The following is part of a series of client alerts prepared by our Global Enforcements and Collections team.
In Invest Bank PSC v. Ahmad Mohammed El-Husseini and others [2023] EWHC 2302 (Comm) (Invest Bank), the High Court of England and Wales determined that foreign monetary judgments, previously unenforceable in their home jurisdiction due to a procedural constraint imposed by domestic law, could still be enforced under English common law.
Background
Invest Bank PSC sought to enforce two monetary judgments from the Abu Dhabi courts in the UAE against an individual who had provided personal guarantees as security for business loans granted by the bank. However, on 2 January 2023, the UAE enacted a law the effect of which meant that, as a matter of procedure, the judgments were unenforceable in the UAE. Following introduction of the law, enforcement proceedings in the UAE with respect to these judgments were unsuccessful. The crux of the matter revolved around whether these judgments, given their unenforceable status in the UAE, could be enforced in England.
The ruling
The High Court rejected arguments that the UAE judgments could not be enforced in England due to their unenforceability in the originating jurisdiction. The court also affirmed that despite the procedural bar in the UAE, the judgments had res judicata effect and could be enforced in England. The court emphasized that English common law dictated the enforcement of the obligations arising from the foreign judgments, and foreign procedural barriers did not affect recognition and enforcement in England.
As a separate issue, the High Court also determined that the guarantees underlying the UAE judgments were in any case valid and enforceable under UAE law. For this purpose, the court analysed the recently enacted UAE law to find that it did not apply to corporate borrowing.
Key takeaways
Res judicata effect
The UAE judgments retained their res judicata effect, meaning they were final and binding. The new UAE law and subsequent decisions that prevented the enforcement of these judgments in the UAE did not alter their final and binding nature. The 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.
Res judicata operates based on the relevant court’s decision, so that subsequent legal events, such as legislative changes, do not impact this status.
Procedural issue is no bar to enforcement abroad
The foreign judgments, though unenforceable in the UAE, could be enforced abroad. The hurdle to enforcing the judgments in the UAE was procedural in nature. This procedural issue, however, does not prevent enforcement in England under common law. The court determined that there were no obstacles to enforcing monetary judgments from the UAE in England. This decision underscores the flexibility of the English legal system, ensuring creditors are not prejudiced by foreign procedural limitations.
The court rejected that the UAE judgments could not be enforced in England due to their failure to create an enforceable obligation against the guarantor in their home jurisdiction, highlighting that there is no common law rule suggesting that a foreign judgment cannot or should not be enforced in England solely because it not enforceable in the jurisdiction of origin. The finality or conclusiveness of a judgment is a separate consideration from its enforceability. The procedural bar that prevented the enforcement of the judgments did not strip them of their res judicata status or effect. The court reasoned that:
Local non-enforceability does not alter the res judicata status or effect of the final monetary judgment, nor render its enforcement in another jurisdiction contrary to public policy in Abu Dhabi. It is irrelevant to recognition and enforcement in this jurisdiction.
The court cited the case Merchant International Co Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy [2012] EWCA Civ 196 which affirms a foreign judgment’s enforceability in England and Wales, even though it was not capable of enforcement in its jurisdiction of origin due to a local statutory change.
Strategic implications for foreign judgment debtors
This decision offers insight into how common law principles are applied when it comes to recognising and enforcing foreign judgments in England. The High Court’s decision clarifies the fundamental concept of obligation that underpins the recognition and enforcement of foreign judgments within the common law framework. It also confirms that any procedural obstacles to enforcement in the country of origin are not relevant when the English court evaluates whether a judgment should be enforced under common law.
The decision offers potential recourse through the English legal system. Creditors may therefore wish to re-evaluate any judgments previously deemed unenforceable due to procedural obstacles in their jurisdiction of origin. On the other hand, judgment debtors may not be able to evade the enforcement of judgments on the basis of procedural hurdles alone.
Conclusion
The ruling in Invest Bank emphasises the distinct separation between the finality of a judgment and its enforceability, reaffirming the English legal system’s robustness in upholding the principles of justice and legitimate expectations. The decision is a reminder that the English courts offer judgment creditors increased flexibility in enforcing judgments against judgment debtors who rely on procedural grounds to evade enforcement.
Client Alert 2023-234
