Court enforces foreign judgment that is unenforceable in local jurisdiction?

Overview

The Judge in this case ruled that foreign monetary judgments that are no longer enforceable in their local jurisdiction due to a change in law can nevertheless be enforced in England, potentially making England a favourable forum for enforcing foreign judgments that cannot be enforced locally.

Background

These proceedings were commenced in July 2021 and a hearing is contingently set down for next summer. This application addressed the issue of whether the claimant, Invest Bank PSC, had statutory capacity to pursue claims against the first defendant, Mr. El-Husseini, and the other defendants, Mr. El-Husseini’s former wife and four adult sons, pursuant to ss.423-425 of the Insolvency Act 1986.

The underlying source of Mr. El-Husseini's alleged liability to the Bank was found in two personal Guarantees which he gave during 2016 in respect of credit facilities granted by the Bank to two UAE-registered companies. The Bank obtained final judgments against Mr. El-Husseini for specific amounts under both Guarantees, of which approximately £19.6m remained outstanding in July 2021 ("UAE Monetary Judgments").

Approximately 18 months after commencing these proceedings in England, the Bank obtained a Default Judgment against Mr. El-Husseini for the outstanding debt plus interest. However, some 11 days before the Default Judgment, there was a material change in UAE law. A legislative amendment took effect on 2 January 2023 which had the effect of making the UAE Monetary Judgments unenforceable in Abu Dhabi. As a result, one of the defendants, Mr. El-Husseini-s former wife, made an application to set aside the Default Judgment in the High Court ("Set Aside Application"). The Bank contested the Set Aside Application, including on the basis that none of the defendants had sufficient standing to set aside a default judgment entered against their co-defendant, Mr. El-Husseini.

The Court’s Decision

The Judge concluded that the UAE Monetary Judgments could be recognised and enforced in England even though they are unenforceable in Abu Dhabi, finding 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. Cases lacking the essential qualities of finality and/or conclusiveness are a different matter. However, the mere fact that the local courts have declined to enforce a judgment does not deprive a final monetary judgment of such qualities. Nor does the enactment of legislation in the relevant foreign jurisdiction which prohibits enforcement of the judgment within that jurisdiction, even where the legislative protection pre-dates the entering of the relevant liability judgment.

With respect to the Set Aside Application, the Judge found that Mr. El-Husseini’s former wife had a sufficient interest to seek to have the Default Judgment set aside, since she met the “directly affected threshold”. However, the Judge declined to set aside the Default Judgment, with the overarching reason being that setting aside the Default Judgment would achieve nothing of practical value in light of the Judge’s findings on, among other issues, the enforceability of the debt in England.

Conclusion

It will be interesting to see whether this decision is appealed. The Judge acknowledged that he may be persuaded to grant permission to appeal, stating that he could see the benefit of appellate exposition on the issue of the enforceability of foreign judgements by reference to their enforceability locally.

In the meantime, England may become a favourable forum for enforcing foreign judgments that cannot be enforced locally.

Judge: Stephen Houseman KC

Counsel: Tim Penny KC of Wilberforce Chambers and Marc Delehanty of Littleton Chambers (instructed by Trevor Mascarenhas of PCB Byrne LLP) for the Claimant Invest Bank PSC

Niranjan Venkatesan and Matthew Barry of One Essex Court (instructed by Debenhams Ottaway LLP) for the Sixth Defendant