels/Lugano (Article 27(1)). The notion has very much the function of a "safety valve" to be utilized in cases where the recognition would lead to a result contrary to the fundamental principles of the legal order or morals of the requested State. In civil or commercial matters - excluding questions of family law and succession - such a hypothesis will be extremely rare, and the inclusion of the public order clause in the Brussels Convention has met with criticism.¹³ A distinction should be made between public policy in the proper, substantive sense (Article 27(1) of Brussels/Lugano) and in a procedural sense concerning the fairness of the proceedings and rights of the defense (covered by Article 27(2) of Brussels/Lugano).¹⁴ In practice, and in the case law of some countries of the European Union, this distinction is not always made. The French courts e.g. will (even where it cannot be said that either party had no adequate opportunity to fairly present his or her case) refuse the recognition or enforcement of a foreign judgment, if no reasons are given in the decision and no document can be produced that may serve as an equivalent to the lacking reasons.¹⁵

This is a very important practical question which the Special Commission may wish to examine. In the civil law tradition, judgments usually contain reasons, but there are important exceptions in some civil law countries, especially at the lower court level. In the common law tradition, with its emphasis on the trial in court, the giving of reasons for the decision is considered less essential to the integrity of the civil procedure. It would seem that the accommodation of this difference in approach requires a more subtle technique than the public policy clause.

During the negotiations on the 1971 Hague Convention, a debate took place on whether the public policy clause could be used where the foreign judgment contained an obvious error of fact or an obvious error of interpretation concerning the laws of the requested State. The prevailing view was that, even in such a case, the public policy clause should not be utilized. This is another point for reflection and discussion for the Special Commission.¹⁶

Article 5(2) of the Hague Convention provides that recognition or enforcement of a decision may be refused "if the decision was obtained by fraud in the procedural sense". The Brussels/Lugano Conventions do not contain a similar clause.¹⁷

The Australian Experts, in their paper for the June 1994 meeting (Work. Doc. No 1, points 29 and following), emphasized the importance of such a clause in a worldwide convention, even though some controversy exists as regards the meaning of the "fraud": may the allegations of fraud have been known to the defendant at the time of the foreign proceedings (and, indeed, may they have been raised and rejected by that court) -- intrinsic fraud -- or should the fraud be based on evidence not known or available at the trial -- extrinsic fraud? If intrinsic fraud is to be accepted as a defence, this would imply that the requested court may in so far review the decision.

iv -- The case of default

If twenty years of experience of the Brussels Convention have taught one thing, it is that the various grounds of refusal listed in Article 27(1), (3), (4) and (5) are hardly ever applied in adversary proceedings in which the defendant appears. In marked contrast to this result, Article 27(2), which only applies to adversary proceedings in which the defendant does not appear (if (s)he appears, (s)he loses its protection),¹⁸ is frequently relied upon in practice.

In a double convention system, such as that of the Brussels/Lugano Convention, the essential steps to protect the defendant should be taken by the first court. Article 20 of Brussels/Lugano requires the court of origin of its own motion to review whether it can base its jurisdiction on one of the provisions of the Convention. Moreover, the court is obliged to stay the proceedings so long as it is not shown (1) that the defendant has been able to receive the document instituting the proceedings, (2) in sufficient time for him to arrange for his defense. In strict logic, in a double convention, which presupposes that courts have confidence in each other's judgments, a requirement as imposed by Article 27(2) of a review by the requested court as to whether the court of origin has correctly applied these provisions is not self-evident. What should be the extent of this review in a future convention? Should it afford the same high level of protection of the defendant as the Brussels Convention offers in the interpretation of the Court of Justice of the European Communities?¹⁹ The Special Commission may wish to discuss how in a future convention the balance should be struck between the rights of the defendant and those of the plaintiff. Should the requested court have discretion to determine on a case by case basis whether a default judgment rendered by the courts of another Contracting State should not be recognized and enforced?

v -- Conflicting judgments

As the examples of the Brussels/Lugano Conventions show, even in the context of a regional double convention, not all conflicts of judgments can be avoided through a lis alibi pendens provision applying to the assumption of jurisdiction stage; Article 27(3) and (5) of Brussels/Lugano require the requested court not to recognize a judgment which is irreconcilable with a judgment rendered in the requested State (whether before or after the foreign judgment), or an earlier judgment rendered in a non-Contracting State.²⁰ Under a worldwide double convention, the potential for conflict between judgments at the recognition stage is even greater, hence the need to provide for the best possible co-ordination at the jurisdiction stage: the more possibilities a double convention provides in order to avoid conflicts at the jurisdiction stage, the less the risk of conflicting judgments at the recognition and enforcement stage. It may therefore be desirable to give a somewhat wider grasp to the provisions on conflicting judgments in a worldwide context than they have in a regional context. Moreover, the requirement (in Brussels/Lugano) that, in order for a judgment from a non-Contracting State to be found to be irreconcilable with another judgment, the judgments must involve the same cause of action between the same parties (in the French text even "entre les même parties dans un litige ayant le même objet et la même cause") may well be too narrow in a worldwide context.²¹

iii -- Judgments based on a jury verdict

In the context of recognition and enforcement of foreign judgments, it will be useful to pay special attention to the role of the jury in civil cases, as known in common law countries and especially in the United States. In the attached note, the United States Experts describe the background of the institution, the rules and procedures which control jury conduct and, in particular, the judicial review of jury verdicts.²² Given the ample opportunities for an American court to control the conduct of the civil jury, is there nevertheless need to subject the recognition or enforcement of a judgment based on a jury trial to special requirements (apart from the question of punitive damages, which will be examined infra iv)? What if the judge has not honoured a request of the defendant to apply one of the techniques available to it to control the conduct of the jury? These and other questions to which the note may give rise merit some further discussion.

iv -- Decisions awarding excessive or multiple damages

One of the crucial issues in the field of recognition and enforcement is caused by the phenomenon of damages awarded by courts in excess of compensation for the actual losses suffered by the plaintiff. The attached notes prepared by the Experts from Australia, Canada, the United Kingdom and the United States show that such damages may be awarded in all these countries but that the scope of their utilization differs considerably as between the first three countries on the one hand, and the United States on the other. This of course mirrors important cultural and socio-economic differences between the social systems of these countries, which includes a larger use of administrative controls to channel hazardous conduct in the former three and greater reliance on private litigation to enhance this function in the United States, as well as the limited role of civil juries in the former three and the significant part they play in the United States. Whereas the use of multiple damages as a deterrent and a punishment is seen in the United States as important to correct and influence the conduct of the defendant and others in a similar position on the market or in society, this is much less so in other common law countries, with defamation as a major exception in the torts area.²³ The notes prepared by the Australian and United Kingdom Experts even refer to special statutory measures taken to enable the courts to refuse enforcement of foreign judgments for multiple damages (the Foreign Proceedings (Excess of Jurisdiction) Act 1984 and the Protection of Trading Interests Act 1980).

The note submitted by the United Kingdom Experts also refers to provisions in the draft Convention between the United Kingdom and the United States providing for the reciprocal recognition and enforcement of judgments in civil matters to which reference has already been made during the discussions of the Special Commission in June 1994.²⁴ The draft Convention, in its chapter on the scope of the Convention (Article 2) provided that (except for the recognition and enforcement of third State judgments), the Convention shall not apply to judgments:

"...(2) (b) to the extent that they are for punitive or multiple damages [or civil penalties]..."

In addition, the bracketed text of Article 8A provided as follows:

"Where the respondent establishes that the amount awarded by the court of origin is greatly in excess of the amount, including costs, that would have been awarded on the basis of the findings of law and fact established in the court of origin, had the assessment of that amount been a matter for the court addressed that court may, to the extent then permitted by the law generally applicable in that court to the recognition and enforcement of foreign judgments, recognize and enforce the judgment in a lesser amount."

The latter provision has been characterized as "fair in its construction" but "xenophobic in its application" because it "fails to countenance compensation for future medical expenses, which are substantial components of tort recovery in the United States".²⁵ Another question which arises is how the line should be drawn to those parts of the judgment that are "for punitive or multiple damages [or civil penalties]" excluded from the scope of the draft Convention and the excessive amount covered by Article 8A.

While the attached notes can confirm that punitive damages as awarded in the United States are in the centre of the international debate, they should also help to put the problem in the proper perspective.²⁶ Moreover, several recent cases decided in Germany, Japan and Switzerland indicate foreign concern with punitive damages generally, but also the ability of courts in civil law systems to deal with punitive damages awards under the general law on recognition and enforcement.

a -- Germany

Two important decisions of the German highest courts, the German Federal Court (Bundesgerichtshof, bgh) and the German Constitutional Court (Bundesverfassungsgericht, BVerfG) provide insight into the German view on foreign awards including types of damages not known in German law.

The first case, already mentioned during the discussions in June 1994, concerned a Californian judgment rendered in a sexual abuse case. It should be noted at the outset that the case had very little connection with Germany, the tort having been committed in California and all the parties being American nationals; the only connection with Germany was the fact that the defendant also had German nationality and had moved to Germany after the judgment had been rendered. It may therefore not be the last word of the German courts on the enforcement of punitive damages award. The original Californian judgment included damages specifically for (1) past medical expenses, (2) future medical treatment, (3) placement costs, (4) pain and suffering, and (5) exemplary and punitive damages.²⁷ The court of first instance had recognized and declared enforceable the judgment in its entirety, including US $400,000 of the exemplary and punitive damages. The appeal court, on the other hand, had limited the enforcement of the amount of non-material damages to about one third and denied enforcement of the exemplary and punitive damages. The bgh approved the decision of the appeal court as to punitive damages, which were refused, but allowed for the enforcement of the non-material damages.²⁸

On each of the types of damages, the debtor had argued that the judgment violated German public policy. This first argument, rejected by the bgh, was that United States pre-trial discovery forces a party to render evidence to be used against himself, contrary to German law. Here, the bgh found that "enforcement of a foreign judgment that might have been based upon pre-trial discovery was not fundamentally contrary to German public policy". This also applied to the argument that future medical expenses cannot be awarded under German law. A third argument was derived from the conflict of laws provision in the German Introductory Code to the Civil Code (egbgb) providing that "no claim arising out of a tort committed abroad can be made against a German citizen which is larger than that provided by German laws". The bgh found: "the fact that a German judge, if he had to make a decision on the trial, would, by the application of binding German law, have come to a different conclusion to that reached by the foreign court, does not mean that a foreign judgment is incompatible with substantive ordre public". Finally, the argument that German law forbids contingency fees agreements and considers such agreements null and void, was not a sufficient reason to prevent enforcement of a foreign award which includes a contingency fee for the attorney. As to the punitive damages, the bgh ruled that "a United States judgment awarding lump sum punitive damages of a not inconsiderable 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 decision of the bgh was followed by a judgment of the German Constitutional Court in a case concerning not the enforcement of a United States decision including the award of punitive damages, but rather the service of process in Germany under the Hague Service Convention of such a judgment.²⁹ The argument of the defendant was again based on German public policy. After having issued a provisional protective measure on 3 August 1994, ordering that for the time being no service should be made -- which suggested that there was a chance that the Constitutional Court would decide in favour of the defendant -- on 7 December 1994 the court rejected the argument that service of the judgment would infringe upon Germany's sovereignty or security (Article 13 of the Hague Convention). The fact that in the recognition stage German courts might deny the enforcement of any resulting punitive damages judgment was sufficient to protect the defendant, and public policy concerns alone, even though acknowledged in the recognition stage by the bgh, were not sufficient to justify a permanent injunction against service under the Convention. Interestingly, in contrast to the opinion of the bgh, which had considered that the award of punitive damages should be seen from a German constitutional viewpoint as a function restricted to the criminal courts, the Constitutional Court left no doubt that it considered punitive damages as civil matters in the sense of the Service Convention.

b -- Japan

The judgment of the Tokyo District Court of 18 February 1991,³⁰ like that of the German Bundesgerichtshof of 1992 (supra, a), also concerned the recognition and enforcement of a Californian judgment, but in this case the connection with the requested State, Japan, was more substantial. The judgment was obtained based on a lease and construction arrangement in favour of an Oregon partnership in a suit against a Japanese corporation based in Japan and a director of the Californian subsidiary of that Japanese corporation. The judgment awarded compensatory damages and costs in the order of us $465,000 against the Japanese corporation and the director, and punitive damages of us $1,125,000 against the Japanese corporation only. The Japanese court took a somewhat different approach to that of the Bundesgerichtshof and ruled that it was "not appropriate to conclude that a foreign judgment awarding punitive damages cannot be recognized in any case at all because punitive damages are unknown to our law or their purpose is criminal in nature". More in line with the ruling of the German Constitutional Court in 1994, the Tokyo District Court did not feel that punitive damages as such bring a criminal law element into the matter: "... It is difficult to deny that the purpose of punitive damages is similar to that of a fine. But directly they involve obligations between private persons. And where the punitive damages are claimed for depends on the attention of a private person. Therefore, it is not appropriate to regard them as a punishment".

In the end, the Tokyo court nevertheless refused to enforce the Californian judgment because it felt that the findings of fact in the judgment were unreasonably insufficient to justify punitive damages.

c -- Switzerland

The judgment of the Civil Court of Basel City of 1 February 1989, affirmed by the Court of Appeals of Basel City on 1 December 1989, again concerns a request for recognition and enforcement of a Californian judgment including a punitive damages award.³¹ In this case, the Californian court had applied English law as the law of the contract. The case concerned a Swiss company, which had contracted to provide services in England concerning the storing and preparing of containers for shipment on behalf of an American company. The Swiss company was found by the Californian court to have improperly sold containers owned by the American company to a competitor. The defendant's conduct was found by court as having "been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff". Applying English law,³² the court therefore determined exemplary damages to be available. The American company was awarded us $ 120,000 in compensatory damages and us $ 50,000 in exemplary damages. The Swiss court rejected the claim of the Swiss company that enforcement of the punitive damages portion of the judgment should be denied because that would be contrary to Swiss public policy. Like the Japanese court, the Swiss court held that the mere fact that the punitive damages also served to punish, did not detract from the fact that they were awarded to a private party, and not based on the State's monopoly to punish under the criminal law system. The Basel court also found that the compensatory damages were predominant and compared the punitive damages with contractual penalty clauses available under Swiss law, which may also be in excess of actual loss. Although the cumulation of compensatory and punitive damages was not known under Swiss law, the combined damages were not ruled inconsistent with Swiss ordre public.

In light of the foregoing, the Special Commission may wish to reflect on the following questions, among others:

-- Does the fact that punitive damages serve purposes of deterrence or punishment in itself prevent them from being characterized as either "civil" or "commercial matters" for purposes of a future convention in which these terms should preferably have an autonomous meaning?

-- Does the fact that punitive or exemplary damages are unknown to the requested State's legal system justify or necessitate their being qualified as "manifestly contrary to public policy"? In this respect, would the proportion of the award for compensatory damages, as compared with punitive damages, be a relevant factor? Would it matter that part of the punitive damages might, on further analysis, might be seen as compensatory in nature? (e.g. contain an element of compensation for attorney fees?)

-- In order for a future convention to deal adequately with judgments containing punitive or exemplary damages, should it (i) exclude such damages from the scope of the convention and/or (ii) contain a clause similar to that of Article 8A in the draft us/uk Convention or (iii) just contain a public policy clause?

-- Should a convention facilitate the task of the requested court by requiring the court of origin, through a substantive provision in the convention's text, to specify the various heads of damages, and in particular to indicate which are compensatory and which are punitive in nature? Should a convention provide for a mechanism for judicial co-operation, allowing the requested court to ask the court of origin -- or another authority in the country of origin of the judgment -- for a further elucidation of the damages awarded?

ENDNOTES

¹ For a comparative overview, see L. Garb & J. Lew, Enforcement of Foreign Judgments, Vol. 1, Kluwer, The Hague, 1995.

² Clunet, 1985.460, note A. Huet; Rev. crit. dr. internat. privé, 1985, 369.

³ See Ph. Francescakis, "Le contrôle de la compétence du juge étranger après l'arrêt Simitch de la Cour de cassation", Rev. crit. dr. internat. privé 1985, pp. 243-273.

⁴ See, however, Article 23(11) of the Convention allowing Contracting States to agree -- on a bilateral basis -- to a more liberal regime for recognition and enforcement but, of course, only to the extent that they respect the "black list" of the Supplementary Protocol.

⁵ It will be recalled that the Working Group which met in October 1992 was of a different view and "felt that a complete double convention of the Brussels/Lugano type, appropriate as it may be in a regional framework, would be overly ambitious in the context of the broad Hague Conference membership". See Conclusions of the Working Group meeting on enforcement of judgments, Preliminary Document No 19 of November 1992, for the attention of the Seventeenth Session.

⁶ See 28 USC paragraph 1331 ("Federal Question Jurisdiction"), paragraph 1332 ("Diversity of Citizenship") and paragraphs 1333 and following.

⁷ See, for example, O. Sieg, "Internationale Anerkennungszuständigkeit bei US-Amerikanischen Urteilen" in IPRax 2/96 pp. 77-80.

⁸ See, however, Section 4 of the Uniform Foreign Money - Judgments Recognition Act, adopted in some twenty-five states of the United States, which provides: "... (a) a foreign judgment is not conclusive if (1) the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law; ...".

⁹ Inspiration might be found in Article 14 of the United Nations Covenant on Civil and Political Rights of 16 December 1966. See also Basic Principles on the Independence of the Judiciary adopted by the United Nations at its Seventh United Nations Congress on the Prevention of Crime and the Treatment of Offenders (which are focused on criminal proceedings but also relevant in civil or commercial matters), A/Conf. 121/22/Rev. 1, and see Recommendation No R(94)12 adopted by the Committee of Ministers of the Council of Europe on 13 October 1994, published by the Council of Europe in 1995.

¹⁰ Clunet 1964.302, note Goldman; Rev. crit. dr. internat. privé 1964, 344 note Batiffol.

₁₁ According to Article 27, paragraph 4, of the Brussels/Lugano Convention, a judgment shall not be recognized:

"... if the court of the State of origin, in order to arrive at its judgment, has decided a preliminary question concerning the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills or succession in a way that conflicts with a rule of the private international law of the State in which the recognition is sought, unless the same result would have been reached by the application of the rules of private international law of that State; ...".

¹² See, for example, H. Gaudemet-Tallon, Les Conventions de Bruxelles et de Lugano (2nd ed.), Nos 342-349, in particular 348 and 349.

¹³ See already P. Bellet, Clunet 1965, p. 862. In its judgment Hoffmann v. Krieg of 4 February 1988 (Case 145/836) the Court of the European Communities made it clear that the clause should be applied only in exceptional cases.

¹⁴ See Droz, La compétence judiciaire et l'effet des jugements dans la Communauté économique européenne selon la Convention de Bruxelles du 27 septembre 1968.

¹⁵ See Cour de Versailles, 26 Sept. 1991, and Cour de cassation, 9 Oct. 1991, Rev. crit. dr. internat. privé 1992, p. 516 with critical note by C. Kessedjian.

¹⁶ See Actes et documents de la Session extraordinaire (1966), p. 39.

¹⁷ It has been suggested that the public policy clause of Article 27 (1) might be utilized for this purpose. See Droz, op. cit., Nos 493-497, arguing however that this should only be done with great circumspection, and never in the case of intrinsic fraud.

¹⁸ It is therefore not applicable to ex parte proceedings such as an order for freezing assets or other such orders intended to stop the defendant taking steps to frustrate the rights of the plaintiff and which do not require that the defendant be notified in advance.

¹⁹ See judgments Isabelle Lancray (Case c-305/88) of 3 July 1990 and Minalnet (Case c-123/91) of 12 November 1992.

²⁰ Article 27 does not cover a conflict between two judgments both from Contracting States. The prevailing view is that, as in the case of a judgment given in a non-Contracting State, the earlier judgment should prevail.

²¹ Cf. H. Gaudemet-Tallon, op. cit. No 377.

²² Jury verdicts presuppose litigation in the presence of at least one defending party: in case of default of the defendant, the plaintiff will not ask for a jury trial, if only to avoid the extra costs of such a trial.

²³ As the United Kingdom paper illustrates, large awards in libel cases are not uncommon in the United Kingdom. A problem of recognition and enforcement of such awards in a case involving a defendant domiciled or a tort committed outside the United Kingdom may, therefore, arise already within the more limited framework of the Brussels/Lugano Conventions.

²⁴ The negotiations on this convention began in the early 1970's. "In 1978, subsequent to publication of the draft Convention, changes were made that resulted in a text more acceptable to the representatives of the United Kingdom. Although the United Kingdom withdrew from negotiations in 1980, the accomplishments must be considered, either in view of probable resurrection of negotiations or as a possible model for negotiations with other countries," see D.L. Woodward, "Reciprocal Recognition and Enforcement of Civil Judgments in the United States, the United Kingdom and the European Economic Community" in North Carolina J. Int'l & Com. Reg., pp. 299-334 (at page 310) (1980).

²⁵ Ibidem, p. 313.

²⁶ See the empirical data provided in the note submitted by the United States, in particular the results of the 1995 United States Department of Justice Report and the significant reform of state litigation rules, particularly in the area of punitive damages, which has taken place during the past decade.

²⁷ Consistent with American practice not to require the losing party to pay the attorney fees of the winning party -- which, incidentally, has not prevented United States courts from enforcing foreign judgments awarding such fees -- the judgment failed to indicate whether the punitive damages were also awarded as compensation for attorney fees relating to the other types of damages. Therefore, the BGH, while discussing the possibility that a portion of the punitive damages award would have been for attorney fees, refused to speculate as to such an allocation on its own.

²⁸ BGH 4 June 1992, BGHZ 118, 312, English translation in 32 ILM 1320 (1993).

²⁹ BVerfG 7 December 1994, BVerfGE Vol. 91, 335.

³⁰ 35 Japanese Annual of International Law, p. 177 (1992).

³¹ 1991 Basler Juristische Mitteilungen, p. 31.

³² See the attached note on exemplary damages submitted by the United Kingdom Experts.

[end of document]