Judgment not on the merits: judgments enforcing foreign judgments

A judicial decision that a foreign judgment meets the criteria for recognition in the legal system of the receiving State does not itself count as, or somehow become, a judgment from the court of the receiving State for the purposes of the recognition of foreign judgments: exequatur sur exequatur ne vaut. No one has seriously challenged a principle which appears to be one of universal application; it is not questioned here, either. The fact that a foreign State has, for reasons of its own, recognised a judgment from a third State is its business, but the foreign State in question has not adjudicated the merits of the underlying claim. Its ‘judgment’, if that is the word for it, is not on the merits of the underlying claim: it is on the merits of the question whether the judgment of the third State may be enforced in and under the law of the foreign State.

If the receiving State allows the judgment creditor, on the basis of a judgment which it recognises (as the English common law does), to obtain an original judgment from the receiving court, it is less obvious that such original judgment should not be liable to recognition, as it is a judgment on the merits of a debt claim. The problem does not appear to have arisen; when it does it may be necessary to extend the principle that exequatur sur exequatur ne vaut, assuming it to be essentially sound, to judgments which in substance, if not in form, give effect to foreign judgments without examination of the underlying merits.

In principle, though, if the foreign State does not recognise foreign judgments as judgments, but treats them as admissible evidence of the merits of the underlying cause of action, a judgment on that cause of action will not be affected, or denied recognition, on the basis that it took account of the judgment of a third State.

There is no reason of common law principle why a finding made in the course of proceedings to obtain recognition, enforcement, exequatur, for a foreign judgment may not give rise to issue estoppel. For example, if a court in State A gives judgment, and proceedings to secure its recognition and enforcement in State B are brought, a decision from the courts of State B to recognise and enforce the judgment will not be recognised in England: the issue whether a judgment from State A can be recognised in the territory of State B is not the same issue as whether it can be recognised in England. However, if the courts in State B were asked to refuse recognition on the ground, say, that the judgment had been obtained by proffering forged documents, and the court in State B rules that the documents were not forgeries, its decision on that issue is certainly capable of recognition as res judicata.[1]

Foreign judgment contrary to agreement about settlement of disputes

If proceedings were brought by the claimant in the foreign court contrary to a binding and applicable arbitration agreement, or in breach of a contractual agreement on choice of court, a judgment in favour of the claimant will not be recognised in England unless the defendant waived the claimant’s breach by counterclaiming in the proceedings or by otherwise submitting to the jurisdiction of the foreign court. The defence is statutory; the provision making it needs to be set it out in full:

32. Overseas judgments given in proceedings brought in breach of agreement for settlement of disputes. (1) Subject to the following provisions of this section, a judgment given by a court of an overseas country in any proceedings shall not be recognised or enforced in the United Kingdom if (a) the bringing of those proceedings in that court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country; and (b) those proceedings were not brought in that court by. or with the agreement of, the person against whom the judgment was given; and (c) that person did not counterclaim in the proceedings or otherwise submit to the jurisdiction of that court. (2) Subsection (I) does not apply where the agreement referred to in paragraph (a) of that subsection was illegal, void or unenforceable or ims incapable of being performed for reasons not attributable to the fault of the party bringing the proceedings in which the judgment was given. (3) In determining whether a judgment given by a court of an overseas country should be recognised or enforced in the United Kingdom, a court in the United Kingdom shall not be bound by any decision of the overseas court relating to any of the matters mentioned in subsection (1) or (2). (4) Nothing in subsection (1) shall affect the recognition or enforcement in the United Kingdom of a judgment which is required to be recognised or enforced there under the judgment which is required to be recognised or enforced there under the 2005 Hague Convention, the 1968 Convention, the Lugano Convention, or the Regulation ...

It may immediately be seen that a judgment for the defendant will be recognised as conclusive against the claimant.[2] Such a judgment is given against the claimant; but as the proceedings will have been brought by the person against whom the judgment was given, Section 32(l)(b) of the 1982 Act will deprive the unsuccessful claimant of an unmeritorious argument based upon his own breach of the agreement.

In statutory form, this is a relatively new defence, though the common law would have refused to recognise a judgment obtained in similar circumstances. It makes a different point from that raised when deciding whether there was a contractual submission to a foreign court. Here the question is whether, even though the court had ‘international jurisdiction’ in the eyes of English law, it was nevertheless asked to exercise its jurisdiction contrary to an agreement on choice of court, or for arbitration, to which the parties had bound themselves. In deciding whether there was a breach of the agreement, the decision of the foreign court upon this very point does not bind the English court, which is required to decide the issue for itself; likewise, in deciding whether the defendant counterclaimed or otherwise submitted, the view taken by the foreign court does not bind the English court, which also decides this issue for itself. In deciding whether the clause was enforceable the view of the foreign court does not bind the English court, which also decides this issue for itself.

The policy behind Section 32 is that the need to prevent breaches of a valid and binding contract to settle disputes in a particular way prevails over the countervailing policy which supports the finality of litigation. Commercial agreements for the resolution of disputes are looked on favourably, and Section 32 lends what weight it can to their effectiveness by withholding recognition from the judgments of foreign courts which disregard them. In cases in which the defendant, who has maintained his objection to the foreign court’s jurisdiction, has been forced - in the sense of having made a practical decision to which he had no real alternative - to participate in the substantive proceedings in order to preserve a sensible basis for an appeal on the jurisdictional point, it is unlikely that he will be taken to have submitted to the jurisdiction of the foreign court in such a way as to prevent subsequent reliance on Section 32. But if the defendant has chosen to submit to the foreign court’s jurisdiction after its dismissal of the jurisdictional challenge, his exercise of choice lets go the defence which Section 32 would have provided.[3]

One particular context in which there may be a refusal to recognise a foreign judgment is where the agreement on choice of court is lopsided, or asymmetric, and this fact has led the foreign court to disregard it. For example, a jurisdiction agreement in a contract between bank and borrower may be exclusive so far as concerns proceedings by the borrower against the bank, but non-exclusive for proceedings by the bank against its borrower. There is no particular reason to take fright at such clauses, which do not necessarily demonstrate the unfair use by the bank of its superior bargaining power. In a long-term commercial relationship, the bank may have to proceed against the borrower in more courts than one, and (when it appears that the borrower has shifted its assets) before a court in which it had not expected to sue when the contract was made. English law sees no objection to such clauses: if that is what the parties want and agree to, there is no more to be said.

In some legal systems a different view is taken. In French law, as it appears, such clauses are treated as void on the ground that they are ‘potestative’, and for that reason void. It also seems, for reasons which are quite obscure, that such agreements fall outside the provisions of the 2005 Hague Convention on Choice of Court Agreements and take their effect, or not, under other conflicts rules. In the light of this, if a French court were to exercise jurisdiction on the basis that its law required it to ignore the agreement on choice of court, that is a matter for it; but the refusal to recognise or enforce the judgment would be a matter for English law, not French law, according to Section 32 unless the English court was required to recognise the judgment under the Brussels/Lugano, either on the basis that the French proceedings were instituted before Completion Day, so that recognition is governed by the Brussels I Regulation,2" or if the United Kingdom rejoins the Lugano Convention and Section 32(4) is amended to exempt Lugano State judgments from Section 32.

  • [1] Cf Owens Bank pic v Bracco [1992] 2 AC 443 at 472 (in the judgment of the Court of Appeal). 2 That is, the contract containing the clause must be construed in accordance with the relevant law, and according to that law, shown to be broken: this law should be the law that governs the remainder of the contract (a view distantly supported by Egon Oldendorff v Libera Corporation [1995] 2 Lloyd's Rep 64).
  • [2] This shows that the decision in The Sennar (No 2) [1985] 1 WLR 490 would be the same today. 2 Ellerman Lines Ltd v Read [1928] 2 KB 144 (considering the applicable common law defence, 50 years before Section 32 was formulated, to be fraud). 3 On the basis of presence. 4 Section 32(3). 5 Section 32(2). Were it not for Section 32(3), can it be argued that the defendant would have been bound? Cf Desert Sun Loan Co v Hill [1996] 2 All ER 847. The wording of Section 32 appears to preclude the possibility of any estoppel; see Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309, [2016] 1 WLR 2231. 6 AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647, [2012] 1 WLR 920. The point was not directly considered by the Supreme Court (AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35, [2013] 1 WLR 1889) but there is no reason to doubt the correctness of the decision below. It is, as has been said above, wrong to approach steps taken before a foreign court as though they had been taken before an English court, for foreign procedural systems are not always the same as the English; see also Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309, [2016] 1 WLR 2231.
  • [3] Spliethoffs Bevrachtingskantoor BV v Bank of China Ltd [2015] EWHC 999 (Comm), [2015] 2 Lloyd's Rep 123. 2 Mauritius Commercial Bank Ltdv Hestia Holdings Ltd [2013] EWHC 1328 (Comm), [2013] 2 Lloyd’s Rep 121; Commerzbank AG v Liquimar Tankers Management £/
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