Enforcement of Foreign Judgments in England1
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ReedSmith October 2004 Legal Update ENFORCEMENT OF FOREIGN JUDGMENTS 1 Helen Mulcahy IN ENGLAND T: +44 (0)20 7556 6809 E: [email protected] INTRODUCTION When an international business transaction becomes unworkable because goods or services are not paid for or monies lent are not repaid, creditors can often be left with a shortfall when they discover that the only assets the debtor owns are outside their local jurisdiction. Businesses, which enter into transactions with a foreign party, can sometimes be left vulnerable when the debtor’s only assets, which could satisfy a judgment, are difficult to attack or are at risk of dissipating quickly without trace. The creditor can choose to initiate proceedings, subject to jurisdiction clauses, local procedural rules Mat Heywood T: +44 (0)20 7556 6710 and issues as to forum conveniens in either:- E: [email protected] (a) their local jurisdiction and try to enforce the judgment in the jurisdiction where the assets are located; or (b) the jurisdiction where the assets are located. Often creditors are hesitant to initiate proceedings in unfamiliar jurisdictions where laws and proce- dures may lead to an unsatisfactory result or, may find at the end of the legal dispute that any assets have disappeared because the rules in that jurisdiction did not provide for freezing the debtor’s assets. For a party engaging in business with foreign parties, one of the most important issues at the outset of the relationship is to ascertain the whereabouts, value, and accessibility of the counter-party’s assets; if a dispute arises then a shrewd creditor will endeavour to preserve those assets pending judgment. Indeed, the very act of identifying and securing those assets can often provide an effective leverage in settlement negotiations and may eliminate the need to proceed with litigation and the attendant LONDON enforcement issues. NEW YORK LOS ANGELES Just as one of the primary considerations for a creditor is whether a favourable judgment may be SAN FRANCISCO enforceable elsewhere; it is equally an important consideration for the debtor: whether he or she can WASHINGTON, D.C. ignore the foreign proceedings, confident that in doing so the judgment will not be (easily) enforce- PHILADELPHIA PITTSBURGH able outside the jurisdiction in which it was obtained, or at least not in the jurisdiction where the OAKLAND debtor’s assets are located. It will be decidedly risky for a debtor to assume that a foreign judgment PRINCETON FALLS CHURCH which is too difficult or too expensive to enforce in certain jurisdictions, will be difficult to enforce WILMINGTON everywhere else. NEWARK MIDLANDS, UK CENTURY CITY 1. English Procedure in respect of enforcement of Foreign Judgments RICHMOND When determining what procedures will be required to enforce a foreign judgment in England, coun- HARRISBURG LEESBURG tries can be split into three categories: WESTLAKE VILLAGE (i) Countries which are signatories to the Brussels Convention 1968, the Lugano Convention 1988 reedsmith.com or Council Regulation (EC) 44/2001 (the "Brussels Regulation"); ReedSmith (ii) Countries with which the UK has bilateral conventions (e.g. French Court may do so subject to the rules of priority. Commonwealth countries). These are given effect to in the UK Where a party seeks enforcement in England of a judgment decided by the Administration of Justice Act 1920 (the "1920 Act") and in another Member State, the Civil Jurisdiction and Judgments Order the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the 2001 provides that a qualifying judgment can be registered with the "1933 Act"); and English High Court and, once registered, that it "shall, for the purpose (iii) Countries with which the UK has no such conventions (for of enforcement, be of the same force and effect" as if it had been a example USA, Japan and the States of the former Soviet Union). judgment of the High Court. The principal factor which determines the applicable rules for enforc- As mentioned earlier, the aim of the Brussels Regulation is to main- ing a foreign judgment is the identity of the Court which gives tain an efficient system for recognising judgments and to eliminate judgment. For example, if the judgment arises out of a civil or com- the need for further or repeated litigation. It is generally impermissi- mercial matter from a French Court, its enforceability in most other ble at the recognition stage to object to the jurisdiction of the European countries will be governed by the Brussels Regulation; oth- adjudicating Court. If grounds exist for objection, they must general- erwise, the rules governing its enforceability will depend on whether ly be raised before the adjudicating Court itself or not at all, because specific reciprocal arrangements exist with other countries. England is all Courts which are subject to the provisions of the Brussels well placed as a forum to conduct litigation, since it is party to the Regulation are regarded as being equally competent to apply the juris- Brussels Regulation and has reciprocal enforcement arrangements in dictional rules and each have jurisdiction and competence to interpret place with most Commonwealth countries as well as other countries those rules and, if necessary, refer questions upon their interpretation which historically have had ties with England. The legal and practical to the European Court of Justice. considerations involved in choosing a jurisdiction to institute pro- There are several notable differences between the enforcement provi- ceedings with a view to enforcing a judgment can be complicated. sions under the Brussels Regulation and the regime established by the Since the Brussels Regulation regulates most European countries this common law and the 1920 Act and 1933 Act. Three principal dif- note will focus on the procedures laid out in the Regulation before ferences are:- setting out the main differences between the Regulation and the (1) that enforcement under the Brussels Regulation is not limited to Lugano Convention and what is required by the English Court for money judgments, or to final judgments; enforcing judgments from Courts in other non Regulation or (2) in principle but subject to certain limitations, the Court in which Convention countries. enforcement is sought is not entitled to investigate the jurisdic- 2. English procedure for enforcing judgments obtained within tion of the Court which gave judgment; the the European Union (other than England) (3) effect of the Brussels Regulation is that the enforcement proce- European law encourages the free movement of judgments: a judg- dures apply to all judgments within their scope, whether or not ment obtained in one European country is enforceable in almost they are against persons domiciled in a Member State. every other European country, with minimal administration by the At common law, for a judgment to be entitled to be recognised, it enforcing Court. This system of recognising judgments for enforce- must: (a) be final and conclusive in the Court which pronounced it; ment is not the case for many other non-European countries with and (b) it must have been given by a Court regarded by the English which English businesses transact daily. Court as competent to do so. In order to be enforceable a judgment By way of background, where proceedings are instituted in a Member must: (a) be recognised as being final and conclusive upon the mer- State (including England) the Brussels Regulation or the Lugano its of the claim; and (b) be for a fixed sum of money. The method of Convention set out guidelines as to which Court or Courts are enti- enforcement is for the judgment creditor to institute fresh proceed- tled to have jurisdiction. As soon as a Court is seised of an action in ings in the enforcing jurisdiction, setting out the circumstances of the a Member State , that Court (for example, France) can then determine judgment debt and how the two pre-conditions are satisfied and whether to allocate: then, depending on whether the defendant disputes the claim, apply (a) the French Court jurisdiction over the dispute; or for summary judgment. (b) jurisdiction to the French Court and to those in another Member The simplicity in the system for recognising judgments under the State; or Brussels Regulations is similar to enforcement of arbitration awards (c) jurisdiction to the Courts of another Member State and deny it to though arbitrations are outside the scope of the Brussels Regulations the French Court. and successful parties wanting to enforce an arbital award in England In scenario (a) the French Court may (and generally must) hear the must rely on the specific procedures provided for in the English case if called upon to do so. In scenario (b) the French Court may Arbitration Act and the specific Court procedural rules associated determine the case, but not if a Court of another Member State with arbitral awards for enforcement in England. accepts jurisdiction first. In scenario (c) the French Court cannot Where an appeal is pending against a judgment determined by a determine the case. In all cases in which the Brussels Regulation or Member State, the Brussels Regulation provides that the foreign the Lugano Convention allow the French Court jurisdiction, the enforcing Court is not prevented from registering the judgment (if it ReedSmith is capable of enforcement) but once it is registered the Court may stay (B) CIRCUMSTANCES FOR REFUSING RECOGNITION enforcement proceedings if an appeal has been lodged against the The grounds for refusing recognition or enforcement of judgments judgment in the Member State in which it was given. Enforcement within the Brussels Regulation are very limited. The jurisdiction of the may also be stayed if the time for appeal has not yet expired, though foreign Court may only be investigated by the English Court if the dis- an appeal has not been lodged.