January 28, 2015

Enforcement of Overseas Judgment in England Where No Reciprocal Arrangements with Country Entering Judgment

Authored by Eric (Rick) Rein

 in International Asset Recovery

A judgment from a non-English court that is sought to be enforced in England by common law is called an "action of the judgment." This involves the creditor commencing English court proceedings against the debtor where the cause of action is an unpaid foreign judgment for a definite amount which is final and conclusive on the merits. But, overseas judgments will not be recognized if:

  1. The judgment was obtained by fraud,
  2. Enforcement is against public policy
  3. The proceedings resulting in the judgment were conducted in a way contrary to natural justice, and
  4. The judgment is a fine or penalty.

The recent English commercial court case of JSC VTB Bank v. Pavel Skurikhin is illustrative. There, VTB had obtained a judgment in Russia on various loan agreements and guarantees. Skurikhin argued that the judgment was obtained by fraud because VTB had refused to sell pledged assets to repay the debt and VTB's real purpose was to control the business by acquiring the assets at below real value. Skurkhin also claimed that the judgment was contrary to English public policy because he was denied the ability to raise certain defenses in the Russian proceedings due to VTB being a state owned entity and to raise the defenses would expose himself to substantial "extra judicial" risks. Skurkhin further argued the Russian proceedings were contrary to natural justice since VTB made false representations that it was acting in good faith and that Skurkhin had no defenses. Finally, Skurkhim pointed out that slightly over 20% of the judgment comprised "penalties" and was in effect an obligation incurred simply for being in default.

The court rejected Skurkhim's arguments and decided they "lacked all reality" principally because his reason for not defending the Russian proceedings was not consistent nor coherent. However, the court refused to award VTB the amounts it claimed for penalties since the amounts were punitive in nature. The court concluded that the Russian court's approach ran contrary to English public policy.

Thus, if a non-English creditor wants to enforce its foreign court judgment consideration needs to be given to the tests the English court will apply before it will recognize and enforce that judgment.

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