ENFORCEMENT OF JUDGMENTS ACROSS THE BORDER WITH MEXICO

David W. Kash, Esq.

© 1995 David W. Kash

Jennings, Strouss & Salmon, P.L.C.

Two North Central Avenue, Suite 1600

Phoenix, Arizona 85004

(602) 262-5919

So you have now ventured on the coattails of the North American Free Trade Agreement (the NAFTA) and are doing cross-border trade in materials or equipment or perhaps you are joint venturing a construction project with a Mexican company. Your customers and suppliers meet here as well as in Mexico in order to enter into agreements for business. There is a falling out and you bring suit against a Mexican company here in the States. A U.S. court enters a judgment against the Mexican company and it is determined that the Mexican company has moved its bank accounts and other assets to Mexico, or you find it never had assets in the U.S. Alternatively, you are involved in a dispute in Mexico and are sued there for non-payment or breach of contract. Rather than hiring a Mexican attorney for your defense, you allow a default judgment to be entered in Mexico. Under either scenario, you now wonder whether the judgments are enforceable and what to do about them. Good questions.

You first research the NAFTA, but it is inapplicable to the settlement of private disputes and is silent on the issue of the enforcement of judgments based on cross-border trade between the U.S. and Mexico. You must look elsewhere.

You look to your state's laws. Many states in the United States, such as Arizona, have adopted the "Uniform Enforcement of Foreign Money Judgments Act." This Act provides a simple procedure to register a judgment by filing in state court, but it applies only to interstate judgments. Here we are faced with a judgment from a foreign country - an international judgment. Many states, including New Mexico and Texas, have adopted the "Uniform Enforcement of Foreign Money-Judgments Recognition Act." This Act sets forth criteria for a U.S. state court to recognize a money judgment from a foreign country. Once recognition is given, the judgment is conclusive as that of a sister state judgment. The Act does not allow for recognition of non-money judgments. Arizona, however, has not adopted this Act. Your research shows that there is no formal agreement between Arizona and its cross-border neighbor, Sonora, Mexico, setting forth a procedure to recognize each others' judgments. Furthermore, there is no treaty between the United States and Mexico providing for a simple mechanism to register a cross-border judgment.

The conclusion you will draw from your research is that the judgment debtor, on either side of the border, will likely never have to pay the judgment unless the judgment creditor is willing to spend a large amount of money and endure lengthy battles in court. The effect is that it is economically worthwhile to pursue only very large judgments across the border. It is very difficult, if not impossible, to enforce non-money judgments in Mexico, such as writs of replevin, judgments dealing with real estate or judgments which provide for some type of injunctive relief. Consequently, enforcement opportunities will arise from either breach of contract situations or failure to pay promissory note obligations.

A U.S. company that has secured a judgment in the United States against a Mexican company will be required to satisfy a multi-step procedure in the hopes of enforcing the judgment in Mexico. The process in Sonora requires that the U.S. judgment be transformed into a valid and enforceable document under Mexican law.

ENFORCEMENT IN MEXICO

The first step to enforce an Arizona judgment in Mexico is to obtain a conformed, certified copy of the judgment, and the documents establishing proper service of process on the Mexican defendant, and have them translated into Spanish. The judgment must be a final judgment, in that the time for any appeal of the judgment must have run. The judgment should on its face, recite the circumstances which establish the court's jurisdiction to enter the judgment, the facts establishing the entitlement to the judgment, and state that appropriate service of process had been made on the defendant. The factual circumstances that gave rise to the dispute which resulted in the judgment must not be such that if the action had been brought in Mexico, it would have been deemed to be unenforceable as against the public policy of Mexico. These documents should then be presented to the Mexican Consulate in Arizona, and you should request from the Mexican Consulate a notarized statement that, based on their review, the documents are valid, legal, and properly issued by an Arizona court. This certification from the Mexican Consulate should be in Spanish. Another method is to route the documents to the U.S. State Department Counsel General's Office for certification, which will then process the documents to the Mexican Foreign Ministry for validation and certification. The judgment creditor must then make a request to a court of competent jurisdiction in Mexico to enforce the judgment. The request should be prepared in Spanish. This document is called an exequatur.

The exequatur must set out all of the foregoing circumstances, and also include the name and address of both the party seeking to enforce the judgment and the party against which the judgment is to be enforced.

The exequatur and all of the supporting documents, which include the certified original English version of the judgment and supporting documents, a Spanish translation of the judgment and supporting documents, and the verification from the Mexican Consulate must then be filed in a Mexican court which has jurisdiction over the defendant. All of those documents must be served on the defendant in Mexico. If the defendant objects in a timely fashion, a hearing will be conducted and the court could potentially address all of the following issues: (1) whether the Arizona court had appropriate jurisdiction; (2) whether service of process was properly made on the defendant; (3) whether the defendant is liable and the judgment should be entered against him; (4) whether the judgment has arisen under circumstances which would violate Mexican public policy; and (5) whether the translation from English into Spanish is accurate.

All of this can be time consuming and expensive for both parties. If the court rules in favor of the plaintiff, a Mexican judgment allowing the enforcement of the Arizona judgment will be issued. If not, you cannot enforce the Arizona judgment. A ruling by the Mexican court is subject to an appellate process, much like the appellate process in Arizona. If the defendant, after service of the papers in Mexico, does not appear and timely object, then the Mexican court will, on its own, and if appropriate, issue a judgment sentencia allowing for the enforcement of the Arizona judgment in Mexico. This sentencia is then enforceable in Mexico as a Mexican judgment, and if the defendant has any locatable property or money, you might collect something.

As you can see, this multi-step process is not only complicated but, the need for translation involves costly experts. Experience with experts in litigation reveals that no two "opinions" are exactly the same and thus battle lines can be created resulting in protracted hearings.

ENFORCEMENT IN ARIZONA

The following are basic steps for a Sonoran judgment to be enforced in the Superior Court of the State of Arizona. First, the Sonoran sentencia should be authenticated or certified by evidence sufficient to support a finding that the matter in question or the judgment is what it in fact purports to be. In general, this suggests that a Sonoran official authorized in Mexico must certify the genuineness of the sentencia and execute or at least verify a copy of the judgment. It must then be presented to a diplomatic official of the U.S. to authenticate the certification by the Mexican official. Next, the judgment must be translated to English. Translation creates an opportunity for dispute over the correctness of the translation. The judgment creditor must then offer proof that the Sonoran court had jurisdiction over the judgment debtor and the subject matter of the claim. Although there are no specific rules on this point, it is highly likely that the Mexican creditor would have to show that enforcement of the Mexican judgment in the United States would not be violative of the public policy or state law of Arizona and that substantive law as well as the remedy set forth in the judgment are similar to judgments originating from Arizona law.

An enforcement proceeding could be administered in state court as a motion for summary judgment. The court could decide all matters by affidavits. But affidavits are easy to challenge. An evidentiary hearing with witnesses and translators will be required by the court if affidavits are contested or if the judgment is not allowed by motion. A lengthy evidentiary hearing and possibly a trial may be necessary, further escalating the costs. These issues have not been ignored.

In a recent interview, Arizona Superior Court Judge Armando de Leon advised that an Arizona/Sonora Judicial Cooperation project is in the process of studying and responding to a proposal to streamline the enforcement of foreign judgments offered by the Chief Justice of the Supreme Court of Vera Cruz, Mexico. Proposals are also being considered for the preparation of a practice manual for use in Arizona and Sonora dealing with civil procedure as guidance for judges. Perhaps we can look forward to uniform rules and standardized forms adopted by the respective governments in the near future to overcome existing problems.

The main problem with recognition of a Sonoran judgment in Arizona is that very few Arizona judges and lawyers are aware of the legal implications of a Mexican judgment or are knowledgeable in Mexican law. The legal systems are enormously different because they have evolved over centuries from different sources of law.

For example, there is no such thing as a jury trial in commercial cases under Mexican law and "trials" do not exist in Mexico as we know them in the U.S. If a civil commercial lawsuit is filed in Mexico and it contains quasi-criminal charges (e.g. fraud), a Mexican judge has the authority to enter a detention order which may result in incarceration of the defendant. It is best to check all files and records in Mexico before appearing and defending a lawsuit.

A neutral forum to resolve contractual disputes such as arbitration should be considered as an alternative to having a commercial dispute decided in a foreign court. However, arbitration has many of its own pitfalls. One relevant here is that arbitrators have no jurisdiction to authorize collection proceedings against the loosing party. Arbitration awards must be confirmed in a court of law. Only a court can enforce an award and order collection of the debt. On the other hand, confirmation of an arbitration award across the border may be easier than enforcing a foreign judgment.

CONCLUSION

A private judgment sought to be enforced internationally between Mexico and the United States may be worthless except in limited circumstances. A quick, easy and inexpensive process simply does not exist. Taking measures to avoid foreign courts such as arbitration agreements, should be thoroughly examined. Eliminating cross-border enforcement of judgments by requiring security bonds, letters of credit, reserve accounts, cash in escrow or other means to ensure collections should be researched and considered a material part of the business transaction process. Until cooperative changes between the legal systems on both sides of the border take place, enforcing foreign judgments will remain risky business.

This publication should not be construed as legal advice or a legal opinion on any specific fact or circumstance. The contents are intended for general information purposes only. The laws of Mexico change often; therefore you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have. For further information about these contents, contact the author, David W. Kash, at (602) 262-5919.

David W. Kash is an attorney with the Phoenix law firm of Jennings, Strouss & Salmon, P.L.C. The author wishes to thank Gerald "Buzz" Alston, also of Jennings, Strouss & Salmon and who officed in Mexico City with the affiliated law firm of Rubio Villegas y Asociados, S.C. during 1994-95, and Arizona Superior Court Judge, Honorable Armando de Leon, for their comments and assistance in preparation of this article.

Reprinted with permission from Arizona Attorney.

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