Client Affairs

GUEST ARTICLE: Enforcing US Judgments In The English Courts

Donna Goldsworthy Irwin Mitchell 2 November 2015

GUEST ARTICLE: Enforcing US Judgments In The English Courts

The enforcement of US judgements in English courts raises a range of tricky issues that private client advisors need to consider for their clients.

Wealth management professionals, such as private client lawyers and tax advisors, will be wearily familiar with the delights of US extra-territorial tax powers in the form of the FATCA Act but there are also other ways that Uncle Sam is able to extend its reach. One avenue is through the enforcement of US judgements in English courts. In this article, Donna Goldsworthy of UK law firm Irwin Mitchell considers the sort of issues that advisors to high net worth persons need to consider. The editors are pleased to share these insights but do not necessarily endorse all the views expressed and invite readers to respond.

A shared language and significant business links mean that for many, a transatlantic lifestyle provides the perfect combination of convenience and financial opportunity. Due consideration, however, must always be given to the protection of an asset portfolio spread across multiple legal jurisdictions. Litigation is an unfortunate reality that many high net worth individuals will face at one point during their lives, and it is important to remember the added difficulties of suing a defendant in one jurisdiction where their assets are in another, beyond the reach of the court. A favourable judgment can be something of a pyrrhic victory if the defendant has no assets within the jurisdiction with which to pay the damages. 

This article considers the steps an individual will need to take if they are to realise the value of a judgment awarded in a US court against a defendant whose assets are located in the UK. 

Court procedure
Where parties to litigation and their assets are located within the EU, claimants will be able to take advantage of a mechanism contained in European law allowing English courts to recognise and enforce judgments obtained in another EU member state.  In contrast, successfully suing a defendant in the US, but whose assets are in the UK, is only half the battle. Despite the close political and economic relations between the US and UK, there is in fact no treaty or convention that provides for the enforcement of judgments between the two countries.

Common law regime
Instead of being able to rely on a statutory regime, a claimant attempting to enforce a judgment obtained in a US court will need to rely upon principles of common law. Under these principles, a US judgment will be viewed by the English courts as a basic contractual debt between the two parties. As such, the claimant will be required to issue a new claim in the English court, seeking to sue for this debt. 
The English court will consider a number of factors when deciding whether they are able to enforce a US judgment. Broadly speaking, where the below criteria are satisfied a claimant is likely to obtain summary judgment on the grounds that there is no defence to the claim. This will mean that the English court will order payment of the debt without the need for the parties to go to a full trial. 

1.    Jurisdiction

It must be established that the US court in question was able to try the case. This will be considered according to English law principles of jurisdiction. It will not be sufficient to establish that the US court considered themselves to have jurisdiction. Generally speaking, an English court will consider jurisdiction to be established where the defendant is based in the US, or has agreed to participate in US-based proceedings. 

Often, a claimant may find themselves in the unenviable position of pursuing a defendant who has gone bankrupt. It is not uncommon for a defendant in insolvency proceedings to fail to attend court. Until recently a concept had been evolving in English law whereby insolvency proceedings should be universally recognised by courts around the world so as to assist creditors in reclaiming debts. This principle sat outside of the common law regime and was useful in multinational insolvencies. 
However in the 2012 case of Rubin v Eurofinance, the UK Supreme Court held that insolvency proceedings should not be exempt from the common law principles dealing with the enforcement of foreign judgments. This now means that where an English defendant has failed to appear in court to face US bankruptcy proceedings, the jurisdiction test will not be satisfied, as they are neither located in the US nor have they agreed to participate in the US litigation. The English court will therefore not be able to enforce the US judgment. 

2.    Definite and ascertainable
A foreign judgment can only be enforced if it is for a definite sum of money. Importantly, this means that an injunction obtained in the US cannot be enforced under common law principles in the UK. 
The English courts will not however enforce judgments for taxes or penalties payable to the US state. In fact, generally speaking penalties of any nature are rarely permissible under English law. As such, the recent case of JSC VTB Bank v Skurikhin brings into question whether US-style punitive damages will be enforceable in the English courts. This is where the defendant must pay to the claimant not only the sum owed as a result of their wrongdoing, but also an additional sum intended to deter the defendant from repeat behaviour. In this particular case, the English court refused to grant summary judgment for the enforcement of this additional sum which represented over 20% of the total value of the judgment. The case has not yet been pursued to full trial, so it remains to be seen whether a claimant can be successful in enforcing US punitive damages in the English courts. 

3.    Final judgment
The US judgment must be final and conclusive, not provisional. English courts are unlikely to enforce a judgment that is subject to an appeal in the US court of origin, as the decision may yet be overturned. 

Whilst the enforcement of foreign judgments in the English courts can in certain circumstances be a relatively straightforward matter, it is important to remember that US judgments in particular may entail additional complexities of a technical legal nature. 
Those seeking to maximise the value of a hard-fought US judgment should always seek expert advice at the outset of any enforcement proceedings in the UK to avoid unnecessary lengthy and expensive litigation. 

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