The Legal Status of Acquired Rights Arising from Fraud upon the Law in a Third State: The Challenge of Recognition and Enforcement of Cross-Border Judgments

Abstract

Fraud upon the law, as one of the exceptions to the application of conflict-of-laws rules, has consistently created serious challenges in relations between the state of origin (whose law has been circumvented) and the destination state (whose law has been applied). Nevertheless, the legal status of the effects of such fraud in a “third state,” acting as the authority for the recognition and enforcement of foreign judgments, has received far less scholarly attention. Using a descriptive-analytical method, this article seeks to answer the question of how a judge in a third state should respond when confronted with acquired rights resulting from a fraudulent act. The findings indicate that the third state fluctuates between two competing imperatives: preserving the international validity of judgments and safeguarding international public policy in combating fraud. Although, according to the classical theory, fraud corrupts everything, within the jurisdiction of a third state there appears to be a tendency toward the relativity of the effects of fraud. In this regard, the present article proposes that the third state should adopt a differentiated approach by distinguishing between fraud directed against internationally mandatory rules and fraud directed against domestic laws. Furthermore, where an abuse of rights by the litigating parties is established, the third state should refrain from granting effect to acquired rights arising from fraud, in order to prevent its jurisdiction from becoming a safe haven for the legitimization of fraudulent acts.