Thanks in large part to the Internet, more US-based businesses are getting involved in international transactions than ever before. While there are certainly many benefits to such transactions, there are also detriments. Key among them is what happens when the US-based company fails to pay its bill. Whilst bringing a lawsuit against the US-based company in its home state is usually the best option, at times it may not be practical. In such circumstances it may be necessary to obtain a judgment against the US-based business in the local, non-US court system. But will such a judgment be enforceable?

In many states, the enforcement of non-US based court judgments is governed by the Uniform Foreign Money-Judgments Recognition Act. See e.g. Iowa Code §626B . Pursuant to the terms of the Act, a foreign judgment which is final and conclusive is enforceable in the same manner and to the same extent as a judgment from another state in the United States. A judgment is deemed final when the time for an appeal in the foreign state has expired or all appeals are exhausted. Non-final foreign judgments may be filed but the defendant can request the court stay the proceedings. A judgment is conclusive between the parties to the extent that the judgment grants or denies recovery of a sum of money.

A foreign judgment is not conclusive in any of the following cases:

a. When the foreign judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law;

b. Except in certain circumstances, when the court of the foreign state did not have personal jurisdiction over the defendant, or

c. When the court of the foreign state did not have jurisdiction over the subject matter involved in the action.

As noted above, personal jurisdiction over the defendant is not always needed. Lack of personal jurisdiction is not a barrier if any of the following have occurred:

a. If the defendant was served personally in the foreign state;

b. If the defendant voluntarily appeared in the proceedings, other than for the purpose of protecting property seized or threatened with seizure in the proceedings or for the purpose of contesting jurisdiction of the court in the foreign state over the defendant;

c. If the defendant, prior to the commencement of the proceedings in the court of the foreign state, had agreed to submit to the jurisdiction of that court in the action concerning the subject matter involved;

d. If the defendant was domiciled, had its principal place of business, or otherwise had acquired corporate status in the foreign state when the proceedings were instituted;

e. If the defendant had a business office in the foreign state and the proceedings in the court of the foreign state involved a cause of action arising out of business done by the defendant through that office in the foreign state; or

f. If the defendant operated a motor vehicle or airplane in the foreign state and the proceedings involved a cause of action arising out of that operation.

The fact that the foreign judgment is final and conclusive does not mandate that it be recognized. If any of the following are applicable, recognition of the foreign judgment is discretionary by the court:

a. The defendant in the proceedings in the court of the foreign state did not receive notice of the proceedings in sufficient time to enable the defendant to defend against the action;

b. The foreign judgment was obtained by fraud;

c. The cause of action on which the foreign judgment was based is contrary to the public policy of this state;

d. The foreign judgment conflicts with a previous, final, and conclusive foreign judgment or other judgment;

e. The proceeding in the foreign court was contrary to a settlement agreement entered into between the parties prior to the foreign judgment’s being rendered by the court in the foreign state; or

f. The court where the plaintiff is seeking to enforce the foreign judgment determines that jurisdiction in the court of the foreign state was based upon personal service only, and the doctrine of forum non conveniens applies to the original action.

As the saying goes, forewarned is forearmed. Presuming your clients are located in a jurisdiction which has impartial tribunals and procedures compatible with the requirements of due process of law as interpreted by most common-law jurisdictions, we would suggest you advise your clients to add a forum selection clause to their contracts, by which the US-based business agrees to submit to the jurisdiction of the local, non-US court in the action concerning the subject matter involved. Such a clause, when coupled with proper service of process in sufficient time to enable the US-based company to defend against the action, will substantially increase the likelihood of the enforcement of any non-US based court judgment within the United States.