In most civil law systems, there is a general rule that foreign judgments will neither be recognized nor enforced, if they have been obtained by fraud or if their recognition or enforcement would be contrary to »public policy«. In English case law and in the United States, constellations of »fraud« are understood to be separate from the category of »public policy«.
Some countries – such as France and Germany – use the term »ordre public«, which is meant to be all-embracing, i.e. it covers the constellation that a foreign judgment has been obtained fraudulently as well as other offences against »public policy«.
While these basic questions of terminology are beyond controversy – and of no practical consequences –, the exact scope of the defence of fraud (respectively ordre public) is in dispute:
Both approaches are understandable. Is one of them objectively »preferable«, or is it merely a question of taste, how much legal protection is offered to a party who claims to have been the victim of fraud in a foreign trial?
This is the topic of the thesis »Prozeßbetrug als Anerkennungshindernis. Ein Beitrag zur Konkretisierung des ordre public-Vorbehaltes« (Fraud as a defence to the recognition of foreign judgments. Putting the ordre public-clause in more concrete terms).
The aim of the investigation is to find compelling arguments where – so far – »sentiments« have seemed to prevail.
Even though the thesis refers to recognition and enforcement of foreign judgments according to German respectively European law, its reach is not restricted to these systems of law.
On the one hand, the recognition and enforcement of foreign judgments is of worldwide interest. Solutions, statements and arguments can be found in many jurisdictions. Therefore, the investigation does not only consider judicial decisions and legal literature from Germany, Austria, Switzerland, France and Britain, but also from the USA, Canada and Australia.
On the other hand, some of the results found with regard to the German and European system of recognition and enforcement will be transferable to many other legal systems, as they are deduced from widely accepted principles such as the prohibition of »révision au fond« (this principle is known in Britain and the USA as the »conclusiveness of foreign judgments«, see below).
If, for example, a French court has made a judgment, and an English court has to decide whether this judgment will be recognized and enforced in England, the French court is the »first court«, and the English court is the »second court«.
There is a consensus that the recognition of a foreign judgment may be denied, if the foreign judgment was obtained by fraud. On the other hand, there is an astonishing variety of opinions on the question under what circumstances the defence of fraud is relevant.
Many authors suggest that there may be constellations where a fraud has happened in the state of rendition, but nevertheless the defence of fraud is not allowed in the state of recognition. If the defence of fraud is restricted in such a way, this can be described by the term »preclusion«.
In judicial decisions and the legal literature, there are various statements regarding the matter of preclusion. These statements can be classified in the following way:
According to the »type 1«-models of preclusion, the second court is bound by all findings of fact contained in the foreign judgment. Hence, precluded is any submission contrary to the findings of fact in the foreign judgment.
Models of type 1 make it practically impossible to make use of the defence of fraud, because the necessary submission is forbidden.
According to the »type 2«-models of preclusion, the second court allows for submission only in so far as the facts have already been presented to the first court. In other words, precluded is the submission of any facts which were not before the first court (regardless whether the party concerned could have presented these facts in the first trial).
Hence, there is no preclusion of facts that were not before the first court, but were unknown to the party at the time of the first trial.
Besides, there is no preclusion of facts that have been presented to the first court »without success«. If a party has tried to convince the first court of certain facts, but unsuccessfully (i. e. the first court was not convinced), the party is still allowed to submit these facts in the second trial in order to prove that the foreign judgment was obtained by fraud.
The »type 4«-models of preclusion are equal to the models of type 3 in so far as they, too, preclude the submission of any facts which were not before the first court, although they could have been presented in that trial.
In addition – and in contrast to the models of type 3 – the models of type 4 forbid the submission of any facts which have already been presented (unsuccessfully) to the first court.
Accordingly, the second court allows a party any submission necessary to prove that the foreign judgment was obtained fraudulently, irrespective of the opportunities of defence before the first court and regardless whether the party has made use of these opportunities or not.
In many cases, this test is similar to the type 4-models of preclusion. A difference occurs, however, if the first court offers »sufficient« remedies, but the party who has allegedly become victim of fraud could not make use of these remedies (e.g. if the fraud was discovered too late).
Looking at this remarkable variety of views, the question is inevitable: Why are there so many different opinions? And: Is it possible to say that some models are better than others, from an objective point of view?
The variety of views can probably be explained by the fact that the recognition of foreign judgments concerns many aspects and that the different participants of the discussion attach different degrees of importance to these aspects.
The »opponents of preclusion« offer a maximum of legal protection to a party who has become the victim of fraud in a foreign country.
By way of contrast, stricter models of preclusion – e.g. of type 4 or type 6 – have the unfavourable effect that in some constellations a party may have no chance to prove that the foreign judgment was obtained by fraud, neither before the first nor before the second court.
Besides, it is possible that the law system of the first court is »inferior« to the law system of the second court – and with regard to that idea it might be argued that the second court should generally offer legal protection itself instead of referring the parties to the first court.
With regard to legal protection, the stricter models of preclusion may lead to disadvantages, while the »opponents of preclusion« seem to stand for the best solution.
However, it is important to realize that the allegation of fraud is not equivalent to the proof of fraud. If any allegation of fraud led to »relitigation«, courts and parties would suffer from overwork, and there would be no finality of judgments. Therefore, in the national context, there seems to be world-wide consent that attacks on judgments on account of alleged fraud must be heavily restricted.
With regard to the law of the United States of America, the Restatement of Judgments 2d states that
Similarly to the principle of »finality of judgments« within the national context, in the international context most law systems know a rule called »conclusiveness of foreign judgments«. According to Cheshire and North, for example,
The principle of »conclusiveness of foreign judgments« guarantees certainty of law (instead of never-ending litigation), it protects courts and parties from overwork, and it prevents the unfavourable constellation that courts in different countries decide differently on one and the same matter (which might lead to »claw backs« and might even have adverse influence on the political climate between the countries involved).
Obviously, the »conclusiveness« of foreign judgments is preserved the better the stricter the models of preclusion are.
Another important aspect is the necessity of litigating abroad: If the second court follows a »strict« model of preclusion, a party who has become victim of fraud in a foreign country may have to go back to the foreign court in order to seek remedy; by contrast, a »lenient« model of preclusion would allow that party to stay at home and to seek remedy before a court which is nearer, which uses a language that the party can understand more easily and which follows a system of law that is known to the party. A German party, for example, who has lost a trial in the USA against an American party, will appreciate it highly if the question of (alleged) fraud can be dealt with before a German court who decides on the recognition of the US-American judgment.
On the other hand, any advantage granted to a party who has allegedly become victim of fraud is, at the same time, a potential disadvantage to the opposing party who has allegedly committed fraud. In the constellation just mentioned, it is convenient for the German party if the second trial takes place »at home« – and it is correspondingly inconvenient for the US-American party that, from their perspective, the second trial takes place abroad.
Obviously it is a challenge to find a solution which takes these aspects (and some more which are not part of this summary) into consideration and attaches the appropriate importance to each of them.
The approach followed in the thesis is to weigh up the arguments in two steps.
In the first step we assume that the courts of the first state work exactly in the same way as the courts of the second state.
On the basis of this – very theoretical – assumption, it shows that the weighing up of interests leads to a simple result: The best solution is to let only the courts in the first state decide on the question whether there was fraud or not. The recognition and enforcement of judgments should therefore not depend on a »defence of fraud«.
In this first step of the investigation, it becomes apparent that there are many similarities between the concept of »finality of judgments« in the national context and the concept of »conclusiveness of foreign judgments« in the international context. The interests speaking for »conclusiveness of foreign judgments« are even stronger than the corresponding interests speaking for »finality of judgments«.
In the second step, we take into consideration that obviously courts in different countries do not work exactly in the same way. In the first and the second state there may be different systems of law, different ways of procedure, different education and qualification of the judges etc.
But to what extent can such differences justify that courts of the second state check whether judgments of the first state were obtained by fraud or not?
In order to answer this crucial question, we have to look more closely at the reasons why courts of the first and the second state do possibly not work in exactly the same way:
On the one hand there are reasons which are not specifically related to the question of legal protection against fraud. For example, it might be that the law of evidence in the first state differs from the law of evidence in the second state. Let us assume that the courts of the first state do generally not allow evidence by way of testimony, but that they only consider documentary evidence; furthermore we assume that a party has become victim of fraud, and there are reliable witnesses to prove this fraud, but no documentary evidence is available. In this constellation, the different law of evidence may have the effect that the party concerned cannot prove the fraud before the first court, although the fraud could be proven before any court of the second state.
Nevertheless, it would lead to severe contradictions if this different law of evidence determined the courts of the second state to allow a defence of fraud — while they, according to the principle of »conclusiveness of foreign judgments«, generally recognize foreign judgments regardless of the law of evidence in the first state. In other words: Why should a different law of evidence in the first state be generally acceptable (whatever the object of a trial may have been), but only inacceptable with regard to alleged fraud?
General concerns about the jurisdiction of the first state have to be dealt with generally. If the first state's law of evidence is insufficient, this may either give rise to a general defence, or it may be regarded as generally insignificant. However, it would be inconsistent to assess such a concern as generally insignificant (with regard to the »conclusiveness of foreign judgments«) and nevertheless to use it in order to justify a »defence of fraud« in the second state.
Now, what about differences of law or jurisdiction which are specifically related to the question of legal protection against fraud? Let's say, for example, that the first state permits relitigation on account of fraud only within two weeks after the judgment, while the second state permits such relitigation within a period of five years (the latter is the case in Germany, according to § 586 of the code of civil procedure).
Such differences can justify an additional control with regard to fraud in the second state. However, the control in the second state must keep within narrow bounds in order to avoid further inconsistencies: In the second state, the defence of fraud will only be available under the condition that the remedies against fraud in the first state are more restricted than the corresponding remedies in the second state and that the judgment in question could have been attacked in the first state, if the first state had provided for the same set of instruments that are available in the second state.
Against the recognition or enforcement of foreign judgments, the defence of fraud should only be available within very narrow bounds.
It is necessary to give up the one-sided approach of offering »maximum legal protection« to a party who has allegedly become victim of fraud in a foreign state. Instead, it must be realized that there are many similarities between the concept of »finality of judgments« in the national context and the concept of »conclusiveness of foreign judgments« in the international context. In both cases it is advisable to allow exceptions only where necessary.