As international trade becomes more common, so do international legal disputes. Where proceedings are commenced against you or your company in a foreign court, but you do not have a physical presence in that country, an important question arises – can a decision of that court be enforced against you?

Generally speaking, whether an overseas decision can be enforced in Australia will depend on whether there exists a treaty between the countries for mutual recognition of judgments from their respective courts. There is also the Foreign Judgments Act 1991 (Cth), which sets out a process for the registration of foreign judgments in Australia and provides for the enforcement of those judgments by Australian courts.

The countries that the Foreign Judgments Act apply to are those which Australia has a relationship of reciprocity with. That is, where Australia and the other country mutually recognise each other’s judgments. Once notable exception is the USA, with which Australia has no relationship established for the recognition of court judgments.

The American problem

This leads to a question of when a judgment of a USA court can be enforced against an Australian person or company. Generally speaking, if the person is in the USA, or the company has a presence there, then the a decision may be enforced against the person or entity within the geographic area over which the relevant USA court’s authority extends. But if you have no presence in the USA, and for example, simply send goods to customers there, can a decision of a court in the USA be enforced against you?

The answer will depend on whether, at common law, the USA court can be described as having “jurisdiction in the international sense” over the Australian entity. This concept comes from the old case of Singh v Rajah of Faridkote [1894] AC 670, where the treasurer of a state in modern day India ignored court proceedings commenced against him in another state in modern India. The treasurer argued that he had no obligation to submit to the jurisdiction of the foreign court. The English Court of Appeal (the irony presumably being lost on them), in siding with the treasurer held that:

that plaintiff must sue in the Court to which the defendant is subject at the time of the suit…

A decree pronounced in absentum by a foreign court, to which the defendant has not in any way submitted himself, is by international law an absolute nullity. He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the Courts of every nation except in the country of the forum by which it was pronounced.

Therefore, unless you have submitted to the jurisdiction of an American court, a judgment cannot be enforced in Australia against you.

Submitting to the jurisdiction

The question therefore arises, in what circumstances will the law say that you have submitted to the jurisdiction of a foreign court?

There are essentially four ways recognised by the common law. They are:

  • presence of the defendant, that is the person is actually in the USA, or the company has office or has an agent with authority to bind it present in the USA;
  • nationality of the defendant (where the individual is actually a citizen of the USA);
  • submission by appearance, that is, the defendant has voluntarily entered an appearance at court in the proceedings; or
  • an agreement to submit to the jurisdiction (for example, through a term in a commercial contract).

Of the above, submission by appearance is often the only means by which an Australian company or person has any choice in the matter. It is effectively enlivened if you decide to try and defend the claim in the American court.

This is the legal equivalent of saying “you cannot have your cake and eat it too”. That is, you cannot try and defend the claim, and then if you lose, seek to hide behind the lack of jurisdiction of the Court. By defending the claim, you are implicitly acknowledging the jurisdiction of the court over you. Therefore, it is necessary for defendants in this situation to make a real choice between deciding to defend the claim or choosing to ignore it.

The law is not entirely obtuse as to reason by which a person may enter an appearance, and the Foreign Judgments Act provides exceptions where an appearance has been entered for the sole reason to protest the jurisdiction of the court, or seeking to protect property that may be seized during proceedings.

Implications

From the above we can see that the jurisdiction of courts in the USA over Australian companies and persons is limited. If you or your business has no actual presence in the USA, and does not agree to be bound by its courts, then you may well be able to effectively ignore proceedings due to want of jurisdiction.

Experience tells us that if you fail to enter in an appearance in court proceedings, it will likely be dealt with in your absence in a manner that is prejudicial to your interests. Therefore, it may well be a commercial or reputational decision to try and defend a claim brought against you. In considering whether to do so, it is important to keep in mind that such a decision will have legal consequences, in that you may well be agreeing to submit to a decision that would not otherwise apply to you. Therefore it is worth obtaining legal advice before you rush off to defend a claim brought against you in an overseas court.