Foreign Currency Judgments - Part 4 Chapter 5 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
The general law on damages has as its objective the placing of the judgment creditor or injured party in a position as close as possible to the status quo ante or that in which he would have been if the obligation had been fully performed or had the injury not occurred. In the context of civil money damages, the injured party is additionally compensated for the time-cost of money occasioned by the breach or the lawsuit through the payment of interest, both pre- and post-judgment.
The objective is the same whether the money damages are measured in U.S. dollars or another currency. However, the practice of American courts of issuing judgments only in U.S. dollars has to date required courts and parties to translate foreign currency claims or judgments into dollars. Over the past fifteen years, as a result of the volatility of foreign exchange fluctuations, this practice has been faulted for giving rise to inconsistent results and has been criticized for impinging on the rights of litigants to be fully compensated.
This chapter discusses the development of the problem and current attempts to provide a solution, in New York by the enactment of section 27(b) of the Judiciary Law, and in the United States in general by the position taken in the Restatement of the Law (Third) of the Foreign Relations Law of the United States (hereinafter “Restatement 3d”), both of which contemplate the entry of judgments in foreign currency, rather than in dollars.
The Dollar-Judgment Rule
Foreign money damage claims most frequently come before U.S. courts in the following two instances: (i) Original actions filed by plaintiffs involving obligations denominated in foreign currency and (ii) Proceedings to enforce foreign judgments or arbitral awards in which the currency of the judgment or award is in a currency other than U.S dollars. Since U.S. courts have historically applied the so-called dollar-judgment rule under which all judgments must be rendered in dollars, if the judgment creditor wanted funds in the foreign currency, it would be his responsibility to purchase, post-judgment, foreign currency with the amount of dollars awarded.
Interestingly, the dollar-judgment “rule” has never been codified, but seems to derive in part from considerations of sovereignty, from statutory authority (since repealed) and from procedural concerns expressed in its counterpart “sterling-only” rule under the English common law (now abandoned).