Should I stay or should I go – when will the courts stay enforcement of a foreign judgment?

Posted: 30/07/2024

Recent judgments have shone a light on the English courts’ interpretation of the notoriously complex rules on enforcement of foreign judgments. In particular, the courts have considered the effect of an appeal pending in the foreign court, the defendant’s submission to the foreign court, and whether or not a foreign judgment can form the basis for a winding up petition. Cases on the enforcement of foreign judgments are few and far between. These decisions contain useful reminders of the key principles and practical points when enforcing foreign judgments in England and Wales. 

Enforcement of US judgments in the UK

At present (as the US has not ratified the Hague Judgments Convention 2019), there is no reciprocal enforcement agreement between the US and the UK. This means that a US judgment can only be enforced in England at common law by bringing a new claim, in which the underlying US judgment is treated as a contractual debt. For a fuller explanation of the enforcement of US judgments, see this earlier article. For the English court to enforce the judgment, it must satisfy various criteria, including that the US court had jurisdiction over the dispute, and that the judgment itself is final and conclusive. This article considers three recent judgments on these points.

Shovlin v Careless – submission to the jurisdiction

In Shovlin v Careless & Ors [2024] EWHC 312 (KB), the High Court refused to enforce a Californian judgment in default for US$10 million because it held that the judgment debtor had not voluntarily submitted to the Californian jurisdiction. 

Mr Shovlin applied for (and ultimately obtained) default judgment in the Californian courts. To challenge the application for default judgment, the defendants made a ‘special appearance’ (through their attorney). They argued the claim should be dismissed under California’s ‘five-year rule’, which mandates dismissal of cases not brought to trial within five years. The defendants contended that their attorney’s actions did not amount to active participation and that they had not submitted to the court’s jurisdiction. 

The key issue in dispute was whether the appearance at the Californian hearing constituted a ‘voluntary submission’ to the Californian court. To establish submission to the jurisdiction, there must be an unequivocal representation, by word or conduct, that objection is not taken to the relevant jurisdiction. The High Court analysed the conduct of the defendants and ultimately found that their participation did not amount to clear and unequivocal consent to the foreign court’s jurisdiction. 

Key points on submission to the jurisdiction

While the decision is specific to its facts, there are key findings of broader relevance:

• the burden of proving the competence of the foreign court lies on the party seeking to enforce the judgment;
• the Supreme Court test for voluntary submission to the jurisdiction of the English court in Rubin v Eurofinance SA [2013] applies to the question of voluntary submission to a foreign court, emphasising that such submission must be unequivocal. The court must look at all circumstances and the totality of the conduct; 
• the assessment of the judgment debtor’s conduct must be objective, from the perspective of the disinterested bystander;
• the role of foreign law is important but not decisive. The English court will not necessarily follow the foreign court's conclusion that there is no submission;
• the mere fact that a foreign judgment was entered in default makes it no less enforceable than a judgment on a defended claim, but the context of the default proceedings should be considered.

Final and conclusive judgment

In Motorola Solutions Inc v Hytera Communications Corp Ltd [2024] EWHC 149 (Comm), the court granted a conditional order staying enforcement of an English judgment (which was obtained to enforce a US judgment). In this case, the court considered that the judgment did not satisfy the ‘final and conclusive’ test as a result of a pending appeal of the US judgment. The court was influenced by the fact that the US appeal decision was expected within a period of a few months (it has now been granted), and that if the entire judgment debt were enforced now, it would require the judgment debtor company to be dismantled.

This judgment contains a useful reminder that the mere fact that a judgment or order is subject to appeal, does not automatically operate as a stay on enforcement. It also highlights the flexible nature of the court’s discretion and the conditions it can attach to any stay of enforcement. In this instance, taking into account the circumstances of the case, the stay was granted for a period of two months and would only continue thereafter (subject to any further applications) on payment of a proportion of the monies (US$25 million) owed under the judgment.

In Tai Mo Shan Limited v Persons Unknown [2024] EWHC 1514 (Comm), in the context of an application for permission to serve outside the jurisdiction to enforce a New York default judgment, the court also considered whether the foreign judgment was ‘sufficiently final and enforceable’ to enable it to be enforced in England. It held that although the judgment was given in default, it was enforceable until an application was made in the US to set it aside. The court heard expert evidence on the issue but cited with approval Professor Briggs’ conclusion in Civil Jurisdiction and Judgments that ‘the fact that the foreign default judgment may be later set aside by the court which gave it, cannot in practice be allowed to deprive the default judgment of its claim to finality’.

Key points on stay of enforcement pending appeal 

• The court may adopt a similar approach to that taken in enforcement proceedings of a domestic judgment; 
• an appeal does not operate as a stay. The court may, pursuant to CPR 83.7(4)(a), grant a stay of execution where there are special circumstances which render it inexpedient to enforce the judgment. A pending appeal in a foreign jurisdiction is not a special circumstance in itself; 
• inexpediency is unlikely to be a factor in cases involving well-resourced parties;
• the court’s discretion to grant a stay will depend on all the circumstances of the case – the essential question is whether granting or denying a stay could lead to injustice for either party, or whether there is a risk that the appeal could be stifled. In the case of a foreign judgment, additional factors may need to be considered.
• the appeal process is unlikely to be stifled if the appeal hearing has concluded and judgment is pending.

Enforcing a foreign judgment by a winding-up petition

In another recent judgment, the English court considered whether a foreign judgment which is final and conclusive on the merits can be directly enforced by a winding-up petition. In Re A Company [2024] EWHC 1070 (Ch) (citing the judgment given a day earlier in Drelle v Servis-Terminal LLC [2024] EWHC 521 (Ch)), the court confirmed that it can. The High Court concluded in this case that an unregistered or unrecognised foreign judgment is final and conclusive, and amounts to a debt for the purposes of the Insolvency Act 1986 without the need for registration or recognition.

The future of foreign judgment enforcement

These recent judgments illustrate the importance of understanding how interactions in foreign litigation, and the nature of the foreign judgment, can influence enforcement. 

The High Court’s conclusion in Shovlin highlights the importance of understanding the consequences of voluntary submission to the jurisdiction of the foreign court. By contrast, the judgments in Motorola and Tai Mo Shan confirm that the existence of an appeal in the foreign court will not automatically lead to a stay of enforcement. The court’s decision will depend on an assessment of all the relevant circumstances. Key to this decision will be the evidence presented in the parties’ objectives in the litigation and the risks arising from the outcome of the appeal. 

Where enforcement under the common law rules or a registration procedure is not possible or desirable, it is important to remember that the foreign judgment can be enforced directly via a winding-up petition.

Finally, a reminder that on 26 June 2024, the United Kingdom formally ratified the Hague Judgment Convention 2019. It will enter into force 12 months after ratification and will apply to judgments given in proceedings commenced after that date. Should, as expected, more countries ratify this convention, it is expected to bring a more effective and streamlined process for enforcing judgments falling within its scope.

For now, parties involved in litigation outside the UK that anticipate needing to enforce any foreign judgments within the UK, are advised to seek advice at an early stage to maximise the prospects of success of any enforcement. 

The article was co-written by Tereza Verdoliva, trainee solicitor in the commercial dispute resolution team.

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