GOVERNMENT RESPONSES TO GLOBAL FORUM SHOPPING

 

Jeffrey D. Kovar

Assistant Legal Adviser

U.S. Department of State

 

U.S. Chamber of Commerce, Institute of Judicial Reform

Washington DC

March 25, 2004

 

 

·           Thank you, Tom, for inviting me to speak to this important audience, and to share the podium with such a distinguished panel. 

 

·           Forum shopping is a difficult and controversial topic even when it is confined to the domestic context.  It becomes almost unmanageably complex when elevated to the global level.

 

--          Yet, as we have heard today, it is a profoundly real problem, one that inhibits investment and trade, and creates international political and economic tensions. 

 

·           What is the U.S. Government doing about the problem?  What can you do to help? 

 

--          I would like this morning to frame the policy and practice problems for you briefly from the State Department's perspective,  bring you up to date on areas in which we are -- or have been -- taking initiatives, and suggest areas in which more attention needs to be focused. 

 

* * * *

 

WHAT IS THE PROBLEM?

 

·           The urge to go Global Forum Shopping exists because litigants have good reason to believe they can gain an advantage by suing in one country rather than another. 

 

·           They do this for any number of reasons:

 

--          They may prefer one court over another because they perceive that the law is on their side or that the court will be more likely to side with their position.

 

--          It may be that they relish - or fear - certain types of legal institutions:  juries, class actions, loser pays attorney fees statutes, broad rules on discovery of evidence, punitive or treble damages, and so on. 

 

--          They may anticipate - or fear - corruption and unfair procedures; or simply procedures that are so slow that they will result in no justice.

 

 ·          Depending on your point of view in any specific case, forum-shopping may seem to be inimical to well-ordered justice, or it may seem to the only way to see justice done.

 

[-          In Europe, as I understand it, it is known as launching the "Italian Torpedo" to rush into Italian court and file a declaratory judgment action of no liability when you fear you are about to be subject to suit.  Because Europe has a strict first-in-time lis pendens rule for dealing with parallel lawsuits, the action will not be permitted to go forward elsewhere.  The company that fires the "torpedo" can then expect that the case will be tied up so long in the Italian courts that it is effectively shielded indefinitely from liability.]

 

·           Forum shopping is a problem to some extent even in domestic legal systems like the American system -- Alabama and D.C. juries are well known in some quarters for the generosity of their money judgments.

 

--          And we have heard how the EC is making every effort as part of their economic and political integration to unify their regional legal system and reduce forum shopping.

 

·           Conflicts over international forum shopping disputes are arising with greater and greater frequency.

 

--          The Supreme Court is hearing three petitions this term related to forum shopping:

 

-           one involving access to U.S. courts to sue over antitrust activities occurring abroad;

 

-           one involving taking of evidence by U.S. courts in support of a party to an administrative antitrust claim before the European Commission where the Commission itself says it does not want the evidence; and

 

-           one involving alleged violations of international human rights law under the Alien Tort Statute brought by a foreign plaintiff. 

 

--          Only narrowly missing the Court, however, were other cases, including:

 

-           efforts by Canada and the European Commission and member states, to sue for treble damages under the Racketeering laws (RICO) to collect lost tax revenue arising from an alleged tobacco smuggling ring;

 

-           a case arguing that the UN Sales Convention requires the prevailing plaintiff to be awarded its attorneys fees;

 

-           and a difficult child abduction case under the Hague Abduction Convention involving custody jurisdiction between Maryland and Scotland.

 

·           In addition, the use by courts of anti-suit injunctions to enjoin parties from bringing suit in foreign courts is on the rise, notably where one of the parties is seeking to enforce an arbitration agreement or collect on an arbitral award. 

 

--          Recent litigation involving state-owned companies from Indonesia and Ukraine comes to mind.

 

·           Finally, a week doesn't go by that U.S. officials are not contacted by attorneys and businessmen who are either contemplating filing a claim against a foreign company or are seeking to collect on a valid judgment against a foreign company.  In some cases, the defendants are state-owned companies or are headed by members of royal families.

 

--          These, too, are frustrated would-be forum shoppers.

 

·           All these cases make for very difficult political relationships.

 

--          How can governments intervene to set things right when we are promoting the independence of courts and the rule of law everywhere? 

 

--          In some cases where there are treaties involved - such as under Bilateral Investment Treaties (BITs) or NAFTA - remedies may exist through arbitration. 

 

--          In many cases, however, there may be no treaty rights involved, and it is hard to bring customary international law to bear.

 

--          But even where there is a treaty, however, what if the decision of the tribunal or court is clearly wrong, or at least arguably so, or what if a party was unfairly treated?

 

--          How does the State Department prevail on a foreign court to change its decision?

 

--          Indeed, from a practical standpoint, even if the State Department were willing and able in a specific case to intervene, how can governments be sure that they understand fully both sides' positions in the dispute? 

 

-           Must governments always back their citizens? 

 

-           Or must they hold quasi-judicial hearings to decide the merits?

 

-           How can the Department weigh the importance of the dispute against a list of other pressing bilateral concerns, from terrorism to trade?

 

--          It was the failure of just such procedures to determine in a prompt, efficient, and effective way whether or not a party to a lawsuit was protected by immunity, that led to the enactment of the Foreign Sovereign Immunities Act in the late 1970s.

 

-           The FSIA leaves all immunity decisions to the courts, whatever the political tensions those decisions might evoke.

 

-           This approach has generally worked very well for immunity questions.

 

 

* * * *

 

WHAT CAN WE DO?

 

·           First, we need gradually to reach a point where parties perceive there is less and less of a reason to forum shop.

 

--          This requires a greater convergence or harmonization of our civil law systems and greater judicial cooperation, particularly among courts of the major democracies and global economies. 

 

--          Convergence is necessary for everything from service of process to the taking of evidence, to speed, availability of counsel, jurisdiction, choice of law, harmonization of substantive law, dealing with parallel litigation, and greater consistency in the awarding of damages. 

 

--          In the great tradition of the common law, it requires something we call "comity."

 

-           In other traditions this situation seems to cry out for more uniform rules - much as the EU is doing at the regional level.

 

·           In fact, the United States has been working with other governments on these issues in at least four institutions for many years:  the Hague Conference on Private International Law, the International Institute for Unification of Private Law (UNIDROIT), the UN Commission on International Trade Law, and the periodic conference on private international law of the Organization of American States (CIDIP).

 

·           Probably the most important steps toward this greater convergence have already been taken in the Hague Service and Evidence Conventions, by the New York Convention on the Enforcement of Foreign Arbitral Awards, and by the UN Sales Convention. 

 

--          Service and Evidence establish common procedures for these most basic steps in the litigation process.

 

--          The New York Convention sets up a system of private justice to resolve international business disputes, with an enforcement network of over 130 countries.

 

--          The Vienna Convention on the Law of Sales creates a uniform default set of rules on basic contract law for international transactions, and is now in force for over 60 countries, including the U.S.

 

·           Ongoing projects include enforcement of judgments in B-B contracts containing choice of court clauses, better implementation of the Service and Evidence conventions, improving the international system of arbitration and mediation, and addressing substantive law harmonization in electronic commerce, maritime transport, insolvency, secured finance, and commercial fraud.  

 

--          The Office of the Legal Adviser is leading these negotiations on behalf of the U.S. Government hand-in-hand with the private stakeholders in the U.S.

 

·           To address forum shopping in an effective way faces severe comparative law challenges.

 

--          I am convinced our brains are wired differently from birth and that civil law and common law citizens simply think differently about the law.

 

--          We spent a decade negotiating at the Hague Conference a comprehensive jurisdiction and enforcement of judgments convention. 

 

--          We had constant clashes with our European friends in those negotiations. 

 

-           They saw the goal to be to force the U.S. to knuckle under -- to alter significantly its traditional approaches to jurisdiction and damages.

 

-           The U.S. side saw an opportunity for the rest of the world to follow the lead of U.S. courts and open up their courts to the liberal enforcement of foreign judgments. 

 

--          We could not find a way to meet halfway, particularly where questions about jurisdiction in Internet cases could not be fully resolved even in domestic courts.

 

--          And we knew the treaty would not get off the ground when the major copyright industries in the U.S. could not resolve fundamental disagreements with the Internet Service Provider industries.  

 

·           The way we found to continue to move forward was to defer the dream of a comprehensive treaty for now and to focus on what should be a firm foundation for agreement -- exclusive choice of court agreements in commercial contracts, including the enforcement of the agreement to go to a specific court, and enforcement of the resulting judgment.

 

--          This last project is now fully underway, with some hope of completion by early 2005.

 

* * * *

 

CONCLUSIONS

 

·           So what can be our conclusion?

 

--          It is to take one step at a time toward convergence, harmonization, and development of common procedures and rules. 

 

--          We are doing this with narrow, targeted conventions that are business or transaction-focused, and with projects that focus on improving the implementation of existing judicial assistance conventions.

 

·           There are no magic bullets, and success will take patience and perseverance in the domestic and international arena.

 

--          Key to any success will be the attitude and willingness of business and legal communities to support these efforts.

 

-           If the Department of State, Justice, and other relevant agencies do not have your support and full participation and contributions, we will not be able to reach our goals.

 

-           To work, new rules must reflect best commercial and legal practice.

 

--          You need to get involved in our work and help us to develop and sell the rules that will work internationally.

 

·           Thank you very much.

 

 

 

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