IN ANY CIVIL OR COMMERCIAL DISPUTE THAT IS RESOLVED BY LITIGATION, obtaining a court judgment in your favour is only part of the struggle. If the other side chooses not to comply with the judgment, it becomes necessary to undertake proceedings to enforce the judgment against the other side and, where necessary, against its assets. In some jurisdiction, it is very easy to enforce a court judgment. In other jurisdictions, it is very difficult.
The challenges are compounded when the dispute is cross-border in nature; in other words, the dispute involves parties or assets in two or more jurisdictions. Firstly, it may be difficult to predict whether a court in one jurisdiction will accept a case initiated by one of the parties, particularly if the parties have not agreed on which court should have jurisdiction to resolve a dispute. Secondly, even where the parties have agreed that the court in one jurisdiction should have jurisdiction to resolve a dispute, one of the parties may refuse to cooperate with the foreign court proceedings or may initiate parallel court proceedings in its own jurisdiction.
In theory, the above challenges should be easier to resolve where the parties have agreed that the courts in one jurisdiction will have exclusive jurisdiction to resolve a dispute. However, further challenges will arise if it becomes necessary for a foreign party to enforce a foreign judgment in the local courts that are located in the jurisdiction of the losing party. The local courts may refuse to recognise and enforce the foreign judgment. In some circumstances, they may not be able to do so if the local law provides no express basis for the courts to recognise and enforce foreign judgments.
For many years, parties to cross-border transactions have preferred arbitration over litigation. This is because many states around the world are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Under this convention, each member state agrees to recognise and enforce an arbitral award issued in another member state.
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A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia.