Globalization has created new challenges for parties threatened by, or involved in, cross-border disputes. Internet communication has made electronic transactions seamless and easy to operate anywhere in the world. Tax havens have enhanced the ability to protect assets via the internet. As a result, the legal benefits provided by different jurisdictions make it more difficult for victims to recover claims from foreign parties and assets located offshore.
There are many obstacles in confronting cross-border recoveries:
- Multijurisdictional complex set of facts
- Disharmony in laws providing access to documents and information in the control of third parties
- Bank, fiduciary and secrecy laws
- Conflicting laws on setting aside legal fictions
- Laws of trusts
- Insufficient time and experience
These obstacles require parties to think differently than in domestic litigation. Parties and their counsel should consider the following:
Do Not Rush to File Suit or to Obtain a Judgment
International claims need to be flexible and judgments may restrict your recovery efforts because they can be strictly construed. U.S. judgments do not simply cross borders and are dependent on the foreign country’s internal laws, treaty obligations, and procedures.
Carefully Consider the Cause of Action
Selection of the cause of action can inhibit recovery in a foreign country. Judgments that contain punitive or treble damages may be viewed as penal and unenforceable.
Understand that Legal Remedies and Protections Vary from Country to Country
The relationship and impact of any country’s laws on other jurisdictions is important in determining where and how to sue. Advance consideration of the interaction between law and process in the pertinent jurisdiction can greatly enhance recovery efforts. For example, consider whether a judgment in one foreign jurisdiction might be recognized in another jurisdiction to a greater extent than a U.S. judgment.
Understand the Informal and Financial Obstacles
The vast majority of asset recoveries involve overseas accounts, trusts, and companies. Certain offshore jurisdictions have regulatory setups and secrecy laws to obscure links to money with shell companies and nominee directors. These jurisdictions make it difficult to know who owns or directs the companies.
Understand the Political Obstacles
Some governments are more supportive than others of private actions for recovery. Depending on the target of the investigation, the political process may be an additional and difficult barrier to overcome.
The confluence between fact-finding and legal principles is unique in this area of practice. Planning, patience, and persistence are essential components of an international recovery effort. They must be approached in a systematic fashion. The initial planning phase is the most critical. Tactical objectives need to be prioritized. An effective strategy identifies the jurisdictions involved, the targets of recovery, the evidence gathering needed and how different countries’ laws interact. Developing such a strategy at the beginning of the process is critical to achieving success when pursuing cross-border recoveries. Simply assuming that pursuing a domestic litigation strategy will result in a successful recovery is likely to lead to higher costs and a lower likelihood of recovery.
Rick S. Rein is a partner at HMB Legal Counsel in Chicago, Illinois.
Copyright © 2020, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).