When French companies do business with entities from other European Union countries, they have a general assurance that any money judgment that the parties obtain in one country will be enforced in the courts of the other. This comfort exists as a result of the Brussels and Lugano Conventions, which extend across the European Community and thus provide (with the exception of limited instances) that a judgment rendered in France will be enforced in Italy, for example, and vice versa.

When that same French company does business with a United States entity, however, there are no such assurances. There is no civil court judgment enforcement treaty between the United States and France or, for that matter, between the United States and any other country. The standard explanation for this discrepancy is that other governments are hesitant to subject their citizens, even in cases in which there may be a clear choice of court provisions in business agreements, to the U.S. court system and, in particular, to paying U.S. jury awards.

It is not that enforcement of civil monetary judgments never happens across borders. Such enforcement, however, occurs almost entirely on an ad hoc rather than a formulaic or rules-based basis. It is, to be blunt, a matter almost entirely within the discretion of the enforcing court, which can proceed largely unchecked and unguided by any recognized principles or restrictions, either from a treaty or other source.

U.S. courts have been instructed since the U.S. Supreme Court’s late 19th century decision in Hilton v. Guyot, 159 U.S. 13 (1895) (itself a case involving U.S. and French nationals) to enforce judgments rendered abroad. The Hilton v. Guyot court was explicit that this instruction is not dependent upon reciprocity and is, simply, what the Court called a matter of international "comity."

Historically, French courts have been less willing than their American counterparts to adopt this principle of international comity, particularly with regard to enforcing awards of punitive damages. The frequent approach of French courts to U.S. punitive damages awards has been to, at the most, enforce the underlying awards (the "direct damages") but not to enforce the punitive elements, which have often been viewed as disproportionate or even against public policy.

The consequence of this infrastructure (or, more precisely, the lack thereof) is that sophisticated parties negotiating cross-border deals more often than not include arbitration clauses in their agreements. These provide that any dispute shall be decided not by a French or American court but by an arbitration tribunal. Arbitration awards, in sharp contrast to court judgments, are the subject of a treaty between the United States and other countries. The 150-plus countries party to the New York Convention of 1958 (officially titled the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards) agree that, with limited exceptions, arbitration awards rendered in the cases of nationals whose countries are signatories to the Convention will be enforced. The enforcing court has very little power to review the underlying arbitration award and is expressly barred from re-examining the merits thereof.

While there is more certainty in arbitration enforcement than in litigation enforcement, a recent decision of the French Cour de Cassation may be an indication that the two systems are becoming increasingly harmonized. In the case of X. v. Fountaine Pajot, the Cour de Cassation was not only receptive to enforcing a large U.S. judgment, but was also specifically receptive to enforcing a component of that judgment in an area that has traditionally brought the most antipathy in foreign courts: punitive damages.

Before any further discussion of Fountaine Pajot or its background, it is important to note that Americans should not break out the champagne just yet in recognition of a new era in Franco-American judgment enforcement (nor should French businesses with clients or activities in the United States pack their bags and leave the country). Despite its indication that it would be receptive to enforcing an award of punitive damages, the Cour de Cassation actually refused to enforce such award in Fountaine Pajot. Like numerous courts before it, the Cour de Cassation held that the punitive damages awarded by the U.S. court were disproportionate to the underlying court judgment, and therefore refused to enforce them.

What, then, makes this judgment different and worthy of note? Fountaine Pajot involved the type of commercial dispute with which many readers of this article will be familiar: a contract case in which the plaintiffs added a tort claim to increase its damages. The Fountaine Pajot plaintiffs bought an expensive catamaran from a French manufacturer. The plaintiffs alleged that the ship was defective and sued for breach of warranty, as well as for fraud. The U.S. court awarded the plaintiffs $1,393,650.12 in direct damages (for repairs to the boat) and an even larger amount ($1,460,000) in punitive damages.

In its holding in the Fountaine Pajot case, the Cour de Cassation stated that "an award of punitive damages is not, per se, contrary to [French] public policy." While the Cour de Cassation justified its refusal to enforce the punitive damages in Fountaine Pajot on the disproportionate amount of such award relative to the direct damages, it noted that it would have been open to enforcing a more reasonable punitive award that was closer to the amount of actual damages. Such wording leaves open the door a crack to future enforcement, and invites further development without being subject to the absolutes of a preordained "yes" or "no" answer. Another equally valid way of viewing the award is that French businesses can no longer rest completely assured that they are immune from punitive damages awards outside of arbitration.

The Fountaine Pajot holding is consistent with the slow, incremental and, one must now say, steady acceptance of French courts regarding enforcement of foreign monetary judgments. French courts traditionally had employed a five-part test in which the plaintiff had to satisfy, inter alia, that the case was not subject instead to French jurisdiction and that the judgment was neither procedurally invalid nor contrary to French public policy. The traditional five-part test required that: (1) the foreign court must have properly had jurisdiction under French law; (2) the foreign court must have complied with its own procedural rules; (3) the foreign court must have applied the appropriate law under French conflict-of-law principles; (4) the decision must not have contravened French concepts of international public policy; and (5) the decision must not have been a result of fraude à la loi (evasion of the law) or fraudulent forum shopping. Munzer v. Munzer [1964] Rev Crit DIP 344; [1964] Clunet / J Dr Int 302 (Civ lere).

In Bachir v. Bachir, [1968] Rev Crit DIP 98; Clunet 102 (Civ lere), the Cour de Cassation dropped the second condition (that the foreign court must have complied with its own procedural rules). Enforcement of foreign judgments in France continued to be hampered, however, by the French courts’ interpretation of Article 15 of the French Civil Code. In a one-two-punch approach, the courts held that (1) a foreign judgment could not be enforced in cases in which a French court had jurisdiction over the French defendant and (2) "French courts had exclusive jurisdiction over French citizens." Cuniberti, "The Liberalization of the French Law of Foreign Judgments," 56 Int’l and Comp. L. Q., 931 (2007).

This changed with the seminal decision in Prieur dv. de Montenach, [2006] Rev Crit DIP 871; [2006] Clunet 1365 (Civ lere). In Prieur, the Cour de Cassation held that Article 15 could no longer be interpreted to confer exclusive jurisdiction of an enforcement-blocking nature. As a result, wrote one commentator, "French defendants will now have to win abroad, and thus to play by (all) the local rules." Cuniberti, supra, at 936.

Fountaine Pajot

 is the next step in this development. While the holding in Prieur meant that a French citizen must defend a judgment abroad rather than simply rely on the French courts to refuse to enforce it, the ruling in Fountaine Pajot means that a French court is more likely than ever to enforce such a judgment.

This is not to say that U.S. judgments, or any other foreign judgments, will have a substantially easier time of it in France. As noted above, the Cour de Cassation did not, ultimately, uphold the punitive damages award in Fountaine Pajot. For that reason, international arbitration remains the best and safest enforcement choice. But not all parties have the foresight or (perhaps) inclination to include an arbitration clause in their commercial contracts, and thus there will continue to be contracts that provide instead for litigation and not arbitration (or are silent altogether on the matter). For those parties, plaintiffs should take care to craft more reasonable punitive damages remedies, bolstered by the knowledge that they are no longer engaged in a futile exercise, and defendants should realize that punitive damage awards may one day be quite punitive indeed as the law develops further.