The need for recognition and enforcement of foreign civil and commercial judgments in trade.

As the Hague Conference on Private International Law met for its annual Council on General Affairs and Policy in late March 2015 in The Hague, Netherlands, the creation of a worldwide treaty to better facilitate the recognition and enforcement of civil and commercial judgments across borders was again emphasised by member States as one of the Organisation’s top priorities.

Australia’s delegation was amongst the loudest voices in support of the pithily named “Judgments Project”. And rightly so. Never before has the challenge of legal certainty in the enforcement of civil and commercial judgments been more important to Australia’s economic interests, particularly with regard to our Asia-Pacific neighbours. Against a backdrop of several nascent strategic commercial partnerships, including the negotiation of a China-Australia Free Trade Agreement in November 2014, a mooted Trans-Pacific Partnership and the 2015 creation of ASEAN’s AEC trading bloc, Australia and other key economic actors in the Asia-Pacific are becoming increasingly more interconnected with both each other and the world.

The Status Quo: Foreign Judgments in Australia

The question thus turns to how legal regimes may provide better commercial security to parties engaged in sophisticated, multistate transactions. How might a judgment creditor enforce a foreign judgment in Australia, ideally in a swift, uncomplicated and unbureaucratic way, against the assets of a judgment debtor?

Currently, Australia’s primary mechanism facilitating the recognition and enforcement of foreign judgments is found under the Foreign Judgments Act 1991 (Cth) (‘the Act’) and its Regulations. Under the Act, a successful claimant abroad may register a foreign money foreign judgment, without the presence of the judgment debtor (ex parte) and without the need to begin fresh proceedings. The Act also grants the judgment debtor appeal rights against registration of the foreign judgment if the judgement debtor can prove fraud on behalf of the creditor, a denial of natural justice, or that the judgment was already satisfied.

However the Act is far from perfect and foremost amongst its problems is the fact that the Act is, fundamentally very picky with the judgments it recognises. Australia currently preferences the foreign judgments of only 28 (mostly Commonwealth) countries listed in the regulations and, crucially, these 28 do not include foreign judgments of four of Australia’s top ten trading partners, including, inter alia, China, the United States, Indonesia and Thailand. These commercial allies in the Asia-Pacific are not given any fast-track preference under this (or any other) legislative regime. Thus, civil and commercial court judgements of these countries must go through an archaic and comparatively protracted process of proof at common law.

Moreover, even for the 28 prescribed countries, the Act currently applies only to monetary judgments, that is, judgments for a liquidated sum of money, whereas all other types of judgment must also take the common law recognition and enforcement route.

It is also worth mentioning that Australia has separate legislation allowing a very high level of circulation with both the UK and New Zealand due to special bilateral arrangements, under the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters 1994 (Cth) for the former and the Trans-Tasman Proceedings Act 2010 (Cth) for the latter.

Our foreign judgments regime is steeped in legal favouritism, which may be doctrinally understandable, but is commercially unviable. We cannot continue to preference only a select few systems with analytically similar regimes and historically close legal connections. What is truly needed is a way to more closely align Australia’s reception of foreign judgements with those countries and legal systems in our region and with whom we perform the largest amount of trade and commerce.

There is a clear need to better connect with our region – why not do so under a worldwide Convention?

Foreign Judgments under the Proposed Hague Convention

Enter the Judgments Project. In February 2015, the Fourth Working Group at the Hague Conference recorded a major breakthrough in the Project, by submitting to Council on General Affairs and Policy preliminary draft text of the mooted Hague Convention towards the worldwide recognition and enforcement of certain civil judgments.

With the approval of Council, the draft text can now be the subject of further work and development by experts, including those from Australia, towards its eventual finalisation.

Admittedly, the draft text contains wrinkles requiring considerable ironing. Many of these stem from historical discrepancies between common law and civil law legal traditions, which both deal very differently with jurisdictional issues. These include disagreements as to the kind of legal suits which contracting State courts should be allowed to hear over the courts of other contracting States and other disagreements about what rules of judicial discretion, if any, should be implemented regarding a Court’s decision/requirement to exercise jurisdiction.

There is also the elephant-in-the-room issue regarding conflicting standards of justice and there is thus a genuine question as to how the Convention can best allow contracting State courts the right to refuse recognition and enforcement of civil judgments which fundamentally go against the enforcement forum’s public policy.

These common law v. civil law misalignments, as well as public policy issues, perhaps epitomise Australia’s historical reluctance to fast-track certain countries in our region under our domestic foreign judgments frameworks. But can our country’s objections still be maintained if many countries are able to agree minimum global standards and uniform rules by virtue of a Hague Convention? Surely not.

Yet it seems this question is already one which Australian lawmakers are shirking – despite the fact that the Hague Conference’s instruments are well recognised as objective, fair and reflective of global best practice, Australia has not yet become signatory to several treaties in civil and commercial legal matters, including The Hague’s 1971 Convention on the Recognition and Enforcement of Foreign Judgments and the 2005 Choice of Court Convention.

The Judgments Project is still just that: a project. Any eventual Convention remains into the future. However, Australia must, in light of globalised economic policies, globalise its domestic legal policies, to ensure our legal system remains relevant, modern and secure for foreign entities and Australian entities litigating abroad. Australia must be ready to not only put pen to paper in drafting, but to do it again when it truly matters; once any such Convention is eventually finalised.

Derek Bayley holds a BA/LLB(Hons I) from the Australian National University. He is the 2015 Peter Nygh Intern to the Hague Conference on Private International Law (co-sponsored by the Australian Institute for International Affairs). This article can be republished with attribution under a Creative Commons Licence.