Unenforceable foreign judgments can still be enforced in England and Wales

Here is our executive summary of the key takeaways from this case before delving into the details:

1. The foreign judgment must be a money judgment issued by a foreign court of competent jurisdiction and where no other statutory regime applies.
2. The foreign judgment must be final and conclusive on the merits, i.e. it is considered res judicata.
3. A procedural issue in a foreign jurisdiction (in the case, UAE) does not necessarily prevent the foreign judgment from being enforced.
4. The implications of the concept of obligation that underpins the enforcement of foreign judgments under common law are emphasised so that UAE judgment creditors may have a fresh recourse through the English courts.
5. In the Invest Bank Judgment, the English High Court ruled that the guarantees remained valid and enforceable as a matter of UAE law, and the default judgment should not be set aside.

Factual background

Invest Bank obtained two monetary judgments of approximately AED96 million (c.GBP20 million) from the Abu Dhabi courts in the UAE against the borrowers and guarantor of two credit facilities granted by the bank to two UAE companies (“the UAE Judgments”). Whilst trying to enforce the UAE Judgments in Abu Dhabi, Invest Bank also issued proceedings in the English High Court under sections 423-425 of the Insolvency Act 1986, alleging that the guarantor had transferred assets, including property located in England and Wales, to beneficiaries.

Due to the UAE government enacting a law that prevented banks from enforcing claims under credit facilities against individuals or sole enterprises, Invest Bank was unable to enforce the UAE Judgments; instead, it sought to enforce the UAE Judgments against the guarantor and his beneficiaries in England and Wales. 18 months after the commencement of the proceedings, Invest Bank successfully applied for a default judgment against the guarantor for the amounts due under the UAE Judgments. However, several months later, three of the other defendants (three of the beneficiaries) applied to set aside that default judgment.

The Invest Bank Judgment deals with two preliminary issues, namely (i) whether Invest Bank had statutory capacity to pursue claims against the judgment debtor and the guarantors pursuant to sections 423-425 of the Insolvency Act 1986, and (ii) whether the UAE Judgments, given their unenforceable status in the UAE, could be enforced in England and Wales; and, the application to set aside the default judgment.

Decision

The English High Court ruled that:

1. The UAE Judgments had res judicata effect in UAE law and were capable of recognition in England and Wales.
2. The UAE Judgments were enforceable in England and Wales notwithstanding the procedural bar to enforcement in the UAE.
3. The guarantees were valid and enforceable as a matter of UAE law. The court considered the recent UAE law and found that it did not apply to corporate borrowing.
4. The default judgment, in the circumstances, should not be set aside. However, the court emphasised that it may be possible for a co-defendant whose liability depends on the primary liability of the defendant to apply to set aside a default judgment.

In reaching the above decision, the English High Court found that the UAE Judgments retained their res judicata effect, meaning they were final and binding, so that ‘subsequent legal events do not affect such status’ [36].

As to their enforceability under common law, the English High Court emphasised that ‘there is no rule of common law that a foreign judgment with res judicata effect in its jurisdiction of origin cannot or should not be enforced here just because it is not presently or fully enforceable in the foreign jurisdiction itself’ [43]. It went even further, and with reference to this case, added that ‘local non-enforceability does not … render its enforcement in another jurisdiction contrary to public policy in Abu Dhabi (see paragraph 37 above). It is irrelevant to recognition and enforcement in this jurisdiction’ [55].

Opinion and implications of the Invest Bank Judgment

The Invest Judgment is a welcome decision that clarifies how common law principles are applied when it comes to the recognition and enforcement of foreign judgments in England and Wales. It confirms that procedural obstacles to enforcement in the country of origin are not relevant and clarifies the fundamental concept of obligation that underpins the recognition and enforcement of foreign judgments under common law.

In practical terms, judgment creditors facing procedural obstacles to enforcement in the jurisdiction of the underlying claim may wish to investigate what assets judgments debtors have in England or Wales in the knowledge that the English High Court remains committed to upholding justice. Indeed, according to The Law Society’s ‘International Data Insights Report 2023’ published last month, London remains the “most attractive centre for commercial litigation and international arbitration… outperforming New York and other competitors.”

We have specialist lawyers with experience in acting for UAE individuals and companies in the English courts.  We can support with enforcement of foreign judgments, including court orders, judgments, and arbitral awards.  Please contact Russell Strong if you need advice.