Chapter 8 Public Policy Exception

• Jurisdiction: United States

8. Public Policy Exception

Since 2002, the principle of mutual trust and the general presumption of the legitimacy and validity of foreign judgments have been fundamental to the EIR 2000 (and now to EIR Recast). Insolvency and insolvency-related judgments must be recognized automatically and immediately. There is one exception, however. Any Member State may refuse to recognize insolvency proceedings opened in another Member State or to enforce a judgment handed down in the context of such proceedings where the effects of such recognition or enforcement would be manifestly contrary to that state's public policy (Article 33 EIR Recast).

As a principle, where international treaties and conventions are concerned, this so-called public policy exception is quite common (see, e.g., Article V(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention)). Under the EIR Recast, the public policy exception has two angles. First of all, a foreign insolvency judgment shall not be scrutinized with respect to its merits (known as révision au fond). All questions regarding the substance of the judgment must be discussed before the courts of the state that opened insolvency proceedings. In the state where recognition or enforcement is requested (requested state), the court is only permitted to consider whether the foreign judgment will have effects contrary to that state's public policy. The fact that insolvency proceedings could not have been brought in the requested state on account of a debtor's capacity shall not preclude recognition or enforcement (Article 19(1) EIR Recast). Secondly, the EIR Recast precludes verification by the recognizing court of the international jurisdiction accepted by the court of the state in which proceedings have been opened pursuant to Article 3 EIR Recast.

The term "public policy" appears to be a somewhat open, abstract norm. This legal norm should be derived from the national law of the requested state, and therefore the concept does not necessarily have an EU-wide, uniform meaning. Public policy is based on the fundamental principles of the law of the requested state and involves, in particular, the constitutionally protected rights and freedoms and fundamental policies of the requested state (Article 33 EIR Recast).

A standard case under EU law explaining public policy is Case C-7/98, Dieter Krombach v. André Bamberski, ECLI:EU:C:2000:164 (March 28, 2000). In this case, it was held...