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1999 WL 223513
(S.D.N.Y.) United States District
Court, S.D. New York. S.C. CHIMEXIM S.A.,
Plaintiff, v. VELCO ENTERPRISES LTD., et al., Defendants. No. 98 CIV. 0142(DC). March 17, 1999. Law Offices of Radu
Herescu, By Radu Herescu, Esq., Mark E. Schaefer, Esq., New York, for
Plaintiff. AMENDED OPINION CHIN, D.J. [*1] In this diversity
case, plaintiff S.C. Chimexim S.A. (“Chimexim”) seeks to
enforce a $201,087 judgment rendered in its favor by a tribunal in Bucharest,
Romania (the “Bucharest Judgment”) against defendant Velco
Enterprises, Ltd (“Velco”) [FN1]. Velco moves to dismiss the
amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2),
and 12(b)(6). Chimexim opposes the motion and cross-moves for summary judgment.
One issue raised by the cross-motions is whether the Romanian judicial system
comports with the requirements of due process. For the reasons set
forth below, Velco’s motion to dismiss the complaint is denied and
Chimexim’s cross-motion for summary judgment enforcing the Bucharest
Judgment is granted. BACKGROUND I provide summaries of
(a) Romania’s government and judiciary; (b) the underlying facts in
this case; (c) the proceedings in Romania; and (d) the proceedings in this
Court. A. Romania [FN2] 1. The Government Romania, a country in
southeastern Europe, became an independent nation in 1878. It became a kingdom
in 1881 and adopted a constitution in 1923, thereby becoming a constitutional
monarchy. In the late 1930’s, however, the parliament was dissolved
and Romania came under authoritarian rule. The Communists formally took power
in 1947 and continued to rule until 1989. In 1989, the Romanian
army joined in a popular uprising against the Communist regime and President
Nicolae Ceausescu was deposed and executed. Thereafter, a provisional
government was established with Ion Iliescu, a former Communist, as president.
In May 1990, multiparty elections were held and a president and national
legislature were voted into office. Iliescu was elected president, and his
party, the National Liberation Front (“NLF”), gained control
of the legislature. In December 1991, a
new constitution was approved by popular referendum. The constitution declared
Romania to be a parliamentary republic and provided for multiple political
parties, a separation of powers between branches of government, a market
economy, and respect for human rights. Romanian military, police, and
intelligence structures eventually were put under civilian control. In November 1996,
general elections were held for the third time since the 1989 revolution. The
coalition that had been in power since the revolution was voted out and
replaced by a “new reform-minded Prime Minister.” Kingston,
at 360. The new government “is implementing a very ambitious and
aggressive economic program aimed at a rapid culmination of privatization and
restructuring of the Romanian economy.” Geoana, at 16. Recent new laws
include an “Emergency Ordinance” that seeks to encourage
investment in Romania by establishing certain protections for foreign
investors, Kingston, at 361, a Copyright Law that is designed to conform to the
standards of the Berne Convention and the World Trade Organization, Romania
Enacts Copyright Law, 8 No. 6 J. Proprietary Rts. 24, 24 (1996),
and tax laws intended to help Romania adapt to a free market economy. Mihaela
Grama and Nicholas S. Hammond, Romania’s Tax System Evolves with
the Free Market Economy, 4 J. Int’l Tax’n 276, 276
(1993). 2. The Judiciary [*2] During
Romania’s Communist period, “individual justice was
subservient to the state’s goal of creating a communist society, and
judges were merely instruments of the state.” Judicial Review, at 1.
After the ouster of the Communist regime in 1989, the judicial system underwent
significant reform. The 1991 Constitution
established Constitutional and Supreme courts in Romania, and a Judiciary Law
passed in 1992 established three levels of courts beneath the Supreme Court.
The Judiciary Law also created the “formal mechanism for the
administration of justice.” Judicial Review at 1; see also id. at 1- 4
(explaining the structure and jurisdiction of the various courts as well as the
administration of the courts). The Constitution and the Judiciary Law also
“explicitly set forth the independence of the judiciary.” Id. at 8.
Indeed, the “judiciary is now a legally independent branch of
government” in Romania. Id. Romanian judges are
“typically selected from among the most outstanding recent graduates
of the law schools.” Id. at 4-5. In addition
to passing an examination, Romanian judges must: have a law degree, a good
reputation, and no criminal record; be physically capable of fulfilling the
required judicial functions; know the Romanian language; and be Romanian
citizens with permanent residences in Romania. Id. at 4; see
also id. at 5-8 (detailing judges’ appointment process, training,
ethics requirements, discipline, compensation, and immunity). B. The Underlying
Facts [FN3] Chimexim is a Romanian
corporation with principal offices located in Bucharest Romania. Velco is a
Connecticut corporation with its principal place of business in New York. In
addition, at relevant times to this suit, Velco had a “Representative
Office” in Romania, which was authorized by the Ministry of Foreign
Trade Organization Department to do business in Romania. (DX 1 (Goldschneider
Aff. Ex. A)). The Authorization states that Velco’s principal place of
business is New York and that the scope of activity of the Representative
Office is “to support the trading activity of Velco[ ] in Romania
concerning the import and export of chemical products.” (Id.). The
Representative Office was staffed by an office manager, two secretaries, and a
messenger, and it was open approximately forty hours a week. [FN4] (DX 2
(Grigore Aff.)). Chimexim and Velco are
in the business of purchasing, selling, and distributing industrial chemicals,
plastics, and related raw materials. Chimexim and Velco bought and sold various
products from and to one another. This case arises from a transaction involving
Chimexim’s sale of polyvinylchloride (“PVC”) to
Velco.
Chimexim apparently performed its end of the bargain but was not
paid in full by Velco. Thus, in 1991, Chimexim and Velco entered into an
“Agreement” that purported “to settle”
Velco’s outstanding invoices in the amount of $307,000. (DX 1 (Ex. B);
PX 9). The Agreement provided that: (1) Velco would pay $75,000 to Chimexim the
week of October 21, 1991; (2) the $232,000 balance would be discharged by Velco
to Chimexim based on “developments [of] bilateral business between the
two companies”—each company agreeing to sell each
other’s products at competitive prices, and Velco promising to reserve
a 3% commission to Chimexim on its purchases and sales; and (3) when Velco
reached a settlement with one of its Brazilian clients, concerning non-delivery
of PVC that affected Velco’s agreement with Chimexim, Chimexim and
Velco would “discuss a fair basis [for] their respective final
settlement.” (Id.). [*3] Velco paid
Chimexim $75,000 as set forth in the Agreement. Chimexim contends that Velco
failed to adhere to the remaining terms of the Agreement. Velco contends that
the Agreement precluded Chimexim from pursuing claims against it in Romania. C. Proceedings in
Bucharest
On January 25, 1996, Chimexim’s attorney in
Bucharest apparently served a “Notification” on Velco
demanding payment of $201,087 under the Agreement. (PX 12). The Notification
stated that if Velco did not pay said amount to Chimexim by February 16, 1996,
the “debtor will be prosecuted, according to the Romanian legislation,
with all consequences arising from this regarding compensation [ ] and
expenses.” (Id.). Velco neither admits nor denies receiving
the Notice, [FN5] but it is undisputed that Velco did not remit payment. On June 19, 1996,
Chimexim brought suit against Velco in Romania before the Bucharest Tribunal,
Commercial Section (the “Tribunal”), to recover the unpaid
balance on the PVC transaction. (PX 5 (Balanescu Aff.)). Chimexim’s
application to the Tribunal stated the relevant facts discussed above,
including information about the PVC transaction and the parties’
Agreement to settle. (DX 5 (Teodorescu translation of Chimexim application to
Tribunal)). The application also stated that Velco owed a balance of $201,087
on the $307,000 initially due to Chimexim under the Agreement. (Id.). Attached
to the application were twenty-five documents submitted in support of the
claim, including a copy of the Agreement. (Id.). Chimexim served Velco
at its Representative Office with a summons by posting the summons in the case
on the Office’s door. (PX 6 (Anagnoste Aff.)). Velco denies that it
was properly served, and maintains that its Representative Office never
received the summons.
Velco failed to appear before the Tribunal.
Accordingly, on July 10, 1996, the Tribunal entered judgment against Velco in
the amount of $201,087. In its judgment, the Tribunal concluded that Velco owed
Chimexim $201,087 and that the “procedure was legally carried
out.” (See DX 5 (Teodorescu translation of Bucharest
Judgment); PX 15 (Margareta translation of Bucharest Judgment stating that
there was “complete legal procedure”)). The judgment also
stated that Velco was “legally summoned at the office of its
representative in Romania.” (PX 15). In addition, the judgment noted
that the Tribunal analyzed “the proofs that have been produced for the
cause, [and] … considers the action of [Chimexim] as founded and is
going to accept it as such to oblige [Velco] to pay the amount of $201.087
… according to the agreement concluded between the parties.”
(Id.; see also DX 5 (Teodorescu translation of Bucharest
Judgment)). Velco appealed the
judgment to Bucharest’s Court of Appeal. In its appeal, Velco asserted
four grounds for reversal: (1) the “introductory application”
(or initial pleading) was insufficiently “stamped” (noting
that the application did not make reference to the applicable law or invoke the
proper grounds and was not filed with the sufficient number of stamps); (2)
insufficient service of process (noting that the proof of service carried
neither “the seal of Velco [ ] nor the signature of any employee of
the Representative Office, although the above-mentioned headquarters were
permanently manned”); (3) lack of personal jurisdiction because only
the Representative Office was allegedly served and it “cannot validly
represent Velco[ ] in court”; and (4) the Tribunal
“mistakenly settled the case, without actually investigating the
merits of the dispute and by breaching [certain provisions of
Romania’s] Civil Code” (arguing inter alia that the
Agreement barred the suit). (DX 1 (Ex. C)). A hearing on Velco’s
appeal took place on May 5, 1997. (PX 17). [*4] In a
written decision dated May 19, 1997, the three-judge panel of the Court of
Appeal rejected Velco’s appeal and affirmed the Tribunal. The Court of
Appeal stated that it considered the following in rendering its decision: (1)
Chimexim’s claim that Velco owed it $201,087, and the documents
submitted by Chimexim to support its claim; and (2) each of Velco’s
four grounds of appeal. (Id.). The Court of Appeal concluded that
“the criticism against the award is unfounded and the appeal
groundless.” In so concluding, the Court of Appeal stated that it: (1)
rejected Velco’s argument concerning the insufficiency of the stamping
on the summons; (2) determined that service was proper; (3) agreed that the
court had personal jurisdiction over the Representative Office “as
long as the representative has legal personality and represents the interests
of the parent company on the Romanian Territory”; and (4) rejected
Velco’s argument that the Tribunal did not investigate the merits of
the claim. (Id.). On October 2, 1998,
Velco appealed to the Supreme Judicial Court of Romania. A hearing on that
appeal was scheduled for February 4, 1999. Neither party has informed the Court
as to the disposition, if any, of that appeal. Neither the Court of Appeal nor
the Supreme Judicial Court stayed the execution of judgment. C. Proceedings in
this Court
On January 1, 1998, Chimexim filed suit against Velco in
this Court, seeking to enforce its Bucharest Judgment. An amended complaint was
filed on April 10, 1998. The parties conducted discovery, limited to the
question of jurisdiction. These motions followed. DISCUSSION A. Applicable Law 1. Comity The recognition of
foreign judgments “is governed by principles of comity.” Pariente
v. Scott Meredith Literary Agency, Inc., 771 F.Supp. 609, 615
(S.D.N.Y.1991) (quoting Victrix Steamship Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d
709, 713 (2d Cir.1987)); see also Hilton v. Guyot, 159 U.S.
113, 163-64 (1895). The seminal case in the area of enforcing foreign
judgments, Hilton v. Guyot, explained the doctrine of comity as
follows: No law has any effect
… beyond the limits of the sovereignty from which its authority is derived.
The extent to which the law of one nation, as put in force within its
territory, … by judicial decree, shall be allowed to operate within
the dominion of another nation, depends upon what our greatest jurists have
been content to call the “comity of nations” ….
[Comity] is the recognition which one nation allows within its territory to the
… judicial acts of another nation, having due regard both to
international duty and convenience, and to the rights of its own citizens, or
of persons who are under the protection of its laws. 159 U.S. at 163-64.
The Supreme Court in Hilton held that if the foreign forum
provides a full and fair trial before a court of competent jurisdiction,
“under a system of jurisprudence likely to secure an impartial
administration of justice … and there is nothing to show either
prejudice … or fraud in procuring the judgment,” the judgment
should be enforced and not “tried afresh.” Id. at 202-03. [*5] The
practice of extending “ ‘comity whenever the foreign court
ha[s] proper jurisdiction and enforcement does not prejudice the rights of
United States citizens or violate domestic public policy,’ has
consistently been followed in this Circuit.” Pariente, 771
F.Supp. at 615 (quoting Victrix, 825 F.2d at 713 and
citing Ackermann v. Levine, 788 F.2d 830 (2d Cir.1986); Cunard
Steamship Co. v. Salen Reefer Servs. A.B., 773 F.2d 452 (2d
Cir.1985); Clarkson Co. v. Shaheen, 544 F.2d 624 (2d
Cir.1976)). 2. New York
Law—Article 53
New York law governs actions brought in
New York to enforce foreign judgments. Canadian Imperial Bank of Commerce v.
Saxony Carpet Co., 899 F.Supp. 1248, 1252 (S.D.N.Y.1995) (citing
In re Union Carbide Corp. Gas Plant Disaster at Bhopal, 809 F.2d
195, 204 (2d Cir.), cert. denied, 484 U.S. 871 (1987)
and Pariente, 771 F.Supp. at 615), aff’d, 104 F.3d
352 (2d Cir.1996). In New York,
“courts ‘generally will accord recognition to the judgments
rendered in a foreign country under the doctrine of comity absent a showing of
fraud in the procurement of the foreign judgment or unless recognition of the
foreign judgment would offend a strong policy of New York.” ’
Allstate Ins. Co. v. Administratia Asiqurarilor De Stat, 962
F.Supp. 420, 425 (S.D.N.Y.1997) (quoting Lasry v. Lasry, 579
N.Y.S.2d 393, 393-94 (1st Dep’t 1992)). Indeed, New York has a
“long-standing” tradition of “permitting the
enforcement of foreign country money judgments.” Fairchild,
Arabatzis & Smith, Inc. v. Prometco Co., 470 F.Supp. 610, 615
(S.D.N.Y.1979) (citing Island Territory of Curacao v. Solitron Devices,
Inc., 489 F.2d 1313, 1318 n. 6 (2d Cir.1973), cert. denied, 416 U.S.
986 (1974)); see also Cowans v. Ticongeroga Pulp & Paper Co., 246 N.Y.
603 (N.Y.1927); David Siegel, Practice Commentaries, McKinney’s
Cons.Laws of NY, Book 7B, CPLR C5304:1, at 548 (McKinney’s 1997)
(describing New York as “generous” in the recognition of the
judgments of foreign nations) (hereinafter “Siegel
Commentaries”). New York has codified
the principles of comity by statute as the “Uniform Foreign Judgments
Recognition Act,” N.Y. C.P.L.R. (“CPLR”) Article 53.
Article 53 provides that “a foreign country judgment … is
conclusive between the parties to the extent that it grants or denies recovery
of a sum of money.” CPLR § 5303. The article applies to
“any foreign country judgment which is final, conclusive and
enforceable where rendered even though an appeal therefrom is pending or it is
subject to appeal.” CPLR § 5302. A foreign country
judgment is “not conclusive” if: (1) “the judgment
was rendered under a system which does not provide impartial tribunals or
procedures compatible with the requirements of due process of law”; or
(2) “the foreign court did not have personal jurisdiction over the
defendant.” CPLR § 5304(a). These bases of non-recognition
preclude courts from recognizing the foreign judgment as a matter of law.
Siegel Commentaries at 548-59; Jack B. Weinstein et al., New York Civil
Practice, Vol. 11., ¶ 5304.01 (1998) (hereinafter “Weinstein
CPLR”). [*6] A foreign
country judgment “need not be recognized,” however, if: (1)
the foreign court did not have subject matter jurisdiction; (2) the defendant
in the proceedings did not receive notice of the proceedings in sufficient time
to enable a defense; (3) the judgment was obtained by fraud; (4) the cause of
action violates public policy; (5) the judgment conflicts with another final
and conclusive judgment; (6) the proceeding in the foreign country was contrary
to an agreement between the parties under which the dispute in question was to
be settled otherwise than by proceedings in that court; or (7) the foreign
court was a seriously inconvenient forum for the trial of the action. CPLR
§ 5304(b). These bases of non-recognition are discretionary. Weinstein
CPLR at ¶ 5304.02 (1998) A foreign country
judgment “shall not be refused recognition for lack of personal
jurisdiction” if, inter alia: (1) defendant was
served in person in the foreign state; (2) defendant voluntarily appeared in
the proceedings, other than for the purpose of protecting property seized; (3)
defendant had its principal place of business, was incorporated, or had
otherwise acquired corporate status in the foreign state; or (4) defendant had
a business office in the foreign state and the proceedings in the foreign court
involved a cause of action arising out of business done by defendant in the
foreign state. CPLR § 5305. If any of the above
bases for personal jurisdiction apply, “recognition [of the foreign
judgment] may not be refused for lack of personal jurisdiction, although
recognition may be refused on one of the discretionary grounds listed in [§
5304(b) ].” Siegel Commentaries at 549. 3. Burdens of Proof
The
burden of proof in “establishing the conclusive effect of a foreign
judgment is on the party asserting conclusiveness.” Weinstein CPLR at
¶ 5302.01. As the Second Circuit has explained: [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. Ackermann v.
Levine, 788 F.2d 830, 842 n. 12 (2d Cir.1986) (citations omitted). Once a
plaintiff establishes a prima facie case of enforceability, a defendant may
then raise defenses such as fraud and public policy. Id. Although
the Ackermann court did not specify how these burdens apply with
respect to Article 53, as a matter of logic, it would appear that plaintiff has
the burden of proving that no mandatory basis for non-recognition pursuant to CPLR
§ 5304(a) exists, and that defendant has the burden of proving that a
discretionary basis for non-recognition pursuant to CPLR § 5304(b)
applies.
B. Velco’s Motion to Dismiss [*7] Velco moves
to dismiss this case pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2).
Rules 12(b)(1) and 12(b)(2), however, are the “means for challenging
the jurisdiction of the court before whom a matter is pending.” Canadian
Imperial Bank of Commerce v. Saxony Carpet Co., 899 F.Supp. 1248,
1251 (S.D.N.Y.1995), aff’d 104 F.3d 352 (2d
Cir.1996). Velco seeks to invoke these rules to challenge the jurisdiction of
the Romanian court, not this Court. Thus, Velco’s reliance
on Rules 12(b)(1) and 12(b)(2) is erroneous and its motion to dismiss on these
bases is denied. See id. (denying motion to dismiss). Velco’s
motion to dismiss for failure to state a claim upon which relief can be granted
is similarly denied. Accepting the allegations of the amended complaint, see
Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996), it does not
appear “beyond doubt that [Velco] can prove no set of facts in support
of [its] which would entitle [it] to relief.” Cooper v. Parsky, 140 F.3d
433, 440 (2d Cir.1998) (quoting Conley v. Gibson, 355 U.S.
41, 45-46 (1957)). Indeed, Chimexim’s allegations concerning the
Bucharest Judgment clearly suffice to state a claim—the amended
complaint states that Chimexim holds a final, conclusive and enforceable
foreign judgment against Velco for monetary damages. (See Am. Cmplt.
¶¶ 20-24). C. Chimexim’s
Cross-Motion for Summary Judgment
Chimexim’s cross-motion
for summary judgment raises three issues: (1) whether Chimexim has met its
burden of showing that the Bucharest Judgment is final and executory under
Romanian law; (2) if so, whether Chimexim has met its burden of showing that no
mandatory basis for non-recognition exists; and (3) if so, whether Velco has
met its burden of establishing that one of the discretionary exceptions for not
recognizing a foreign judgment exists. These issues involve questions of both
law and fact. 1. Finality
Velco
contends that the Bucharest Judgment is not final, conclusive, and enforceable
because it is on appeal to Romania’s Superior Court. I reject the
argument because the undisputed evidence in the record demonstrates the
contrary. Three Romanian lawyers declare that the Bucharest Judgment is final
and executory under Romanian law, notwithstanding Velco’s latest
appeal. (See PX 5 at ¶¶ 8-9; PX 6 at ¶ 8;
PX 7 (Manzini Aff. ¶ C.4)). Moreover, Velco does not contest the fact
that neither the Court of Appeal nor the Superior Court stayed execution of the
Bucharest Judgment. Finally, Article 53 specifically states that it applies to
judgments “even though an appeal therefrom is pending or is subject to
appeal.” CPLR § 5302. Hence, there is no genuine issue of
material fact as to presumptive validity of the Bucharest Judgment. 2. Chimexim’s
Contentions Concerning Recognition Chimexim contends that
this Court should enforce the Bucharest Judgment because: it was rendered under
a system which provides impartial tribunals and procedures compatible with the
requirements of due process of law, and because the Romanian courts had
personal jurisdiction over Velco. Velco disagrees. I discuss these issues in
turn. a. Impartial
Tribunal and Due Process [*8] The
materials submitted to the Court as well as the Court’s own research
demonstrate that the Romanian judicial system comports with the requirements of
due process. Velco’s sweeping allegation that the Bucharest Judgment
is unenforceable because the “Romanian judicial system is incompatible
with due process” (Velco Mem. at 10) is rejected, as a matter of law.
Because I conclude that the Romanian judicial system comports with the
requirements of due process, I also conclude that there is no genuine issue of
material fact in this respect for trial. The record establishes
the following: First, the Romanian
government and its judicial system have undergone extensive reform since the
fall of the Communist regime in 1989 and the adoption of the Romanian
Constitution in 1991. As one of Velco’s own submissions observes: Six years after the
fall of Ceausescu, Romania is a greatly changed society with many of the
institutional features of democracy, a nascent capitalist economy, and an
identifiable path toward gradual integration with Europe. (Velco Mem. Ex. B
(excerpt from Thomas Carothers, Assessing Democracy Assistance: The Case of
Romania 15 (Carnegie Endowment for International Peace 1996) (hereinafter “Carnegie
Assessment”)). [FN6] Likewise, as another of Velco’s
submissions states: The Romanian
Constitution contains basic due process guarantees, but the procedures
necessary to implement these guarantees are not strictly followed. The Constitution
provides free access to justice, procedural due process, and guarantees the
right to the assistance of an attorney …. All persons are considered
equal before the court and entitled to their day in court. There is some
evidence that these guarantees are not always accorded. Under the Constitution,
all parties to a judicial proceeding are provided with a right of appeal. (Id. Ex. A
(Judicial Review at 9). See also Robert B. Yegge, 37
No. 3 Judges’ J. 41 (1998) (detailing CEELI judicial reform efforts in
Romania since 1991 and observing that “[t]here has been significant
social and political change in Romania” since it democratized, and
that U.S. assistance with judicial reform has succeeded). Second, the Romanian
judicial system now has the earmarks of an independent system that is capable
of duly administering justice. There is a Constitution that sets forth certain
due process guarantees, including procedural due process. There is a Judiciary
Law that establishes the judiciary as an independent branch of government.
There is judicial tenure for at least some judges. There are three levels of
appellate review, and in the instant case Velco has taken advantage of that
right to appellate review. Third, as expert
testimony submitted by Chimexim demonstrates, due process in fact is provided
under Romanian law. Constantine I. Manzini, a Romanian lawyer who is also
admitted to practice law in New York, declares that “Romania provides
impartial tribunals as well as procedures compatible with the requirements of
due process of law.” (PX 7 at ¶ C.3). In the context of this
particular case, Victor Anagnoste, a Romanian lawyer who is president of the
Romanian Bar Association, declares that “[d]ue process and procedures
compatible with the requirements of due process were accorded to
defendant.” (PX 6 at ¶ 3b). Velco failed to submit any expert
opinion suggesting that Romanian tribunals are not impartial or that Romanian
civil courts do not provide litigants with due process. [*9] Finally,
the United States entered into a trade relations treaty with Romania in 1992,
which provided that: [n]ationals and
companies of either [the United States or Romania] shall be accorded national
treatment with respect to access to all courts and administrative bodies in the
territory of the other [country], as plaintiffs, defendants or otherwise. They
shall not claim or enjoy immunity from suit or execution of judgment,
proceedings for the recognition and enforcement of arbitral awards, or other
liability in the territory [of either country] with respect to commercial
transactions. (See PX 8). The
language of the trade agreement demonstrates that the United States was willing
to recognize Romania’s judicial system. On the basis of this
record, which includes the unrebutted affidavits of Chimexim’s expert
witnesses, I can only conclude that Chimexim has met its burden of
demonstrating that the Romanian judicial system comports with the requirements
of due process. As noted, the record
does demonstrate that the Romanian judicial system is far from perfect. As
Velco points out, “corruption remains a concern” in Romania
and there “is some evidence that [due process] guarantees are not
always accorded.” [FN7] No judicial system operates flawlessly,
however, and unfortunately injustices occur from time to time even in our own
system. Velco’s general (and conclusory) assertions are not sufficient
to create a genuine issue of fact that Romania’s judicial system as a
whole is devoid of impartiality or due process. [FN8] b. Personal
Jurisdiction Chimexim also contends
that the Bucharest Judgment is entitled to recognition because the Bucharest
courts had personal jurisdiction over Velco. I agree. Pursuant to CPLR
§ 5305(a), at least three separate bases existed for the Tribunal to
exercise jurisdiction over Velco in Romania. 1) Voluntary
Appearance First, Velco
voluntarily appeared in the proceedings, other than for the purpose of
protecting property seized or protesting jurisdiction. CPLR §
5305(a)(2); Siegel Commentaries at 556. Velco contends that its appeal from the
Bucharest Judgment does not constitute a voluntary appearance. Velco is
mistaken.
One of Velco’s arguments on appeal concerned the
merits of the underlying dispute. Velco argued that the Tribunal
“mistakenly settled the case, without actually investigating the merits
of the dispute and by breaching [certain provisions of Romania’s]
Civil Code.” (DX 1 (Ex. C)). Because it appeared in the Romanian
proceedings in part to attack the Bucharest Judgment on the merits, Velco
cannot now complain that the Romanian courts did not have personal jurisdiction
over it. “If the judgment debtor did any more than [it] had to do
… to preserve [a] jurisdictional objection in the foreign court, [it]
would thereby have submitted voluntarily to its jurisdiction and forfeited the
right to claim an exception.” Siegel Commentaries at 556; see also PX 18
(Manzini Supp. Legal Opinion at 3-4, 6). [*10] On this
basis alone, Chimexim has met its burden of proving that the Romanian courts
had personal jurisdiction over Velco. After all, “[i]f any one of [the
bases for personal jurisdiction listed in CPLR § 5305(a) is] present,
recognition may not be refused for lack of personal jurisdiction.”
Siegel Commentaries at 549. 2) Corporate Status
& Cause of Action Arising from Foreign Office
Even were I to
conclude that Velco did not voluntarily appear, I would still find that
personal jurisdiction was proper because: (1) Velco’s Representative
Office had acquired a corporate status in Romania (CPLR § 5304(a)(4));
and (2) Velco had a business office in Romania and the underlying dispute
“involved a cause of action arising out of business done by [Velco]
through that office” in Romania. CPLR § 5304(a)(5). It is undisputed that
Velco’s Representative Office was authorized to do business in Romania
by Romania’s Ministry of Foreign Trade Organization Department. (DX 1
(Ex. A). Thus, Velco acquired a “corporate status” in
Romania, even though its principal place of business was New York and it was
incorporated in Connecticut. (See generally PX 6, 7, 18).
Velco’s Representative Office was registered in Romania and was
authorized to “to support the trading activity of Velco[ ] in Romania
concerning the import and export of chemical products.” (DX 1 (Ex.
A)). In addition,
Chimexim’s claim against Velco arose out of business done by Velco through its
foreign office. The purchase orders for the PVC transaction state that they
were “conveyed through Velco Bucharest.” (PX 7 (Exs. 3 and
4)). Velco itself admits in its reply memorandum that the PVC purchase orders
were “transmitted, in the first instance through the representative
office ….” (Velco Reply Mem. at
11). Velco urges the Court to consider its Representative Office—which
was open approximately forty hours a week, and staffed by four full-time
individuals—to have functioned “as no more than a
messenger.” (Id.). The undisputed facts demonstrate the
contrary, and no reasonable factfinder could conclude otherwise on this record.
(See also PX 18 at 6; PX 19 (Liliac Aff.)). Accordingly, the
Romanian courts had at least three valid bases for exercising personal
jurisdiction over Velco.
In short, Chimexim has met its burden of proving
that no mandatory basis exists for not recognizing the Bucharest Judgment. 3. Velco’s
Contentions Concerning Non-Recognition
Velco contends
that this Court should exercise its discretion to deny enforcement of the
Bucharest judgment because: (a) the Romanian courts did not have subject matter
jurisdiction; (b) the Bucharest Judgment is contrary to the parties’
1991 Agreement; and/or (c) Velco did not receive notice in sufficient time to
enable it to defend. Each of these contentions is rejected. The Romanian courts
had subject matter jurisdiction over the underlying case, and Velco offers no
valid argument or evidence to the contrary. (See generally PX 6, 7,
18). Likewise, the Bucharest Judgment does not conflict with the
parties’ 1991 Agreement. The Agreement nowhere states that Chimexim
was precluded from bringing suit against Velco. Moreover, the issue as to
whether the Agreement barred suit was specifically raised by Velco on appeal
and rejected. Finally, I do not accept Velco’s contention that it did
not receive notice in sufficient time to enable it to defend. Even accepting
Velco’s contention that its Representative Office did not receive the
summons, the evidence presented demonstrates that Velco mounted a vigorous defense
against the Tribunal’s decision on appeal, and that the Court of
Appeal duly considered its arguments. The Court of Appeal, however, was
unpersuaded and determined that the evidence presented warranted an affirmance
of the Tribunal’s decision. I will not second-guess that
determination. CONCLUSION [*11] For the
reasons set forth above, Velco’s motion to dismiss is denied and
Chimexim’s cross-motion for summary judgment is granted. The Bucharest
Judgment will be granted comity. The parties shall appear for a conference on
April 2, 1999 at 10:00 A.M. in Courtroom 11A at 500 Pearl Street. SO ORDERED. FN1. Chimexim names
Velco Enterprises, Ltd., Euronetics, Inc. (f/k/a Velco Enterprises, Ltd.), and
Velco Chemicals, Inc. (d/b/a Velco Enterprises. Ltd.) as defendants in this
case. In a conference on July 21, 1998, I decided that Velco Chemicals need not
answer Chimexim’s complaint pending a decision on the other
defendants’ motion to dismiss. Although Velco Chemicals does not appear
on this motion, I refer to defendants collectively as
“Velco.” FN2. Unless otherwise
indicated, the facts in this section are drawn from the materials submitted by
the parties as well as the following: Mircea Geoana, Romania: Euro-Atlantic Integration
and Economic Reform, 21 Fordham Int’l L.J. 12 (1997)
(“Geoana”); Andrew B. Kingston, Romania, 32
Int’l Law. 360 (1997) (“Kingston”); Daniel N.
Nelson, Romania, Encarta Multimedia Encyclopedia (Microsoft
1997); Judicial Overview of Central and Eastern Europe by the American Bar
Association Central and East European Law Initiative (CEELI) (1996)
(hereinafter “Judicial Review”); John W. Van Doren, Romania:
Ripe for Privatization and Democracy? Legal Education as a Microcosm, 18 Hous.
J. Int’l L. 113 (1995). FN3. Although the
parties do not agree on all the facts, the material facts are not in dispute. FN4. Velco contends
that the Representative Office’s function “was to facilitate
Velco’s transaction of business with Romanian companies ….
[and was not] authorized to transact business on behalf of Velco.” (See DX 1
(Goldschneider Aff. ¶ 11)). Chimexim alleges, on the other hand, that
the Representative Office initiated negotiations with it for the transaction at
issue. (See Chimexim 56.1 Statement (mislabeled as a
“3(g)” Statement) at ¶ 1; PX 19 (Liliac Aff.)). FN5. An employee of
Velco’s Representative Office declares only that the Office was never
served with the summons or complaint relating to Velco and Chimexim. (See DX 2). FN6. The same study
also observes, however, that “[a]t the same time, however, it lags
badly behind many of its neighbors in clearly breaking away from the Communist
past.” Carnegie Assessment at 15. FN7. See also Carnegie
Assessment at 53 (“Since 1989, the rule of law in Romania has improved
significantly. Serious shortcomings do remain, however, including: illegal
behavior, particularly corruption by government officials; a common attitude at
the higher levels of the power structure that the government and the state are
above the law; and only weak institutional reform processes concerning both the
law-making and law-enforcing processes. The judicial system has undergone
partial reforms, including the creation of a Superior Council of Magistrates,
the restoration of the pre-communist-era appeals courts, and the establishment
of judicial tenure for at least some judges. Yet major problems
remain.”). FN8. Velco also states
that there are “no cases involving … recognition of judgments
issuing from former Soviet-bloc nations, much less Romania.” (Velco
Mem. at 13). Likewise, however, there are no cases involving non-recognition
of Romanian judgments on the basis that its courts deny litigants due process.
Although a judge in this district denied summary judgment enforcing a Bucharest
judgment, the court did so on the ground that issues of fact existed. See Allstate
Ins. Co. v. Administratia Asigurarilor De Stat, 962 F.Supp. 420, 426 (S.D.N.Y.1998)
(holding that “this Court cannot determine with any certainty
…. that the Bucharest Court possessed jurisdiction”); see
also Reinsurance Co. of America Inc. v. Administratia Asigurarilor De Stat, No. 83 C
4682, 1985 WL 749 (N.D.Ill.1985) (declining to enforce Romanian judgment, prior
to Romania’s democratization, because court concluded that party
against whom judgment was being offered was not subject to personal
jurisdiction). Moreover, the Allstate judgment was
allegedly entered in 1983, “long before the Romanian government was
democratized.” Id. |