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The Role of Comity in International Disputes

  • I. Introduction.

    • A. Hierarchy in single system of jurisprudence

      1. Within a single system of law or jurisprudence, there typically exists a hierarchy that gives finality to certain types of decisions, judgments, or rules.  In U.S. jurisdictions, for example, there are principles of finality, preclusion, and mutual recognition of judgments that guide and in some cases dictate a subsequent court in giving conclusive recognition to the final judgments of a court in a coordinate branch of government.  E.g., the Full Faith and Credit Clause of the U.S. Constitution.

    • B. Hierarchy between systems

      1. Between systems of law or jurisprudence, however, the rules of the game are typically quite different.  So, for example, the enforcement in the U.S. of a judgment rendered by a court outside the U.S. is not entitled to the protections of the Full Faith and Credit Clause. 

    • C. “Comity”

      1. Instead, another – and until quite recently powerful – tool used to give litigants the protections (and saddle them with the burdens) of final litigated results elsewhere is called “comity.” 
      2. The principle was adumbrated in an early decision by the U.S. Supreme Court, Hilton v. Guyot 159 U.S. 113 (1895).  As the Court stated there:

        “‘Comity,’ in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other.  But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.”  Hilton, 159 U.S. at 163-64.

      3. As the influential Second Circuit Court of Appeals articulated the principle more recently, international comity is “concerned with maintaining amicable working relationships between nations, a shorthand for good neighborliness, common courtesy and mutual respect between those who labor in adjoining judicial vineyards.”  JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418, 423 (2d Cir. 2005) (internal quotations omitted).

    • D. Is Comity A Limited Doctrine?

      1. There have been other articulations of the principle of comity – some much more narrow and limited than that quoted in Hilton above.  So for example, the Supreme Court in Hartford Fire Ins. Co. v. California, 509 U.S. 764, 798 (1993), ruled that comity comes into play when a litigant is subject to conflicting or inconsistent regulations – that is, when complying with the rules of one jurisdiction will lead to violating the rules of another.  As the Supreme Court said there:  “No conflict exists . . . ‘where a person subject to regulation by two states can comply with the laws of both.’” Hartford Fire Ins. Co., 509 U.S. at 799 (citing Restatement (Third) of Foreign Relations Law § 403 (1987)).

      2. This limited approach has been articulated by other courts as well.  So for example, the Second Circuit has said: “International comity comes into play only when there is a true conflict between American law and that of a foreign jurisdiction.”  In re Maxwell Commc’n Corp., 93 F.3d at 1049; In re Treco, 240 F.3d 148, 157-8 (2d Cir. 2001).

      3. At least one author has rejected modern international comity jurisprudence as an incoherent agglomeration of several disparate doctrines: “[T]here is no coherent generalized doctrine of ‘comity’ that informs how and when foreign acts are to be given effect in federal court.”  Michael D. Ramsey, Escaping “International Comity”, 83 Iowa L. Rev. 893, 895 (1998).

  • II. How Far Does Comity Extend?

    • A. Even further than domestic rules?

      1. It has been held:  “Even assuming that a contrary result would be forthcoming in a domestic context,” U.S. courts will accord comity to the judgments of non-U.S. tribunals in the interests of the international commercial system’s need for predictability.  Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 629 (1985).

      2. Because the extension or denial of comity is discretionary, decisions are reviewed for abuse of discretion.  See, e.g., Sarei v. Rio Tinto PLC, 487 F.3d 1193, 1211 (9th Cir. 2007); Jota v. Texaco, Inc., 157 F.3d 153, 160 (2d Cir. 1998); Remington Rand Corporation-Delaware v. Business Systems, Inc., 830 F.2d 1260, 1266 (3d Cir. 1987).

    • B. Applicability to non-final non-U.S. judgments?

      1. Just as it is just as typical to see one jurisdiction refusing to  recognize as binding even the final decisions, judgments, or rules of another jurisdiction, it is even more common to see one jurisdiction refusing to recognize as final the non-final judgments of another jurisdiction, even in cases where the jurisdiction in which the non-final judgment is entered would in fact recognize the judgment as final.

      2. See for example, Banco Nacional De México, S.A., Integrante Del Grupo Financiero Banamex v. Societe Generale, 820 N.Y. Supp.2d 588 (1st Dep’t 2006), which stated:   “In any event, even under the traditional comity analysis, there is no basis for the motion court to recognize the Mexican injunctions because they are non-final, ex parte orders of Mexican courts. CPLR 5302 permits recognition of foreign judgments under certain circumstances if they are final, conclusive and enforceable where rendered. This Court has consistently held that although the decision whether to extend comity is a matter of discretion, it is normally not extended by New York courts to non-final, non-merit orders. See In re Estate of Johnson, 142 Misc.2d 388, 391-392, 539 N.Y.S.2d 243, 246 (N.Y. County Sur. Ct., 1988), aff'd, 145 A.D.2d 388, 536 N.Y.S.2d 363 (1st Dept.1988); see also LBS Bank-New York v. Yutex, Inc., 283 A.D.2d 281, 724 N.Y.S.2d 313 (1st Dept.2001).”

  • III. What is the Source of Judicial Power to Accord a Non-U.S. Judgment “Comity”?

    • A. Hilton v. Guyot’s articulation:

      1. In the famous quote above from Hilton v. Guyot 159 U.S. 113 (1895), it seems clear that the Court believed it had inherent power to accord comity to a non-U.S. judgment.

      2. And, over the more than a century that the principle of comity has been practiced and extended by U.S. courts, courts have, on the whole, seen the question as one going to their jurisdiction to hear a case – not in the technical sense of lacking the power to hear a case but in the “prudential” sense of not being willing to disregard what appears to be the validly entered judgment of a non-U.S. tribunal. 

    • B. Morrison v National Australia Bank.

      1. This use of “jurisdiction” has been called into question – possibly inadvertently – by the U.S. Supreme Court.

      2. In Morrison v. National Australia Bank, No. 08-1191 (June 24, 2010), the Supreme Court addressed the case whether the U.S. Securities Exchange Act of 1934 could be found applicable to regulate conduct described as “foreign cubed” or “f-cubed” in nature. That short-hand has been used to apply to a case where a non-U.S. (or “foreign”) claimant attempts to sue in the U.S. a “foreign” defendant with respect to alleged fraud relating to securities listed, not on a U.S. exchange, but on a “foreign” exchange (hence there are three “foreigns” and hence the moniker, “f-cubed”).

      3. The Supreme Court found that the U.S. securities laws did not apply to such conduct in a case brought by a private party.  The Court’s reasoning, however, is what is important to the analysis of the principle of “comity”.

      4. In reaching its decision, the Supreme Court said that the question it was addressing was not a question of subject matter jurisdiction but rather was one going to the “merits” of whether the federal securities laws “reached” the alleged acts.  The Court said that, “to ask what conduct § 10(b) reaches is to ask what conduct § 10(b) prohibits, which is a merits question.”


        1. Relatedly, the Court held that the federal court had jurisdiction (under 15 U.S.C. § 78aa) because of an express grant of exclusive jurisdiction over all claims to enforce the Securities and Exchange Act.  This gave the court the judicial power to adjudicate the question of whether § 10(b) applied to the conduct at issue.

      5. The Supreme Court was right that, over the decades, the prior cases had invoked subject matter jurisdictional concerns to analyze the question whether a federal law, rule, or statute would extend to largely “foreign” conduct.  This prudential use of jurisdiction has several salutary benefits to litigants.  For example, challenges to jurisdiction are most commonly done at the commencement of lawsuits in the U.S., before the parties embark on protracted and expensive disclosure and discovery proceedings.

      6. In rejecting that approach, and in holding instead that the proper question was one addressed to the “merits” of the issue, a concern arises whether courts faced with such motions will be as courageous in taking a hard look at the case to determine if its international scope renders it inappropriate for U.S. federal court determination.

      7. For example, can a district court be as solicitous of their limited power at the commencement of litigation if they are faced, not with a “subject matter jurisdiction” challenge, but with a “merits” challenge?  Can a district court consider interests and facts outside the complaint on a Rule 12(b)(6) motion as on a jurisdictional motion, where considering matters outside the complaint is routine?  See Fed. R. Civ. P. 12(d) (requiring conversion of the motion to one for summary judgment if matters outside the pleadings are presented and not excluded by the court).

      8. The Supreme Court in Morrison did not address the  implications of its ruling to the issue and important use of the principle of international comity. For example, in United States v. Lee, 106 U.S. 196, 237 (1882); accord Sarei v. Rio Tinto, PLC, 456 F.3d 1069, 1086 (9th Cir. 2006), the courts have made it clear that, “Under the international comity doctrine, courts sometimes defer to the laws or interests of a foreign country and decline to exercise jurisdiction that is otherwise properly asserted”.  It would be unfortunate – and we believe unintended – if Morrison were to be read to preclude an international comity analysis addressed at the early and initial phases of a case, whether the issue is denominated “merits” or “subject matter jurisdiction” based.

      9. This issue is discussed in our OneWorld blog post of 8/4/10.

      10. For an implicit and important use of the concept of international comity, see our OneWorld blog post of 8/25/10.

      11. And for discussion of invalidating forum selection and choice of law clauses in the name of international comity, see our OneWorld blog posts of 8/9/10 and 8/11/10.

  • IV. What Showing is Needed to Have a Court Accord Comity to a Non-U.S. Judgment?

    • A. Interpretation of non-U.S. law

      1. “Principles of international comity are not violated when U.S. courts hear cases that require them to interpret foreign law.”  Bigio v. Coca-Cola Co., 448 F.3d 176, 178-79 (2d Cir. 2006).

    • B. Factors considered

      1. In determining whether to grant comity to a non-U.S. judgment or proceeding in the case of a conflict of laws, courts consider various factors (see Sarei v. Rio Tinto PLC, 487 F.3d 1193, 1212 (9th Cir. 2007)):

      2. The link of the regulated activity to the regulating state;

      3. The connections between the regulating state and the persons to be regulated;

      4. The character, importance, and general acceptability of regulation;

      5. The manner in which justified expectations may be upset through the regulation;

      6. The importance of the regulation to the international legal, political, or economic system;

      7. The extent to which the regulation accords with international legal tradition;

      8. The extent to which another state may have an interest in regulating the activity in question;

      9. The likelihood of conflict with another state’s legal schema.

    • C. The Second Circuit

      1. This influential Circuit in the area of international practice appears more permissive with respect to granting comity: “Comity will be granted to the decision or judgment of a foreign court if it is shown that the foreign court is a court of competent jurisdiction, and that the laws and public policy of the forum state and the rights of its residents will not be violated.”  Cunard SS Co. v. Salen Reefer Services AB, 773 F.2d 452, 457 (2d Cir. 1985).

    • D. Jurisdictions “similar” to the U.S.

      1. Courts will more readily extend comity to sister common law jurisdictions with procedural protections similar to those in the United States.  See, e.g., Clarkson Co. v. Shaheen, 544 F.2d 624, 629-30 (2d Cir. 1976).

      2. Mere divergences between the legal systems of the United States and those of other nations will not bar recognition of non-U.S. judgments. One of the leading jurists said nearly 100 years ago:  “We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home.”  Loucks v. Standard Oil Co., 224 N.Y. 99, 111 (1918).

  • V. Fundamental Reasons Why a U.S. Court Would Refuse to Accord Comity to a Non-U.S. Judgment.

    • A. Basic principle

      1. It has been held that a final determination of a matter obtained through “sound procedures” will still not be given due weight in a U.S. court where “(1) the foreign court lacked jurisdiction . . .; (2) the judgment was fraudulently obtained; or (3) enforcement of the judgment would offend the public policy of the state in which enforcement is sought.”  Telenor Mobile Commc’ns v. Storm LLC, 584 F.3d 396, 408 (2d Cir. 2009) (quoting Ackermann v. Levine, 788 F.2d 830 (2d Cir. 1986)).

      2. If the non-U.S. court lacks sound procedures, then comity will not be forthcoming.  See, e.g., Int’l Transactions, Ltd. v. Embotelladora Agral Regiomotana, S.A., 347 F.3d 589, 594 (5th Cir. 2003) (“Notice is an element of our notion of due process and the United States will not enforce a judgment obtained without the bare minimum requirements of notice.”).

      3. New York’s highest court has also held that, to be found to be “repugnant” to public policy, a non-U.S. judgment must be “inherently vicious, wicked or immoral, and shocking to the prevailing moral sense.”  Sung Hwan Co. v. Rite Aid Corp., 7 N.Y.3d 78, 82 (2006).

      4. Perhaps because of the central role played by free speech principles in our courts, a non-U.S. judgment that ignore or tread upon constitutional rights, especially First Amendment rights, are often found to be “repugnant” to public policy.  See Yahoo!, Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme, 169 F. Supp.2d 1181, 1189-90 (N.D.Cal. 2001) (refusing to recognize a French judgment rendered under a law prohibiting Nazi propaganda because such a law would violate the First Amendment), rev’d on other grounds, 433 F.3d 1199 (9th Cir. 2006) (en banc); Bachchan v. India Abroad Publ’ns Inc., 585 N.Y.S.2d 661, 662 (Sup. Ct. 1992) (determining a British libel decision to be constitutionally defective under the First Amendment and so unenforceable under principles of comity).


        1. In determining whether granting comity is appropriate in free speech cases, courts should examine the level of First Amendment protection that is demanded by the public policy of the U.S. jurisdiction in a given case and then determine whether the non-U.S. legal regime offers “comparable protections.”  Sarl Louis Feraud Int’l v. Viewfinder Inc., 489 F.3d 474, 481-82 (2d Cir. 2007).

    • B. Burden of proof

      1. Courts are split on the question of where the burden of proof lies in cases in which a defendant argues for non-recognition of a non-U.S. judgment.  Bank Melli Iran v. Pahlavi, 58 F.3d 1406, 1409 (9th Cir. 1995).

      2. At least one federal circuit court placed the burden on the plaintiff to demonstrate the propriety of the non-U.S. judgment under the UFMJA.  See Ackermann, 788 F.2d at 842 n.12 (noting that “a plaintiff seeking enforcement of a foreign country judgment granting or denying recovery of a sum of money must establish prima facie: (1) a final judgment, conclusive and enforceable where rendered; (2) subject matter jurisdiction; (3) jurisdiction over the parties or the res; and (4) regular proceedings conducted under a system that provides impartial tribunals and procedures compatible with due process”).

      3. Some federal courts have speculated that the plaintiff bears the burden of showing that neither mandatory ground for refusing comity applies, thus shifting the burden to the defendant to demonstrate the applicability of at least one of the discretionary criteria for refusing recognition of the foreign judgment. 

  • VI. Comity in the Context of Money Judgments

  • VII. Does Comity Apply Differently to International Restructurings: Chapter 15’s Revisions to Section 304 of the Bankruptcy Code.

    • A. Chapter 15 of the U.S. Bankruptcy Code

      1. Chapter 15 was enacted in 2005 as part of the Bankruptcy Abuse Prevention and Consumer Protection Act.  The language of Chapter 15 tracks the Model Law on Cross-Border Insolvency formulated by the United Nations Commission on International Trade law (“Model Law” and “UNCITRAL”), with some modifications that are designed to conform the Model Law with existing United States law.

      2. Chapter 15 imposes a procedural change, one that does not undermine principles of comity.  In fact, though Section 304 case law is no longer controlling, it continues to inform judicial determinations under Chapter 15.  See Iida v. Kitahara (In re Iida), 377 B.R. 243, 256 (B.A.P. 9th Cir. 2007).

      3. Before obtaining relief, the foreign representative must obtain a recognition decision from the bankruptcy court. Recognition grants the foreign representative the capacity to sue and be sued in United States courts and the authority to apply directly to a court in the United States for appropriate relief.  All courts in the United States must grant comity to the foreign representative.

    • B. Proceedings Under Chapter 15

      1. Under Chapter 15, recognition may only be granted to a foreign main or nonmain proceeding.


        1. Both foreign main and foreign nonmain proceedings are eligible for relief under 11 U.S.C. § 1521.

        2. In the case of non-U.S. nonmain proceedings, though, the relief is not automatic; rather, the bankruptcy court determines whether any such relief is appropriate “after notice and a hearing, at the court’s discretion, and subject to the requirement that all creditors be sufficiently protected.”  In re Ran, No. 09-20288, 2010 BL 118666, at *14 (5th Cir. May 27, 2010).

      2. A foreign proceeding is a “foreign main proceeding” if it is “pending in the country where the debtor has the center of its main interests,” and a “foreign nonmain proceeding” if “the debtor has an establishment . . . in the foreign country where the proceeding is pending.”  11 U.S.C. § 1517(b).


        1. Chapter 15 provides courts with some guidance in determining the “center of . . . main interests” (“COMI”): “In the absence of evidence to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the center of the debtor’s main interests.”  11 U.S.C. § 1516(c).

        2. Comity plays no role in the initial determination of whether a court should grant recognition in the first place; recognition arises solely from the “strict application of objective criteria.”  In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333 (S.D.N.Y. 2008).

           
        3. Comity, on the other hand, is an important discretionary principle that may only be granted after recognition has been accorded.  Id.  This distinguishes Chapter 15 from Section 304, that granted all relief discretionary basis informed by subjective, comity-influenced factors.  Id.  By bifurcating recognition and comity considerations, Chapter 15 promotes predictability in the pre-recognition stage while retaining flexibility in the post-recognition stage.  Id.

        4. However, the Bankruptcy Code is silent on the type of evidence that would adequately rebut the presumption that the COMI is the debtor’s registered office or habitual residence.  One court speculated that rebuttal factors might include the locations of the debtor’s headquarters, the debtor’s managers (such as a holding company’s headquarters), the debtor’s primary assets, the majority of the debtor’s creditors, and the jurisdiction whose law would apply to the majority of the disputes.  In re SPhinX, Ltd., 351 B.R. 103, 117 (Bankr. S.D.N.Y. 2006).

        5. For the purpose of determining whether a non-U.S. proceeding is a nonmain proceeding, the Bankruptcy Code defines an “establishment” as “any place of operations where the debtor carries out a nontransitory economic activity.”  11 U.S.C. § 1502(2).