Foreign judgment enforceable at common law despite legislative change making it unenforceable in state of origin

The High Court has held that there is no common law rule preventing enforcement of a foreign judgment in England and Wales simply because it is not presently or fully enforceable in the relevant foreign jurisdiction. In the present case, that meant that Abu Dhabi judgments for amounts due under two guarantees remained enforceable in England despite a subsequent change in the law of the United Arab Emirates (UAE) which meant they could not be enforced there: Invest Bank PSC v El-Husseini [2023] EWHC 2302 (Comm).

This contrasts with the position under the Foreign Judgments (Reciprocal Enforcement) Act 1933 which enables judgments from certain countries (including for example Australia, Canada and India) to be enforced by registering the judgment in England. Under the express terms of the 1933 Act, a foreign judgment cannot be registered if it could not be enforced by execution in the country of origin.

A foreign money judgment is enforceable at common law not by registration but by suing on the judgment as a debt. The key requirement is that the foreign judgment must be final and conclusive in its jurisdiction of origin. In the court's view, a mere impediment to enforcement in that jurisdiction did not mean the judgment failed to be final and conclusive. It therefore remained enforceable at common law.

The judge noted, however, that if his conclusion on this issue were essential to the outcome of the case (which it was not, because of an alternative basis for the claim) he might have been persuaded to grant permission to appeal on it. This issue may therefore be ripe for consideration by a higher court.

Background

The claimant (the Bank) brought claims against the defendants under s.423 of the Insolvency Act 1986, which relates to transactions defrauding creditors. The court considered as a preliminary issue whether the Bank had standing to bring the challenge as a "victim" of the relevant transactions, and as part of that question whether it had an enforceable debt against the first Defendant (D1).

The underlying source of D1's alleged liability to the Bank was two personal guarantees which D1 gave in 2016 in respect of credit facilities the Bank granted to two UAE-registered companies. The Bank obtained final judgments against D1 in Abu Dhabi for amounts due under the guarantees, and some £19.6 million odd remained outstanding under those judgments by July 2021.

In January 2023 the Bank obtained a judgment against D1 in default of defence for the outstanding debt under the Abu Dhabi judgments (plus further interest). When seeking default judgment the Bank expressly abandoned the alternative basis of its claim against D1, ie liability under the guarantees.

Shortly before the default judgment was entered in the English court, there was a change in UAE law which had the effect of preventing or prohibiting enforcement of the judgments in their jurisdiction of origin. Enforcement in Abu Dhabi was expressly refused in March-May 2023.

The defendants argued that the Abu Dhabi judgments were not capable of enforcement in this jurisdiction because: (i) they no longer had res judicata effect in Abu Dhabi in light of the change in the law and/or the refusal of enforcement there; or (ii) they were not enforceable in Abu Dhabi and therefore could not be enforced here as a matter of English private international law.

Decision

The High Court (Stephen Houseman KC sitting as a High Court judge) held that the Abu Dhabi judgments were enforceable in this jurisdiction, and therefore the Bank had standing to pursue the s.423 claims.

Having heard expert evidence of UAE law, which represented the law of Abu Dhabi for this purpose, the judge was satisfied that the Abu Dhabi judgments had at all material times had res judicata effect in Abu Dhabi, regardless of the change in the law which meant the judgments became unenforceable and the subsequent refusal of enforcement there. None of that altered the final and binding status of the judgments. Further, there was no impediment in UAE law to the judgments being enforced elsewhere in the world; that would not be contrary to UAE public policy.

Since the Abu Dhabi judgments continued to have res judicata effect in UAE law, they were capable of recognition in this jurisdiction. The question was whether they were enforceable.

The defendants argued that, as a matter of English private international law, a foreign judgment with res judicata effect in its jurisdiction of origin cannot or should not be enforced here to the extent that it is unenforceable in the foreign jurisdiction itself. They said that was the position at common law, as reflected in s.2(1)(b) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 which provides that a foreign judgment shall not be registered under that Act if "it could not be enforced by execution in the country of the original court”.

The judge rejected this argument. It was not safe to assume that s.2(1)(b) was intended to reflect or codify the common law position. He cited Professor Briggs in Civil Jurisdiction & Judgments (7th ed. 2021) where he says:

“So far as concerns matters which arise after the trial, it is no defence to recognition or enforcement in the fact that the foreign judgment is not, or not yet, enforceable under the law of the foreign court which gave it. The enforceability of the foreign judgment under the law of the court which gave it may well be relevant in relation to those schemes for registration of a foreign judgment, where it is the foreign judgment itself which is given direct effect in England. As the common law does not enforce the judgment as such, as distinct from the obligations which arise from the adjudication, whether the foreign judgment is enforceable under the law which gave it is a matter of foreign procedure, not relevant to a court in England.”

The defendants' argument was also contrary to Court of Appeal authority. In Merchant International Co Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy [2012] EWCA Civ 196, the court held that the fact that a foreign liability judgment could not be enforced in its jurisdiction of origin because of a local statutory provision was not an impediment to its recognition or enforcement in this jurisdiction. It was still a final and conclusive judgment in the eyes of the common law.

The defendants relied on two lines of cases which they said supported their position: first, where the foreign order is inherently conditional or vulnerable to being varied or revoked (typically involving foreign maintenance orders in matrimonial proceedings); and second, where the foreign order has been subject to a stay of execution pending appeal in the foreign court (as a departure from the ordinary position that a pending appeal does not have such effect: see eg Colt Industries Inc v Sarlie (No.2) [1966] 1 WLR 1287). The judge did not accept that either category of case assisted the defendants. They merely reflected the fact that a foreign judgment must be final and conclusive in its jurisdiction of origin before it can be enforced at common law, and in both of these cases it may not be possible to characterise the judgment in that way.

The situation was different in principle where a monetary judgment was final and conclusive in its jurisdiction of origin but not (fully or presently) enforceable against the judgment debtor in that place. The local impediment to current enforceability did not strike down its characterisation as final and conclusive. The Abu Dhabi courts' refusal to enforce the judgment debt was practical and procedural and did not alter the res judicata status of the Abu Dhabi judgments, nor render their enforcement in another jurisdiction contrary to public policy in Abu Dhabi. It was irrelevant to recognition and enforcement here.

The conclusion that the Abu Dhabi judgments were enforceable in this jurisdiction meant that the court did not need to consider the Bank's alternative case that D1 remained liable under the guarantees. However, the court did go on to consider that question and concluded that the guarantees remained valid and enforceable as a matter of UAE law, as another basis for finding that the Bank had the necessary standing.