Helpful link on recognition of foreign judgments

Over on China Law Blog is the following helpful and succinct practical law company link and summary on getting your judgment recognised and enforced in different foreign courts:

So today when a lawyer from a Middle East country emailed me to discuss enforcing a large judgment from that (intentionally unnamed) country in China, I had to figure out whether China enforces that country’s judgments or not (it doesn’t).  In doing that research, I came across this very helpful chart put out by the Practical Law Company, listing what countries enforce what foreign judgments.  This chart does not list the enforcement rules for every country, but it does list it for the following 32 and I am guessing that will cover at least 90 percent of the searches out there: Argentina, Australia, Brazil, British Virgin Islands, Canada, Cayman Islands, China, Cyprus, Egypt, France, Germany, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Lithuania, Luxembourg, Luxembourg, Malta, Mexico, Romania, Russian Federation, Singapore, South Africa, Sweden, Turkey, USA, United Arab Emirates, and United Kingdom.

Two countries, two legal systems

Over the past few months, the Australian media has reported on the plight of two Australians - Marcus Lee and Matthew Joyce - who have been languishing under house arrest in Dubai, pending trial for criminal bribery. Lee and Joyce were both arrested in 2009 over bribery allegations relating to a 2007 property deal in Dubai. Joyce and Angus Reed, another man who returned to Australia before the arrests but was still tried in absentia, were convicted last month of fraud and sentenced to 10 years jail and $12 million fines, while Lee was acquitted. The Dubai prosecution has since indicated that it will be appealing Lee’s acquittal, making it unclear whether Lee will be able to leave Dubai in the near future.

The Australian reporting of the story has been the stuff of a typical good guy/bad guy Hollywood movie.  The media was quick to judge the unfairness of Dubai's legal system, well before the trial was complete and has been intent on supporting the perceived innocence of the Australians.  This has unfortunately led to the media peddling inaccurate representations of the legal situation at hand.

The property deal in question involved the Sunland property group, Prudentia, and its affiliate Hanley (investment companies), and a Dubai government development entity, Dubai Waterfront LLC or DWF. In 2007, Joyce was the managing director of DWF, Lee was the Director of commercial operations for the same company and Angus Reed was a director of Prudentia. It was alleged that Joyce and Reed misrepresented to Sunland Property group that a payment to Prudentia would be needed to secure the purchase of a block of land in Dubai, Plot D17. Sunland acted on the alleged representation of the two Australian men, paying Prudentia, but then later learned that the payment had been unnecessary. Lee  allegedly had a role in facilitating the payment.

Joyce and Reed also faced an Australian civil suit commenced by Sunland, brought under Australian legislation and common law and based on the same, or similar, factual circumstances to the Dubai prosecution. Lee, however, was not named as a defendant in the civil action. Justice Croft of the Victorian Supreme Court determined the Australian case in 2012, finding that the claims were not made out.  Justice Croft strongly criticized the grounds on which the Australian civil suit was brought, particularly disputing the reliability of the evidence relied on by Sunland.  It is this judgment and criticism that has led to the Australian media heralding the innocence of Lee and Joyce and declaring that the matter has been finally determined.

The problem with the media’s approach to the legal situation is that it fails to acknowledge that the  legal systems in Australia and Dubai are substantially different and therefore so were the cases brought in each country.  Specifically, the Australian matter was brought as a civil case by Sunland, who alleged that the men had breached the Australian Trade Practices Act and committed the common law tort of deceit, neither of which apply in Dubai.  As such, these laws were not the basis for the Dubai criminal case, brought by the Dubai prosecution. 

In fact, not only were the two cases brought under different laws, but the foundations of the two legal systems are significantly different.  Australia has a common law legal system, inherited from the British, and Dubai has a hybrid civil law and sharia legal system.  These two different foundations have a substantial bearing on case determinations as they provide distinct approaches to legal interpretation and evidentiary issues. 

Given these significant differences, it is incorrect to suggest that the Australian finding proves the innocence of the two men and that they have no case to answer in Dubai, as the Australian media has, at times, suggested.  Justice Croft clearly acknowledging the differences in the two legal systems, stopped short of commenting on the innocence of the men in relation to the Dubai prosecution – focusing his criticism on Sunland’s conduct, factual inaccuracies in the evidence provided and its bearing on the Australian civil claim.

Past Australian media criticism of foreign legal cases has at times negatively impacted on the process and outcome of these matters.  Therefore, while this is a truly tragic story for the men and their families involved, their situation is not assisted in any way by inaccurate media reporting, or a parochial representation of the legal system in Dubai.

Powerful Weiner or Women?

On the same day that Anthony Weiner has announced his intention to run in the New York City mayoral race – Forbes has released its list of the most powerful women of 2013.  This is causing me to ask myself - who is more influential – Weiner or Women?

Many will be familiar with Anthony Weiner as the disgraced ex-US congressman, forced to resign after tweeting lewd photos of himself to women.  I am sure that many in New York City will feel lucky to have such a renowned, and apparently reformed, sexter in its mayoral race.  However, the 2013 most powerful women will probably not be feeling so lucky – given the Forbes list has been completely overrun by Weiner’s story in the media – suggesting that even the world’s most powerful women are unfortunately still outshone by a Weiner.

Latin America Investing to its Own Tune?

On 5 March 2013 the world’s headlines were filled with reports of the death of Venezuelan President Hugo Chavez.  A controversial leader, Chavez’s legacy is to have not only divided Venezuela from the West, but also to have unified some Latin American countries with his personality and anti-Western sentiment. One area where this is particularly apparent is international investment law. 

In 2012, Chavez controversially withdrew Venezuela’s membership from the World Bank’s International Centre for Settlement of Investment Disputes, or ICSID. Established by treaty and created to provide facilities for the settlement of international investment disputes, ICSID’s credibility has been questioned in recent years due to a perception that it, and the “club” of arbitrators it produces, is pro-Western.

Chavez’s actions were motivated by his belief in the pro-Western prejudice of ICSID and his desire to ensure that his government had control over Venezuela’s economy.  This was particularly at a time when Venezuela was increasingly defending its actions in international investment disputes. Many in the West were critical of Chavez’s withdrawal as being an anti-Western stunt.  However, these actions seem to have been part of a growing movement in Latin America away from international investment law and dispute settlement.

International investment disputes arise when a foreign investor alleges that a country, which is a party to an international investment treaty with the foreign investor’s national country, has breached its treaty terms. Commonly, international investment treaties are bilateral, between two countries, but can also be multilateral and provide protections for investors.  One of the most famous international investment treaties – in multilateral, not bilateral, form – is contained in Chapter 11 of the North American Free Trade Agreement (NAFTA).

International investment treaties include a standard set of protections for foreigner investors, designed to encourage investment between the countries that are party to the treaty.  These are:

• the guarantee that the investor will be afforded ‘fair and equitable treatment’ by the foreign government;
• the guarantee that the foreign investor will be afforded national treatment - equal to that provided to a country’s own nationals;
• the guarantee that the investor will be given most favored nation treatment, that is, treatment equal to, or greater than, that provided to investors from other foreign governments; and
• the guarantee that the investor’s assets will not be expropriated, or taken by the government. 

Controversially, these international investment treaties – although entered into between two or more different countries – generally allow an aggrieved private foreign investor to initiate arbitration proceedings against a country it alleges has breached the protections in the treaty as long as the investor is a national of, or has been incorporated in, a country that is a party to the treaty.  This aspect, many argue, erodes the power of sovereign, often democratically elected, countries to act in their country’s interests in favor of private investors, predominantly multinational corporations.

Adding to the controversy surrounding these treaties is the fact that the vast majority exists between developed countries (capital exporting states) and developing countries (capital importing states) – therefore between two parties in vastly different bargaining positions.  The treaties are often established with the intention of ensuring that foreign investors from developed countries are protected in less stable developing country regimes around the world.  Essentially this has meant that the majority of international investor arbitrations have been brought against developing country governments – particularly Latin American countries.

Venezuela, under Chavez’s leadership, is not the first country in Latin America to have objected to ICSID and the international investor law system – nor will it be the last.  This is because Latin American countries are increasingly facing international investment arbitral damages awards in the hundreds millions of dollars.

Argentina, a country that has been involved in a significant amount of international investment disputes, following on from the country’s economic collapse in 2003, announced its plans to withdraw from ICSID in January 2013, joining Bolivia and Ecuador who withdrew their ICSID memberships in 2007 and 2009 respectively.  Similarly Ecuador has withdrawn from a number of its bilateral investment treaties – thereby ceasing its obligations to foreign investors under these treaties. 

Chavez’s issues with ICSID were not part of a general rejection of international law – he was instrumental in developing the multilateral 2008 treaty that established the Union of South American Nations, UNASUR.  This body, a regional institution, like the European Union, aims to economically unify the region.

In fact, it was a selection of these UNASUR countries that recently met to consider the current impact of international investment law on Latin American countries.  What came out of that meeting was a proposal for the development of a new form of international investment dispute settlement for Latin America. 

The proposal advocates shifting international investment arbitration from ICSID to a body set up by UNASUR, which would then be overseen by a state-funded observatory.  The observatory would not only ensure fair and equitable investment treaty results, but also generally facilitate legal cooperation and harmonization amongst UNASUR countries to facilitate trade – both within and outside of Latin America.  The states that have developed the proposal – including Venezuela – are set to meet again in Venezuela in July to consider the issue further.

While it is unclear whether this proposal will amount to a final solution, it is clear that the anti-ICSID and international investment law system sentiment is not going away with the death of Chavez.  As a result, Western policy makers, international lawyers and investors will need to start seriously considering how to bridge the growing wedge on international investment law in Latin America if relationships on this issue are to be fostered in the future. 

Groundhog Day not Judgment Day

Reports are that the Hague Conference on Private International Law has again postponed work on the judgments project for six months, because of differing government views standing in the way of the project’s progression.  This project started over 20 years ago, in 1992, and has already been shelved once due to the irreconcilable positions of state governments.  This latest temporary shelving of the project is an unfortunate development for businesses trading across borders, particularly those without the means to pay for lawyers and experts in multiple countries.

The Hague Conference on Private International Law is a multilateral body tasked with putting in place measures to reduce the differences between legal systems around the world and enable greater global legal cooperation.  The Hague Conference cites membership from 71 countries and 1 regional organization (the European Union). A famous product to come out of the Hague Conference that often receives media attention is the abduction convention, which puts in place a framework to facilitate the return of internationally abducted children. 

The judgments project was looking at developing an arrangement to enable the judgments of one country’s courts to be recognized in another country without parties having to initiate new legal proceedings in the second country. Currently there is no global framework in place to allow this to occur. 

Regional arrangements exist, such as within the European Union, as do a selection of bilateral treaties.  Notably, however, some of the major trading economies, such as China, are largely absent from these arrangements, preventing successful parties from enforcing their judgments against individuals and companies with their assets in China.  

In order to get around this problem, companies have to employ local experts in several countries, resort to arbitration or informal dispute resolution, when they would otherwise prefer to have their dispute resolved in a court, or just write off judgment debts that are too difficult to be recovered.  While progress on the judgments project will not necessarily improve the situation in particular countries, it is hoped that it will turn the spotlight on this gap.

Governments around the world continue to devote considerable resources to the promotion of free trade agreements but little attention is paid to reducing these non-tariff barriers to trade.  Until Governments consider prioritizing projects such as these, companies will continue to face significant trading risks.