The Problem of Selective or Sporadic Recognition: A New Economic Rationale for the Law of Foreign Country Judgments
35 Pages Posted: 21 Aug 2010 Last revised: 8 Sep 2011
Date Written: August 21, 2010
Conventional law and economics analysis overlooks a significant feature of the law of recognition of foreign country judgments - an area of the law that regulates the private local practical use of such judgments. The existing literature on the topic currently describes two competing economic hypotheses as relevant to modeling the incentives of countries to recognize foreign country judgments. The first describes a (repeated) prisoner’s dilemma game. An alternative economic hypothesis argues that countries envisage cooperation as a weakly dominant strategy. This Article offers a new economic rationale based on an asymmetric information explanation. I argue that no country can identify, at any given moment, whether or not another given country is applying a recognition regime that is as cooperative as the regime applied by it, or whether the foreign jurisdiction is applying a less receptive regime. Each country therefore fears that the foreign jurisdiction is implementing either a “selective” recognition regime, under which the relative lack of cooperation with the forum is driven by a deliberate agenda, or a “sporadic” recognition regime, under which the foreign country turns out to be less receptive to the forum’s judgments as a result of mere coincidence.
The new economic rationale has several positive and normative implications, relating to cooperation between countries. Four are discussed in this Article. First, registration of foreign judgments, as a method for localizing foreign judgments, is shown to be superior to mere recognition, inasmuch as cooperation with other countries is the goal. Second, attempts to form inter-country recognition agreements (conventions and treaties) that ignore the problem of private information are exposed as futile. Third, the reciprocity requirement, the relevance of which as a prerequisite for recognition is currently the subject of heavy debate in the US, is also shown to be unnecessary. Fourth, countries should in limited, enumerated circumstances, concede to the local legal effect of certain unrecognized foreign judgments.
Keywords: Recognition, Foreign Judgments, Asymmetric Information
JEL Classification: K33, K49
Suggested Citation: Suggested Citation