NEW YORK STATE UPDATES THE FOREIGN MONEY JUDGMENTS RECOGNITION ACT

George Benaur, Benaur Law LLC

New York has long served as a center for the enforcement of judgments rendered by foreign courts. As a major financial center, and a hub for global trade, New York courts have been flooded with international cases where creditors seek to enforce foreign judgments against debtors who are in the U.S., have assets here or are trying to shield their assets beyond the reach of creditors in the United States or elsewhere. A large amount of these cases were litigated under New York’s Foreign Money Judgments Recognitions Act, governed by Article 53 of the C.P.L.R., which is New York’s version of the Uniform Foreign Country Money Judgments Act.

A few days ago, New York State amended Article 53 of the New York Civil Practice Law and Rules (“CPLR”), amending the rules regarding the state’s recognition of foreign money judgments. The new law is intended to be consistent with the revised Uniform Foreign-Country Money Judgments Recognition Act (the “2005 Uniform Act”) already enacted in at least 26 states. The revised rules will be immediately effective and apply to all actions commenced on or after its effective date.

Notably, the new law excludes “a judgment for divorce, support or maintenance, or other judgment rendered in connection with domestic relations” from the definition of a Foreign Country Judgment, which is subject to Article 53 recognition proceedings. This change will make it much more difficult for a spouse to use CPLR 53 to enforce a foreign divorce judgment in New York courts. In connection with at least one major international judgment enforcement case involving Russian oligarchs, these revisions have already received some criticism, and arguments that the changes were politicized and the result of lobbying by lawyers for the oligarch. Still, the law passed.

The revised law also impacts how cases will be defended in New York, as it allows for additional arguments to be made to oppose recognition of foreign judgments. These new grounds include arguments that the foreign court lacked subject matter jurisdiction, as well as a catch-all, albeit discretionary ground for non-recognition where the foreign judgment “was rendered in circumstances that raise doubt about the integrity of the rendering courts with respect to the judgment.” Of course, if the foreign court lacked subject matter jurisdiction, it should be grounds for non-recognition. This has been the law so this change does not appear to be that particularly significant.

The new rule also clarifies that Article 53 applies only to money judgments issued by the courts of foreign countries and has no application to judgments entered in sister states, which are entitled to full faith and credit under the U.S. Constitution. This was already, or should have been apparent from the prior law.

It also specifies that the burdens of proof are that a party seeking recognition of a foreign judgment bears the burden to prove that the judgment is subject to Article 53, while a party seeking non-recognition bears the burden to prove a specific ground for non-recognition. The law also establishes that the statute of limitations on enforcement of a foreign-country judgment is the earlier of the limitations period for enforcement of the judgment in the country that entered it or New York’s current limitation period of twenty years from when the judgment became effective in the foreign country.  CPLR § 211 (b).

Being very fresh, it remains to be seen how the law will impact cases. But one does not need to be an oracle to predict that debtors seeking to avoid judgments against them will argue that foreign court that rendered the judgment was faced or operated in “circumstances that raise doubt about the integrity of the rendering courts with respect to the judgment.” This is a rather subjective standard and opens up opportunity for litigation, discovery about what the circumstances where, how the foreign case was conducted etc. However, New York already has a wealth of precedent articulating that the courts of particular foreign countries do comport with the standards of due process in the U.S., and thus, it will be difficult to just brush aside this precedent when attempting such an argument under the revised law.

The New York City Bar Association’s commentary and more detailed discussion of the changes is available here: https://www.nycbar.org/member-and-career-services/committees/reports-listing/reports/detail/uniform-foreign-country-money-judgments-recognition-act

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