Every attorney reading this article is familiar with the recent firestorm over defective products from China. These defects range from lead paint to exploding tires and in several cases resulted in significant personal injuries. The FDA is charged with inspecting foreign shipments of food, drugs, cosmetics, medical devices, animal drugs, and some electronic devices to ensure the safety of American consumers. From July 2006 to June 2007, FDA inspectors stopped 1,901 shipments from China. However, the FDA only inspects about one percent of the imports that fall under its jurisdiction. This means a significant amount of foreign merchandise goes unchecked, some of which will be tainted. The current problem is at least in part related to America’s increasing dependence on cheap imports. In 2001, the United States imported approximately $1.14 trillion in merchandise. This number jumped to $1.95 trillion in 2007. The increase in imports, and concurrent increase in defective foreign products, has exposed not only the potential physical dangers of international trade, but the legal dangers as well.
When a United States citizen is injured by a foreign product, the first question is from whom is that person entitled to recover. Often the foreign producer has operations and assets in the United States, making domestic litigation routine. However, there are an increasing number of incidents in which the foreign producer is entirely foreign, with no physical presence within the United States. This generally results in the injured party suing the importer or retailer in the United States. This leaves the importer or retailer with the unenviable position of filing an indemnity lawsuit against the foreign manufacturer or exporter. This is exactly what happened after the National Highway Traffic Safety Administration ordered the recall of several Chinese-made tires that had been imported to the United States. The importer, a small family-owned business known as Foreign Tire Sales, was sued in the United States after the defective tires caused several deaths. This, of course, was after Foreign Tire Sales spent approximately $90 million recalling the tires. Foreign Tire Sales then sued the Chinese manufacturer, Hangzhou Zhongce Rubber Co. (HZ), in the United States for indemnity. This raises some interesting questions for a party intending to sue a foreign corporation in the United States, especially regarding service and enforcement of a judgment abroad.
Service of process of a foreign corporation may require consideration of the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Convention). In California, Code of Civil Procedure Section 413.10(c) provides that service outside the United States is subject to the Hague Convention. According to the Supreme Court’s ruling in Volkswagen v. Shlunk, unless someone with authority to accept service on behalf of the foreign corporation is present in the forum state, the requirements of the Hague Convention must be met. Service suddenly becomes much more complicated than merely handing a document to the offending party. The Hague Convention requires compliance with a few procedural and technical steps before proper service of process abroad can be made, which can prove to be a time consuming and expensive process. Pursuant to Article 2 of the Hague Convention, each member state, of which there are currently 55, shall designate a Central Authority upon which all international judicial documents will be served. For example, in China, the Bureau of International Judicial Assistance has been designated as the responsible entity for completing service under the Hague Service Convention. Pursuant to Article 5, the Central Authority may require that all documents be translated into the language of that country. The Hague Service Convention does not place a time limit on service by the Central Authority. Instead, the duration is governed by the domestic law of the foreign country. In practical application, one should expect actual service to take anywhere from several weeks to several months.
Assuming proper service has been made, and the court has found sufficient contacts with the forum state, the next concern becomes what to do with a favorable judgment. There is currently no bilateral treaty or multilateral international convention in force between the United States and any other country on the enforcement of judgments. In Hilton v. Guyot (1965) 159 U.S. 113, the United States Supreme Court determined the recognition and enforcement of foreign judgments would be determined by local domestic law and the principle of comity, reciprocity, and res judicata. This determination is reflected in the domestic law of several foreign countries but is by no means universal. In China, for example, the Civil Procedure Law of the People’s Republic of China references reciprocity in the enforcement of foreign judgments:
“The People's Court shall, after examining the judgment of the foreign court in accordance with
the international treaties to which the People's Republic of China is a signatory or has acceded,
or by virtue of reciprocity, regarding it as not contravening the fundamental principles of the law of
the People's Republic of China or state sovereignty, security, and public policy, declare its
validity, and issue a decree of enforcement if necessary. No recognition and/or enforcement shall be
granted to those judgments that shall be deemed to contravene the fundamental principles of the
law of the People's Republic of China or state sovereignty, security, and/or public policy.”
Thus, it would seem possible at first glance to enforce a money judgment against a Chinese manufacturer such as HZ. However, as is the case with China, the statutory authority authorizing the enforcement of foreign judgments is often undefined and based upon principles such as “fundamental principles of law” or applied only in cases “compatible with the national law.” For example, Mexico’s Article 564 of the Federal Code provides:
“The jurisdiction assumed by the foreign court shall be recognized in Mexico as regards the enforcement
of a judgment, when said jurisdiction has been assumed for reasons compatible with the national law,
except in those cases which are of the exclusive jurisdiction of the Mexican courts.”
As suggested by these two statutory provisions, successfully enforcing a foreign judgment often necessitates understanding the internal law of the foreign nation and answering several initial questions. Is there a similar cause of action under the laws of the foreign country? Does the foreign country operate under a civil or common law system and how might this potentially affect my judgment? Are punitive damages tolerated? Does this country award attorney’s fees? Will the political climate ensure a fair and unbiased ruling? Even if the host country’s laws are understood, and the answers to the threshold questions seem favorable, there remains the possibility that the court will interpret your client’s issue to be incompatible with the internal law. This kind of arbitrary enforcement is a real danger in countries where a long track record of enforcing U.S. judgments is not available.
The bottom line is if you plan on expending the time and energy to obtain a judgment against a foreign corporation in the United States, it is imperative you study the foreign country’s law and track record to determine whether enforcement of your client’s judgment is a reality, a possibility, or a long shot. Depending on the likelihood of success, the time and expense of properly serving a foreign corporation and pursuing enforcement of a judgment to completion may not necessarily be in your client’s best interests.
