My colleague Trey Childress has a nice summary of the recent decision by a federal court in Florida in Osorio v. Dole Food Company to refuse to enforce a $97 million Nicaraguan judgment. Here’s the key excerpt of the decision:
“the evidence before the Court is that the judgment in this case did not arise out of proceedings that comported with the international concept of due process. It arose out of proceedings that the Nicaraguan trial court did not have jurisdiction to conduct. During those proceedings, the court applied a law that unfairly discriminates against a handful of foreign defendants with extraordinary procedures and presumptions found nowhere else in Nicaraguan law. Both the substantive law under which this case was tried, Special Law 364, and the Judgment itself, purport to establish facts that do not, and cannot, exist in reality. As a result, the law under which this case was tried stripped Defendants of their basic right in any adversarial proceeding to produce evidence in their favor and rebut the plaintiffs’ claims. Finally, the judgment was rendered under a system in which political strongmen exert their control over a weak and corrupt judiciary, such that Nicaragua does not possess a ‘system of jurisprudence likely to secure an impartial administration of justice.’”
As Childress notes, the decision is important for three reasons:
This case is interesting on multiple levels. First, the district court applied an “international concept of due process.” This standard was seen to be in concert with, but different than, US notions of due process. Second, the court found that Nicaragua does not have impartial tribunals. In so doing, the court relied not only on US State Department pronouncements but also on expert testimony regarding what law is like on the ground in Nicaragua “on paper and in practice.” Finally, this case is perhaps most interesting because the general understanding is that it is hard to resist enforcement. This case shows that US courts, if presented with appropriate evidence, are willing to ascertain the validity of foreign judgments, especially in countries facing political and social turmoil that may negatively impact the administration of justice in those countries.
But the case also raises a host of issues on the nexus between enforcing judgments and pursing denial of justice claims in investment arbitration. Can Dole now bring a “denial of justice” claim against Nicaragua under the U.S.-Nicaragua BIT? What effect, if any, would the district court judgment have in such a case? Or consider the Dole case in light of Chevron’s litigation woes in Ecuador. I’m curious what relationship, if any, there is between its investment arbitration claim of denial of justice and attempts to prevent enforcement of foreign judgment for failure to provide due process. Does a successful “denial of justice” claim preclude enforcement as a matter of res judicata? Or is it persuasive authority for a future federal court? Is the opposite also true? If the claim for denial of justice is not successful, does that suggest the Ecuador judgment should be enforced? Finally, if the Ecuador court rules against Chevron and a U.S. court enforces the judgment prior to the issuance of an award, what impact would that have on the denial of justice claim in arbitration?
Roger Alford
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Interesting post, and interesting way of looking at things: I would have thought that Dole benefited from a denial of justice. It was the defendant, and I understand that before resisting enforcement of the foreign judgment, it had successfully argued against the jurisdiction of US courts on conveniens grounds.
Roger is not far off in speculating as to the relationship of all of this to investment treaty arbitration claims.
The Shell Oil Company has also been held liable by the Nicaraguan courts in relation to harms imputed to the agro-chemical DBCP. In the aftermath of a multi-million dollar judgment against Shell, certain trademarks of the company were seized – and threatened with being auctioned off – so as to help pay the judgment.
Notably, Shell responded by having two of its Dutch-based subsidiaries bring a claim against Nicaragua under the Netherlands-Nicaragua BIT. The claimants alleged that the “expropriation” of their intellectual property was unjustified, as the Dutch subs were the real owners of these trademarks – rather than the Shell entity which was the defendant in the Niacaraguan suit.
More apposite for purposes of Roger’s post, the two Shell subs also professed to be the victim of a denial of justice in Nicaragua.
While the Shell claim was settled the next year, after the Nicaraguan Government backed off on the IP seizure, it’s certainly not far-fetched to expect other denial of justice claims to arise.
As the other commenter to this post suggests, it will be particularly interesting to see to what extent arbitrators take account of the fact that defendants do sometimes invoke forum non conveniens at the outset of these cases, so as to have the cases heard in developing countries – but later profess concern as to the lack of due process provided by such courts. (In the Chevron-Ecuador dispute cited by Roger, there are two BIT arbitrations now running; and in the first of these cases, the two sides have sparred over this very issue. Ecuador accuses Chevron of lauding the Ecuadorian courts in order to have claims tossed out of US courts, but then souring on those same courts when it is deemed expedient; meanwhile Chevron retorts that the Ecuadorian courts have gotten much worse in recent years, and that a fair trial is no longer possible there.)