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Examination of the foreign judgment
By: SyCip Salazar Hernandez & Gatmaitan - Anthony RV Jacoba , Ricardo Ma. P.G. Ongkiko and Trisha Beverly C Flores
Vitiation by fraud
Will the court examine the foreign judgment for allegations of fraud upon the defendant or the court?
When raised as an issue, Philippine courts will examine the foreign judgment for allegations of fraud since the foreign judgment may be repelled by evidence of fraud (section 48, Rule 39 of the Rules of Court). Whether or not there was fraud will be decided by the court where enforcement of the foreign judgment is sought on the basis of its own internal law (Coquia and Aguiling-Pangalangan, Conflict of Laws: Cases, Material and Comments, p556 (2000)).
To hinder the enforcement within this jurisdiction of a foreign judgment, fraud must be extrinsic - that is, fraud based on facts not controverted or resolved in the case where judgment is rendered, or which would go to the jurisdiction of the court or would deprive the party against which judgment is rendered a chance to defend the action to which it has a meritorious case or defence. In contrast, intrinsic fraud - that is, fraud that goes to the very existence of the cause of action, such as fraud in obtaining the consent to a contract - is deemed already adjudged, and it therefore cannot militate against recognition or enforcement of the foreign judgment (PAWI v FASGI Enterprises Inc, 342 SCRA 722, 737 (2000)). Although there appears to be no specific ruling by the Supreme Court on the matter, Philippine courts may look into the defence of collusion, which is akin to fraud, under the express provisions of section 48, Rule 39 of the Rules of Court.
Will the court examine the foreign judgment for consistency with the enforcing jurisdiction’s public policy and substantive laws?
The court cannot give effect to a foreign judgment that contravenes the Philippines’ laws, customs and public morals (Arca v Javier, 95 Phil 579 (1954)). To extend the effect of a foreign judgment in the Philippines, Philippine courts must determine whether the foreign judgment is consistent with domestic public policy and other mandatory laws (Fujiki v Marinay, 700 SCRA 69, 91 (2013)). Prohibitive laws concerning persons, their acts or property, and those that have for their object public order, public policy and good customs, shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon, in a foreign country (article 17 of the Civil Code).
The viability of the public policy defence against the enforcement of a foreign judgment has been recognised in the Philippines. This defence allows for the application of local standards in reviewing the foreign judgment, especially when such judgment creates only a presumptive right, as it does in cases wherein the judgment is against a person. The defence is also recognised within the international sphere, as many civil law nations adhere to a broad public policy exception that may result in a denial of recognition when the foreign court, in light of the choice of law rules of the recognising court, applied the wrong law to the case. The public policy defence can safeguard against possible abuses of the easy resort to offshore litigation if it can be demonstrated that the original claim is noxious to constitutional values (Mijares v Ranada, 455 SCRA 397, 420-421 (2005)). A specific instance of public policy negating the enforcement of a foreign judgment is when an absolute divorce decree is secured by a Philippine national married to another Philippine national. According to the Philippine Supreme Court, this is contrary to the concept of public policy and morality and will not be recognised in the Philippines (Bayot v Court of Appeals, 570 SCRA 472 (2008), citing Llorente v Court of Appeals, 345 SCRA 592 (2000)).
What will the court do if the foreign judgment sought to be enforced is in conflict with another final and conclusive judgment involving the same parties or parties in privity?
While there is no Philippine Supreme Court decision on this point, a view is taken that a conflicting decision is one of the discretionary grounds for non-recognition of foreign judgments (Coquia and Aguiling-Pangalangan, Conflict of Laws: Cases, Material and Comments, p557 (2000)).
Enforcement against third parties
Will a court apply the principles of agency or alter ego to enforce a judgment against a party other than the named judgment debtor?
Yes. In case of a judgment or final order upon a specific thing, the foreign judgment is conclusive upon the title to the thing; hence, if the thing is held by a party other than the judgment debtor, the foreign judgment is still enforceable against the third party because it relates to the thing (section 48, Rule 39 of the Rules of Court). On the other hand, in a judgment or final order against a person, the foreign judgment is presumptive evidence of a right between the parties and their successors in interest by a subsequent title (section 48, Rule 39 of the Rules of Court), which is an express statement that the foreign judgment may be enforced against third parties provided that the third party is a successor in interest of the judgment debtor by a subsequent title. Although it appears that the Philippine Supreme Court has yet to resolve a foreign judgment case involving piercing of the corporate veil, we believe that the principles behind piercing may allow the enforcement of a foreign judgment against a party other than the judgment debtor. Examples might include where the veil of corporate fiction is being used as follows:
to defeat public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation;
in fraud cases or when the corporate entity is used to justify a wrong, protect fraud or defend a crime; or
in alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organised and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation (De Castro v Court of Appeals, 805 SCRA 266, 290 (2016)).
Alternative dispute resolution
What will the court do if the parties had an enforceable agreement to use alternative dispute resolution, and the defendant argues that this requirement was not followed by the party seeking to enforce?
While there appears to be no Supreme Court case that directly resolves this point, the answer here may depend on whether or not the defence that the agreement to resort to alternative dispute resolution was not followed was raised in the foreign court proceedings.
If the party raising the defence of non-compliance with the agreement to resort to alternative dispute resolution participated, but did not raise the issue, in the foreign court proceedings, we believe that the defence may be defeated under the doctrine of waiver of rights. Under Rule 4 of the Special Rules of Court on Alternative Dispute Resolution, a party to a pending action filed in violation of the arbitration agreement may request a court to refer the parties to arbitration in accordance with such agreement until the pretrial conference. After the pretrial conference, the court will only act upon the request for referral if it is made with the agreement of all the parties to the case. Applying this principle, if a party failed to invoke an agreement to resort to alternative dispute resolution in the foreign court proceedings, the Philippine courts will consider such a party to have waived the right to resort to alternative dispute resolution.
If the defence of non-compliance with the agreement to resort to alternative dispute resolution was raised in the foreign court proceedings but the foreign court ignored said defence and proceeded to hear the case and render a judgment, there may be a different approach by the Philippine courts depending on the mode of alternative dispute resolution chosen by the parties. If the mode is arbitration, we believe that the defence of non-compliance with the agreement to resort to alternative dispute resolution may be raised in light of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, which was ratified by the Philippine Senate; Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004; and the declared public policy of actively encouraging and promoting the use of alternative dispute resolution (section 1 of Republic Act No. 9285). On the other hand, if the mode is mediation or other similar modes, which, unlike arbitration, do not result in a binding award or decision rendered by a third party, we believe that the defence of non-compliance with the agreement to resort to alternative dispute resolution will not succeed because the nature of the mode chosen by the parties may only cause the suspension of the court proceedings (to allow the parties to go through the alternative dispute resolution process agreed upon), but may not invalidate a court judgment rendered after due proceedings.
Favourably treated jurisdictions
Are judgments from some foreign jurisdictions given greater deference than judgments from others? If so, why?
Alteration of awards
Will a court ever recognise only part of a judgment, or alter or limit the damage award?
The Philippine Supreme Court has yet to rule on a matter involving the recognition of only part of a judgment, or an alteration or limitation of the damage award, but we believe it is possible for the Philippine courts to recognise only part of a judgment, or alter or limit the damage award on, among other things, public policy or clear mistake of law or fact grounds (section 48, Rule 39 of the Rules of Court).
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