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Granting Comity to a Foreign Court Sequestration Order

By: Kristen Barone

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Comity 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 person who are under the protection of its laws.”[1] In order to grant comity to a foreign court or its rulings, a United States court must generally evaluate whether: (1) the foreign court was competent and used proceedings consistent with civilized jurisprudence; (2) the judgment was rendered by fraud; (3) the foreign judgment violated American public policy notions of what is fair and just; and (4) to respect the judgment of a foreign court or to defer to parallel foreign proceedings.[2]

A Florida bankruptcy court in In re Neves afforded comity to a sequestration order issued by an Italian court, after finding that the Italian court’s order was consistent with American public policy.[3] Prior to the U.S. proceeding, the Civil and Criminal Court of Rome (the “Italian Court”) issued a sequestration order in connection with a criminal proceeding under the Anti-Mafia code pending in Italy.[4] Pursuant to the sequestration order, a judicial administrator was appointed and entrusted with control over the plaintiffs’ assets. Thereafter, the judicial administrator entered into a settlement with the defendants resolving the claims with and against the plaintiffs. The conflict arose when the defendant, who had obtained a judgment against the plaintiffs on certain counter-claims, requested that the U.S. court extend comity to the sequestration order. Plaintiffs argued that the sequestration order was not final, and therefore not subject to comity.[5] Plaintiffs further argued that comity should not be granted because (1) the defendant failed to establish his burden that the Italian court had jurisdiction over plaintiffs or plaintiffs’ assets in the United States, (2) the procedures of the Anti-Mafia code were inconsistent with American public policy, and (3) the sequestration order may have been obtained by fraud or mistake.[6] The bankruptcy court concluded that the sequestration order was “final enough” to be afforded comity, rejected the jurisdictional claim, and determined that the proceeding was in accordance with American public policy and not obtained by fraud.[7] Further, the court concluded that the Italian court was competent and that the sequestration order did not violate due process because the litigants’ principal was personally served and was afforded the opportunity to be heard but chose not to do so. [8] Finally, the court emphasized that while the sequestration order was being litigated in Italy, the bankruptcy court would not conduct a parallel proceeding on the validity of the order.[9] The court thus found it proper to afford comity to the sequestration order.

There are no bright line tests for extending comity to a foreign court’s order. It remains a matter of discretion based on considerations of international comity and expediency.[10] Indeed, a court may extend comity to an order that may be subject to appeal in the foreign country. Absent fraud, a United States court is likely to extend comity to an order that was properly issued by a foreign court.[11] Further, if the plaintiffs believe that the order was obtained by fraud or improvidently entered, that argument should be first pursued in the foreign court system.[12] The court noted that a party cannot assert for the first time in the U.S. that a foreign order was obtained by fraud to avoid the consequences and enforcement of that order. The court’s approach in this case reflects the deferential approach typically taken by U.S. courts when determining whether a foreign judgment should be enforced in the United States. However, had the plaintiffs obtained a stay of the sequestration order in Italy, the result may have been different.

 

 



[1] Hilton v. Guyot, 159 U.S. 113, 164 (1895).

[2] In re Neves, 570 B.R. 420, 427 (Bankr. S.D. Fla. 2017) see also Ungaro-Benages v. Dresdner Bank AG, 379 F.3d 1227, 1238 (11th Cir. 2004).

[3]In re Neves, 570 B.R., at 420, see also In re Cozumel Caribe, S.S. de C.V., 482 B.R. 96, 116 (Bankr. S.D.N.Y 2012) (concluding that “[d]ue process is not violated by the entry of ex parte orders, provided that notice and opportunity to appear and defend are promptly given.”).

[4] Id. at 423 The Sequestration Order was entered pursuant to the Italian “Anti-Mafia Code,” (consolidating “all existing laws against criminal organizations and established specifically regulated tools to counter criminal organizations including seizure and confiscation of their assets.”).

[5] Id. at 424.

[6] Id. at 424-425.

[7] Id. at 427-431 (determining that the Italian court was consistent with civilized jurisprudence, and that the sequestration order was entered as part of an Italian criminal proceeding brought in accordance with Italy’s Anti-Mafia Code).

[8] Id. at 420 ([e]x parte procedures used in foreign courts are not per se violations of American notions of fairness and due process).

[9] Id. at 425.

[10] See Hilton v. Guyot, 159 U.S. 113, 234 (1895).

[11] In re Neves, 570 B.R., at 431.

[12] Id. at 431.