Default Judgment Research Articles

The Challenge of Unopposed Arbitrations

THE USE of arbitration as a means of dispute resolution is certainly on the increase.1 Its advantages over other methods of dispute resolution are much vaunted: it is variously described as flexible, quick, confidential and cheap. In fact, to varying degrees, it has some, all or none of these attributes. Principally, the answer to many questions in the sphere of international arbitration is ‘it depends’. The answer depends on the rules adopted (if any), the applicable law, the situs, the arbitrators and counsel. However, the answer to the question whether an arbitral tribunal has the power to make an award akin to a default judgment is generally ‘no’.2 Certainly in the English courts a default judgment will be granted where the defendant has not filed an acknowledgement of service or, having filed an acknowledgement of service, fails to serve a defence. The issue of a default judgment is a simple, instantaneous, clerical process by means of ‘an administrative act rather than by judicial decision’.3 Under the provisions of Part 12 of the Civil Procedure Rules now in force and governing procedure in the English courts, the claimant simply files a request or, in exceptional circumstances, makes a written application4 to the court and judgment is awarded. Although there is an argument5 that by entering into the arbitration agreement the parties accept a continuing obligation to co-operate with the arbitrators and each other, in the world of international arbitration (and this duty is clear in English law),6 this is not necessarily adhered to by the parties once they are in dispute. A claimant (as it is usually the respondent who does not participate in the arbitration) may often find that his opponent is considerably less co-operative than when the arbitration agreement was drafted. The nature …

Constitutionality of Civil Imprisonment

The creditor company obtained a default judgment against the debtor and a writ of execution was issued. The debtor had already divested himself of all his property and accordingly the creditor took out a summons requiring the debtor to show cause why a decree of civil imprisonment should not be made against him. The debtor, though not indigent, failed to answer the summons and an order of civil imprisonment was made by the magistrates’ court. The debtor applied to the Supreme Court challenging the constitutionality of the order.

Commercial Bank of Kuwait v. Rafidain Bank and Central Bank of Iraq

261State immunity — Jurisdictional immunity — Action against foreign State instrumentality — Commercial activity — Activities taken in connection with commercial activity performed outside jurisdiction — Default judgment entered for failure to make payments under loan agreements — payments to be made in United States — Whether reliance by plaintiff upon agents in United States to collect sums due to it constitutes direct effect in United States sufficient to establish jurisdiction — Whether “good cause” shown for denying motion for default judgment — The law of the United States

Psychological Barriers to Litigation Settlement: An Experimental Approach

** Research Fellow, SCCN. B.A. 1989, Stanford; Ed.M. 1991, Harvard; J.D. 1994, Stanford. Ed. Research support for this project was provided by a generous grant from the SCCN. The authors thank Robert Mnookin, Janet Cooper Alexander, Ian Ayres, and Tom Lyon for their advice and comments on earlier drafts, the participants in the Harvard Law School Negotiation and Conflict Resolution Interdisciplinary Research Seminar for their comprehensive and incisive written and oral critiques, and especially Lee Ross for his consultation on social science laboratory research methodology. 1. One seminal empirical study, now over 20 years old, found that only 4.2% of automobile liability claims filed against insurance companies ultimately reach trial. See H. LAURENCE Ross, SETTLED OUT OF COURT: THE SOCIAL PROCESS OF INSURANCE CLAIMS ADJUSTMENTS 217 (1970). A more recent study found that approximately 8% of civil suits filed in state and federal courts went to trial, and another 22.5% of those cases disposed of by judges, most through dismissal, summary judgment, or default judgment. See David M. Trubek et al., The Costs of Ordinary Litigation, 31 UCLA L. REV. 72, 89 (1983). More than 50% of the claims settled out of court prior to adjudication. Id. Criminal suits also settle in overwhelming numbers through plea bargaining. See JAMES E. BOND, PLEA BARGAINING AND GUILTY PLEAS ? 1.2 (2d ed. 1983). 2. Litigants incur both psychic and financial costs. According to Marc Galanter, who cites a number of empirical studies to support his argument, trials impose substantial emotional costs on both plaintiffs and defendants. See Marc Galanter, The Day After the Litigation Explosion, 46 MD. L. REV. 3, 8-11 (1986). For plaintiffs and defendants alike, litigation proves a miserable, disruptive, painful experience. Few litigants have a good time or bask in the esteem of their fellows indeed, they may be stigmatized. Even those who prevail may find the process very costly. Id. at 9 (citations omitted). Plaintiffs and defendants also incur financial costs at trial. Trubek et al., supra note 1, at 90-93. Costs fall into two categories: out-of-pocket costs including legal fees, expert witness fees, and so on and the monetary value of the time clients spend on cases. Id. at 91. Generally speaking, the more legal actions that take place, the higher the costs incurred that is, increased legal fees, client time away from work, and trial fees, such as expert witness fees, stenographic costs, and travel expenses. Id. at 104 (finding that duration does not have a substantial effect on hours.... [T]he more motions filed and discovery conducted, the more hours spent.); see also RAND: THE INSTITUTE FOR CIVIL JUSTICE, COMPENSATION FOR ACCIDENTAL INJURIES IN THE U.S. 135-36 (1991) (finding that about one-fifth of personal injury plaintiffs were told that the fee would depend on the length of time required to resolve the claim, the ultimate amount received, or whether or not a trial was required). 3. J.S. Kakalik and R.L. Ross examined public spending on civil disputes during fiscal

Meadows and Another v. Dominican Republic and Another

37State immunity — Jurisdictional immunity — Whether presumption of sovereign immunity — Commercial activity exception — Distinction between sovereign and commercial acts — Distinction turning on nature, rather than purpose of act — Requirement of direct effect in United States — Foreign State under contractual obligation to make payment in the United States — Whether financial loss suffered as a result of non-payment constituting a direct effect — The United States Foreign Sovereign Immunities Act 1976 — Judgment in default — Grounds for setting aside judgment in default — The law of the United States

Addendum

On appeal by Iraqi Airways Company (IAC) the Court of Appeal (Nourse, Leggatt and Simon Brown LJJ) reversed the ruling of Evans J and held that in removing and “keeping safe” the Kuwaiti aircraft IAC was acting in the exercise of sovereign authority, and accordingly, by virtue of section 14(2) of the State Immunity Act 1978, was immune from the proceedings brought by Kuwait Airlines. The Court of Appeal also held that, by applying for a stay of the default judgment and performance of the conditions subject to which a stay was ordered, IAC had not submitted to the jurisdiction of the English court within the meaning of section 2(3)(6) of the Act (Transcript, 23 October 1993).

Security for Costs of Arbitration Proceedings in England, New Zealand and Australia

ALTHOUGH it is trite to observe that legal costs are of importance to all parties to arbitration proceedings, securing those costs from an opponent can prove a daunting task. Arbitrators, in contrast with judges, possess only limited powers to award security for costs with the result that parties frequently feel obliged to seek redress in the courts where in reality the risk of an unfavourable costs order is not equally shared. It is beyond doubt that a plaintiff has a choice whether or not to litigate, but a defendant is in a less advantageous position. In order to avoid default judgment, the defendant is compelled to litigate or settle, whether the plaintiff has available assets sufficient to pay the costs of a successful defence or otherwise. Courts have sought to strike a balance enabling impecunious plaintiffs to prosecute their claims while protecting a party who is brought to court against the possibility that the plaintiff, if unsuccessful, will be unable to meet an order for costs.1 Such a fine balance has been achieved through the exercise of an unfettered discretion to order security for costs based on all the circumstances of the case. This article is concerned with the powers of arbitrators and courts to award security for costs from parties to arbitration proceedings. An arbitrator can only derive power to award security for costs by agreement of the parties to a consensual submission2 or as a condition for the making of an interim award3 or stating a special case.4 In contrast the court derives jurisdiction to order security for costs in arbitration proceedings not through inherent jurisdiction, which by its very nature is limited to proceedings before a court,5 but by specific statute engaging the rules of court and associated inherent jurisdiction6 or …

Practical Concepts Inc v. Republic of Bolivia

State immunity — Jurisdictional immunity — United States Foreign Sovereign Immunities Act 1976 — Commercial activity exception — Distinction between sovereign and commercial acts — Whether entering into a contract a sovereign or commercial act — Distinction turning on main rather than subsidiary terms of the contract — Contract to advise Bolivia on rural development — Provisions for diplomatic, tax and customs privileges — Whether entering into contract constitutes a commercial act — Judgment in default — Grounds for setting aside judgment in defaultRelationship of international law and municipal law — Foreign relations interest in litigation before municipal courts — Action against foreign State — Evidence from executive that action affecting foreign relations interest — Relevance — The law of the United States

National Union Fire Insurance Co. of Pittsburgh v. People’s Republic of the Congo.

This appears to be the first decision dealing with the recognition in the United States of a foreign judgment rendered against the government of a third country. At issue was the recognition of a default judgment rendered by the English High Court of Justice, Chancery Division, against the People’s Republic of the Congo (Congo). The facts leading to the English judgment were as follows. In 1984 the Congo issued to an English bank a promissory note in the amount of over $26 million corresponding to a Credit Facility Agreement (Credit Agreement) with the bank. At the same time, the National Union Fire Insurance Co. of Pittsburgh (NUFI) became the insurer of the Congo’s obligations under the note. When the Congo failed to make payment, NUFI paid in its stead and became subrogated to the rights of the lender.

Sovereign immunity—waivers of immunity—agency—apparent authority of ambassador—default judgment against foreign sovereign

Sovereign immunity—waivers of immunity—agency—apparent authority of ambassador—default judgment against foreign sovereign

Suing Solely to Extract a Settlement Offer

Suing Solely to Extract a Settlement Offer

Camin v. Oudes

International law in general — International Comity — Public policy — Liability for road accident — Foreign judgment establishing civil liability — Whether such judgment should be recognized by municipal courts — Liability based on finding of guilt in criminal proceedings where defendant not given possibility to defend himself — Whether recognition contrary to Dutch public policy — Analogy with default judgments under the Netherlands-Italy Treaty regarding Recognition and Enforcement of Judicial Decisions, 1959 — The law of the Netherlands

A model in which suits are brought for their nuisance value

By a suit brought for its nuisance value, we mean a suit in which the plaintiff is able to obtain a positive settlement from the defendant even though the defendant knows the plaintiff's case is sufficiently weak that he would be unwilling or unlikely actually to pursue his case to trial. This note considers a model of the legal dispute allowing for the occurrence of such nuisance suits (among other types of outcome). The main features of the model are illustrated in Figure 1. Specifically, the plaintiff may choose to file a claim at some (presumably small) cost. If the defendant does not then settle with the plaintiff and does not, at a cost, defend himself, the plaintiff will prevail by default judgment. If the defendant does defend himself, however, the plaintiff then may either withdraw or may, at a cost, litigate, resulting in a favorable verdict only with a probability (and a low one if his case is weak). Given the model and the assumption that each party acts in his financial interest and realizes the other will do the same, it is easy to see how nuisance suits can arise. By filing a claim, any plaintiff, and thus the plaintiff with a weak case, places the defendant in a position where he will be held liable for the full judgment demanded unless he defends himself. Hence, the defendant should be willing to pay a positive amount in settlement to the plaintiff with the weak case--despite the defendant's knowledge that were he to defend himself, such a plaintiff would withdraw. This idea is elaborated below in Section II, which presents a general analysis of the model using numerical examples. The situations in addition to that of the nuisance suit that are discussed in the analysis are those where the plaintiff's case is 'meritorious'--h e would be likely to prevail at trialmbut he would still not want to go to trial because the litigation costs would exceed the expected judgment; where the plaintiff's case is sufficiently strong and the expected judgment sufficiently high that he would be willing to go to trial; and, generally, where litigation costs are shifted to the losing party at trial. Section III formally analyzes the model and proves the results of Section II. The concluding Section IV considers the realism of the model, offers several qualifying remarks, and comments on previous models of the litigation process.

United States: District Court for the Northern District of Alabama (Eastern Division) Memorandum of Opinion Setting Aside Default Judgment in Jackson v. People's Republic of China (Foreign Sovereign Immunities Act; Service of Process; U.S.-Sino Relations)

United States: District Court for the Northern District of Alabama (Eastern Division) Memorandum of Opinion Setting Aside Default Judgment in Jackson v. People's Republic of China (Foreign Sovereign Immunities Act; Service of Process; U.S.-Sino Relations)

Clerget v. Banque Commerciale Pour L'europe du Nord and Others

Sovereign immunity — Property of foreign States — Action far arrears of salary — Judgment in default — Whether foreign State entitled to immunity from execution — Attachment of bank balances — Whether funds whose origin and destination is undetermined are subject to attachment — Whether fact that debt arose from activity iure gestionis is relevant — The law of France

Foregin Trade Institute Bank Account Case

209Sovereign immunity — Property of foreign States and their agencies — Foreign trade institute — Trade section of consulate — Employee — Citizen of rcceiving State — Action for unpaid salary — Judgment in default — Whether institute entitled to immunity from execution — Attachment of bank account of institute — Whether institute performs separate functions from consulate — Whether institute acting iure gestionis or iure imperii — The law of the Federal Republic of Germany

Spanish Consular Bank Accounts Case

Sovereign immunity — Property of foreign States — Enforcement of default judgment against foreign State — Whether foreign State entitled to immunity from execution — Attachment of funds in bank accounts of consular agencies of foreign State — Whether such funds devoted to sovereign purposes — Classification of funds under municipal law — Distinction between administrative and fiscal assets — Whether insertion of forum clause in lease constitutes submission to measures of execution — The law of the Federal Republic of Germany

Re Royal Bank of Canada and Corriveau et al.

Sovereign immunity — Foreign State — Immunity from execution — Default judgment against foreign State — Whether capable of being enforced by attachment of funds held at bank in State’s name — Restrictive theory of sovereign immunity — The law of Canada

Castro and Others v. Saudi Arabia

Sovereign immunity — Foreign State — Nature of sovereign immunity — Plea which goes to subject matter jurisdiction — Whether court required to consider plea entered after default judgment — Waiver — Agreement by foreign State to indemnify State of the forum — Whether a waiver of immunity — Commercial activity — Whether agreement between States for training military personnel a commercial activity — Immunity from tort claims — The law of the United States

Default Judgments in Social Security Claims Litigation

Default Judgments in Social Security Claims Litigation