To appear or not to appear, that is the question - Avoiding a submission to the jurisdiction of a Foreign Court

It has been said that ‘...the enforceability of any judgment is not the last issue to be addressed in cross-border litigation, but the first’.

Successful enforcement of a foreign judgment in England and Wales involves identifying the appropriate enforcement regime for the judgment in question and ensuring that the criteria for enforcement under the regime is satisfied on the facts. Unless the judgment in question is covered by the Brussels I or Brussels Recast Regulation (for judgments issued by a court in one of the EU 28 member states) or is the subject of a reciprocal treaty arrangement with the foreign jurisdiction in question (under either the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933 enforcement of a foreign judgment will turn on the application of the English rules of private international law. 

Many key foreign jurisdictions including the United States do not have reciprocal enforcement arrangements with the United Kingdom. The continuing importance of the common law in the enforcement of foreign judgments has been recently emphasised by Lord Neuberger in Vizcaya Partners Limited v Picard [2016] UKPC 5 in which he commented:

“The conditions for the enforcement of foreign judgments at common law remain an important practical question, notwithstanding the fact that in the United Kingdom much of the ground is covered by statute and by European Union legislation, for these reasons: first, the common law rules continue to apply in the United Kingdom to the many countries, some of them of great trading importance (such as the United States, China and Japan), with which there are no treaties or other arrangements for the reciprocal enforcement of judgments; second, the statutory schemes in the Administration of Justice Act 1920 (which applies to many Commonwealth countries) and the Foreign Judgments (Reciprocal Enforcement) Act 1933 (which still applies to several foreign countries, to some British dependencies, and to some Commonwealth countries including Australia, Canada and India), and their equivalents in the Commonwealth, are based on the common law and fall to be interpreted in accordance with the common law; and third, the common law rules continue to apply in many parts of the Commonwealth.

 Criteria for enforcement of a judgment in England at common law

The Courts in England have developed 3 recognised criteria which a judgment creditor must satisfy if his judgment is to be amenable to enforcement against a judgment debtor in England. It must be shown firstly that the court in England has jurisdiction in a private international law sense over the judgment debtor. Secondly the court will need to be satisfied that the judgment sought to be enforced is final and conclusive and thirdly that the judgment sought to be enforced is for a fixed sum of money not by way of a tax or penalty.

Each of these recognised criteria contain hidden pitfalls for the unwary practitioner and there are many cul-de-sacs and satellite issues which may arise in the course of a particular enforcement claim. Of particular importance for a successful enforcement at common law is satisfying the court in England that it is possessed of the jurisdiction necessary to enforce a foreign judgment. It is important to be aware that merely because the foreign issuing court considered that it had requisite jurisdiction over the judgment debtor or the jurisdiction of the foreign court was not challenged prior to judgment, it does not follow that enforcement in England and Wales is a given.

The evidence which may afford the requisite jurisdiction in an English court to enforce a judgement at common law were reviewed by the Supreme Court in Rubin v Eurofinance [2012] 3 W.L.R. 1019 and are set out in the 15^th Ed of Dicey, Collins and Morris ‘The Conflict of Laws’;

 “a court of a foreign country outside the United Kingdom has jurisdiction to give a judgment in personam capable of enforcement or recognition as against the person against whom it was given in the following cases:

 “First Case—If the person against whom the judgment was given was, at the time the proceedings were instituted, present in the foreign country.

 “Second Case—If the person against whom the judgment was given was claimant, or counterclaimed, in the proceedings in the foreign court.

 “Third Case—If the person against whom the judgment was given submitted to the jurisdiction of that court by voluntarily appearing in the proceedings.

 “Fourth Case—If the person against whom the judgment was given had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of that country.”

 Each of these potential jurisdiction-affording categories present their own issues, however it is the issue of whether the judgment debtor submitted to the jurisdiction of the foreign court which issued the judgment sought to be enforced which may often raise the most difficulties. Depending on the foreign jurisdiction in which proceedings are taking place an attempt to challenge the jurisdiction of the foreign court may draw the defendant into addressing the merits of the claim and may under the procedural law of the local court amount to a submission to the jurisdiction of the court. In this circumstance the foreign court may issue a judgment which it considers valid for enforcement in any third party jurisdiction.

 When is an appearance in foreign proceedings not a submission to the jurisdiction of the foreign court?

Those advising parties caught up in foreign proceedings need to be aware of the potential consequences of appearing in foreign proceedings and how English law affords protection to a party who makes such appearance. The issues are illustrated by a recent case in the commercial court Golden Endurance Shipping v RMA Watanya [2016] EWHC 2110

This litigation involved the question of a ship owner’s liability to insurers who had been subrogated to the rights of the cargo receiver. The issues arose after cargo carried on their ship, namely 6,489.95 mt of wheat bran pellets, was damaged by mould and insects. The claimant provided security in the form of a bank guarantee. The insurers claimed against the bank before a court in Morocco.

The ship-owner had taken part in the proceedings before the court in Morocco essentially to argue that given the existence of an arbitration clause the Moroccan court did not have competent jurisdiction to determine the claim. The difficulties such as they were arose from the vagaries of Moroccan civil procedure which distinguished between a jurisdiction challenge, relating to a lack of subject-matter or territorial jurisdiction and which did not require consideration of the merits, and an admissibility challenge, relating to a party's right to bring the claim and under which the court had to engage with the merits as well. The ship-owner had made an admissibility challenge which entailed submitting a defence on the merits. A jurisdiction challenge had to specify the court to which the case should be transferred; that did not include an arbitral tribunal. A challenge like the shipowners' based on an arbitration agreement could only be brought as an admissibility challenge.

Through no fault on its part, rather the inherent trap which the Moroccan procedure laid, the ship-owner if it wanted to protect its position in the Moroccan proceedings, had no option but to argue that the insurers were not entitled to bring the claim they did because of the existence of an arbitration agreement and as part of this process to address also the merits of the insurers claim.

The ship-owner brought proceedings in England and had sought a declaration of non-liability to the insurers. It argued that these proceedings were not ruled out by the Moroccan judgment as it had no alternative but to engage the merits of the claim in Morocco as a means of making its jurisdictional challenge.

 Section 33 Civil Jurisdiction & Judgments Act 1982

Whether there had or had not been a submission to the jurisdiction of the Moroccan court by virtue of a voluntary appearance in those proceedings depended upon the application to the facts of a piece of legislation introduced to protect parties who have chosen to defend their position in foreign proceedings by way of a challenge to the jurisdictional legitimacy of the foreign court in question. Section 33 (1) Civil Jurisdiction and Judgements Act 1982 sets out the categories of act which if undertaken in connection with foreign proceedings will not be taken to amount to a submission to the jurisdiction of the foreign court namely;

 (a) to contest the jurisdiction of the court;

(b) to ask the court to dismiss or stay the proceedings on the ground that the dispute in question should be submitted to arbitration or to the determination of the courts of another country;

(c) to protect, or obtain the release of, property seized or threatened with seizure in the proceedings."

Section 33 does not provide an obvious answer where, as in The Golden Endurance appearing for one of the purposes identified at section 33 also entails addressing the merits of the claim where this a requirement under local procedural law.

The answer given by the courts in England has been to focus upon whether the Defendant to the foreign proceedings by making a voluntary appearance was maintaining a challenge to the jurisdiction of that court even if the effect of local law is that it is forced also to address the merits of the claim against it. The test as it currently applies is summarised in Dicey and Morris as formulated by the Court of Appeal in AES Ust-Kamenogorsk Hydropower Plant LLP v AES Ust-Kamenogorsk Hydropower Plant JSC [2012] 1 W.L.R. 920

"The real question for the English court should not be whether the defendant has taken a step in proceedings which prepare for the trial of the merits, but whether he has chosen to abandon his challenge to the jurisdiction. In answering this, the English court is not bound to follow the law of the foreign court on whether a defendant has succumbed to its jurisdiction; and if the defendant had no real option but to act as it did the court may be reluctant to find that it has submitted to the jurisdiction."

In The Golden Endurance the argument on behalf of the insurers was that the ship-owner was challenging the right of the insurer to bring its claim thereby constituting an admissibility challenge in which the merits of the claim were also considered. A jurisdiction challenge under Moroccan law was not possible on the facts as that would have required the ship owner to nominate a court of competent jurisdiction to which the proceedings should be transferred. The procedure did not encompass transfer to an arbitral tribunal. Therefore despite the working of Section 33 (1) (b) there had been a submission to the jurisdiction of the Moroccan courts.

The High Court adopted the approach of the Court of Appeal in AES Ust- Kamenogorsk and held that as the ship-owner had sought to request the Moroccan court to dismiss the proceedings before it and refer the matter to arbitration by the only route available to it under the applicable local law it would not be deemed to have submitted to the jurisdiction of that court. In other words having been forced to address the merits as part of its challenge, the Court in England could nevertheless hold that the ship-owner had maintained its challenge to the jurisdiction of the Moroccan court.

The fact that Moroccan civil procedure forced the ship-owner to make an admissibility challenge as it was seeking to enforce an arbitral Agreement and thus was forced to address the merits of the claim being brought, did not have the effect of ousting the Application of Section 33 if it could be said that the ship-owner was maintaining its challenge to the jurisdiction of the Moroccan court.

Mr Justice Phillips observed obiter that there may be an extreme case in which a challenge to the jurisdiction is ‘so obviously absurd’ that the English court might conclude that the party advancing it had in reality submitted to the jurisdiction of the foreign court. However the mere fact that a challenge was obviously wrong or irrational would not in itself appear to justify a conclusion that there had been a submission. He further commented that a party cannot be deemed to have submitted to the jurisdiction of a foreign court on the basis of anything it might have done in this jurisdiction. The Court concluded that as the ship-owner had continually maintained a challenge to the jurisdiction as its primary response to the proceedings in Morocco, it had not thereby submitted to the jurisdiction of that court.

The ship-owner had further argued that a submission was prevented by Article 33 (1) (c), namely that its appearance in the Moroccan proceedings  was necessary to obtain the release of property seized, namely a bank guarantee which had been given in order to secure the release of a  vessel.   As the High Court found there had been no submission it was unnecessary for it to consider this point. The Act itself provides no definition of the term ‘property’ for the purposes of Section 33 (1) ( c ) or its scope. It would have been an interesting question whether an appearance to secure the release of a guarantee would fall within the scope of Article 33 (1) (c).

The insurers had sought to argue that the bringing of the proceedings before the High Court in England was an abuse of the process of the court. This was based on the principle of English law that a party cannot approbate and reprobate or ‘blow hot and cold’ by relying on diametrically opposed positions in different proceedings. The insurers in The Golden Endurance argued that the ship-owner having argued in the Moroccan proceedings for the enforcement of the arbitration Agreement could not bring proceedings before a court in England without reference to the existence of the arbitration Agreement. This argument failed principally  because the court found that it was not inconsistent to argue a point in foreign proceedings whilst recognising in parallel proceedings that the point would not succeed as a matter of English law. Further the ship-owner had not denied the existence of the arbitration Agreement in the English proceedings.

As it happened although the ship-owner had not submitted to the jurisdiction of the foreign court, it was held that the proceedings in Morocco constituted a valid suite for the purposes of Article III 6 of the Hamburg Rules.  They were therefore not discharged from liability to the insurers.

 Summary

This recent piece of litigation serves to illustrate the benefits of Section 33 CJJA to parties seeking to defend their position in foreign proceedings. Those who take the position that it is necessary to make such appearance would be well advised to make clear that the primary purpose of any such appearance is to challenge the jurisdiction of the foreign court either because those proceedings breach a choice of court Agreement or because, as in this case, they are contrary to an Agreement to refer disputes to Arbitration or there is some other basis to legitimately challenge the jurisdiction of the foreign court. It will only be where the challenge is devoid of a legitimate basis or absurd that a court in England is likely to hold that a challenge to a foreign court jurisdiction involves a submission to that court’s jurisdiction. Whenever the appearance involves securing the release of property which has been seized or is under threat of seizure, a further ground to argue against submission may be invoked.

if you would like to learn more about the law & practice of enforcing foreign judgements our live program 'Enforcing Foreign Judgments -From the Eurozone and beyond' may be of interest to you. For further information please visit www.europalw.com/eu-cross-border-law-and-practice/