Enforcing foreign default judgments in England and Wales - avoiding jurisdictional red herrings.
- Issues as to the enforceability of foreign default judgments raise particular issues when the issuing jurisdiction is either a non-EU member state or a state which has no reciprocal enforcement treaty with the United Kingdom.
- The Supreme Court in Rubin v Eurofinance  3 W.L.R.1019 reviewed the basis on which a foreign judgment will be enforceable at common law in England. In essence the enforceability of a foreign judgment turns on either the presence of the judgment debtor in the jurisdiction of the foreign court or submission to the jurisdiction of the foreign court, whether by means of the entering of an appearance in the litigation before the foreign court or agreement to submit disputes to the jurisdiction of the foreign court.
- Vizcaya is a timely reminder for those advising judgment debtors or creditors where the enforcement proceedings concern an Order from a foreign court, that issues regarding the jurisdictional competency of a foreign court do not turn on the foreign court’s rules. Rather the English rules of private international law apply to jurisdictional competency issues. The factual context concerned the enforceability of a judgment issued by a court in New York. It involved monies invested by Vizacaya Partners in the Bernie Madoff Ponzi scheme. Before the fraud had come to light Vizacaya Partners had been repaid some of the monies invested in the sum of $180m.
- The Trustee in the liquidation proceedings of Madoff’s companies in New York commenced proceedings there against Vizcaya seeking repayment of the $180m. The Trustee obtained judgment in default of appearance from the court in New York for that sum.
- Some $74 million of the funds were located in Gibraltar and other funds in the Cayman Islands. It was in those jurisdictions that the Trustee was concerned to enforce the New York judgment. The rules for enforcement in those jurisdictions are the same as English law and accordingly the Trustee had been afforded permission to intervene in the case cited previously that had been before The Supreme Court, Rubin v Eurofinance Limited.
- The issue for the Privy Council was whether the New York judgment was enforceable as a matter of the English rules of private international law on enforcement. The evidence was clear that the issuing Court in New York considered that it had the requisite jurisdictional competency to issue the judgment in default. The New York Court based its finding of jurisdictional competency in part on a doctrine unrecognised by English courts for jurisdictional purposes. Namely, that of ‘purposeful availment’. The notion underpinning this doctrine is that if a party purposely and voluntarily directs its activities to the forum this thereby permits the forum in question to constitutionally assert jurisdiction over the actor.
- The rational supporting the purposeful availment doctrine is that in determining personal jurisdiction over a non resident, random or fortuitous contacts with the forum state should not result in jurisdiction over the non resident. Purposeful availment as a basis for jurisdiction in personam does not depend upon the physical presence of the defendant in the forum state. It suffices if the defendant has directed its commercial activities to that state.
- The New York Bankruptcy Court found that the evidence that Vizacaya had purposefully availed itself of the benefits of conducting commercial transactions in New York had thereby caused it to submit to the jurisdiction of the courts of New York. Other matters which founded jurisdiction were account agreements found to have been made in New York and which were to be performed in New York and evidence of funds wired from accounts held in New York.
- None of these factors, in themselves, would afford the New York court jurisdictional competency for the purposes of enforcing its judgment in England or in jurisdictions in which the English rules of enforcement governed. The enforceability of the judgment therefore turned on whether the evidence supported a finding that Vizacaya had agreed to submit to the jurisdiction of the New York Court.
- There was no overt provision by which Vizcaya expressly submitted to the jurisdiction of the Courts of New York. However, the Court held after a review of relevant authority that, in appropriate circumstances, an implied Agreement to submit to the jurisdiction of a foreign Court may be found.
- The Privy Council also held that a submission to the jurisdiction of a foreign court need not be contractual in nature. Neither need the judgment debtor bind itself by formal terms. Rather, the issue is whether the judgment debtor expressed willingness or consented to or acknowledged that he would accept the jurisdiction of the foreign court.
- It also held that as a matter of English law, there were certain established matters which would not lead to the determination that a term should be implied in fact that a party had submitted to the jurisdiction of a foreign court. For example, the fact that the contract which was the subject of foreign proceedings was made in that country or the mere fact of being a shareholder in a foreign company or involvement in a foreign partnership.
- The expert evidence in the New York proceedings was that by agreeing to account management documents which established an agency relationship in New York and by transacting business in New York, as a matter of New York law Vizacaya had thereby submitted to the jurisdiction of the courts of New York.
- However, as far as the requirements of the English rules of private international law were concerned, the Privy Council found that there was nothing in the expert evidence which gave rise to an implied term that Vizacaya had consented to the jurisdiction of the courts of New York. That evidence, rather, demonstrated objective factors which New York law would deem to amount to a submission to the jurisdiction of its courts. From the perspective of the enforceability of the judgment in England the expert evidence in New York was a jurisdictional red herring. That evidence did not demonstrate the implied consent to the courts of New York which was a requisite according to the English rules of private international law. The evidence did no more than establish the basis in which courts in New York could exercise long-arm jurisdiction.
- The upshot was that The Privy Council determined that there was no basis for a finding that Vizcaya had consented to the jurisdiction of the courts of New York. Therefore, under English law & Gibraltarian law the New York judgment was unenforceable.
- Vizcaya is a timely reminder to those advising judgment creditors and debtors in cross border cases that knowledge of the rules under the specific enforcement regime that applies on the evidence is crucial. It is also a salient reminder that evidence received in the foreign proceedings as to the jurisdiction of the forum court and that court’s own assessment of its jurisdictional competency may not seal enforceability issues for the judgment creditor before an English court. English private international law is both autonomous and mutually exclusive from the rules of a foreign court in determining these questions, as the Trustee in Vizcaya found to its cost.
Europa Law Editorial
If you would like learn more about the key law & practice issues which arise from the enforcement in England & Wales of judgments from EU and non-EU member states the following live program may be of interest;
Enforcing Foreign Judgments in England and Wales – From the Eurozone and beyond
Please visit our EU Cross Border Litigation Law & Practice programs page for further information.