Insights

Chasing Debtors all over the World: Enforcing Foreign Judgments


17/12/2012

Debt was said by Rabelais’s Panurge to be “the whole Cement whereby the Race of Mankind is kept together.” With British firms being encouraged to do more business abroad, the risk of incurring bad debts from foreign debtors is increasing.

So how can English creditors pursue their foreign debtors? What can you do if you are owed money by someone, but his money is in a bank in Luxembourg or he lives and works in Spain? What if you obtain a judgment against a debtor, but his assets are all in Germany?

There is a system whereby countries recognise each other’s judicial decisions and can issue a judgment without the whole case having to be heard again. The judgment can be registered in the other country’s court and enforced as if it were its own judgment.

There was a famous head-butting incident between two footballers in the World Cup – Marco Matterazzi, playing for Italy, was head butted by Zinedine Zidane, playing for France. The Daily Star newspaper reported that Matterazzi had called Zidane’s mother “a terrorist whore” and goaded him into the head-butting incident. Matterazzi sued The Daily Star for libel, and eventually the newspaper issued an apology and paid damages. So where does an international judgment come in?

When Matterazzi failed to pay one of his English lawyer’s bills, the lawyer sued, and eventually obtained a judgment against Matterazzi. By now, he was in Italy, playing for Inter Milan. For a debt judgment in Europe, there is a special scheme in place. A European Enforcement Order can be used so the English judgment can be enforced in Italy as if it were an Italian court judgment.

One effective way of making an employee pay their judgment debt, is to get an attachment of earnings order against their employer. Matterazzi was keen to pay up rather than have his earnings from Inter Milan cut.

Distance is no problem when it comes to enforcing a judgment. One debtor in an English claim happened to own a restaurant in Tokyo, along with his Japanese wife. The judgment was registered in Japan, and a charge was placed over his Japanese property. At this point, the debtor paid his debt.

Reciprocity works both ways. If companies or individuals based outside England have debtors who may own assets in England then it can be a straightforward process to register the foreign judgment in England and then proceed to enforce that judgment here, as if it were an English judgment debt. If an Irish judgment debtor owns a flat in Kilburn, the Irish judgment can be registered in London and a charge can be placed on the flat. Then, in order to recover the money, the Irish creditor can apply for an order in the English courts to sell the property and then recover the debt.

Not all countries have reciprocity arrangements with the UK so foreign judgments cannot always be registered. The USA, for example, has no such arrangements and in this case, it is possible to sue under common law and rely on the foreign judgment. That is not to say that the claim would necessarily succeed. In a recent case our client faced a judgment obtained against him in Massachusetts, USA, but we defeated the claim by showing that the US judgment had been obtained by fraud.

Foreign judgments are not always enforced by the English courts, as has also been shown by the recent Court of Appeal case of Merchant International Company Ltd (MIC) v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy (2012). In this case, the Court of Appeal held that a Ukranian judgment should be refused recognition as there had been a flagrant breach of a right to a fair trial.

Enforcing a judgment in a foreign country can be a slow business. Mr Vrbica, a Montenegrin, was injured in a road traffic accident and, in 1991, a court in Montenegro ordered two Croatian companies to pay him damages for his injuries. Ten years later, in 2001, having successfully registered the Montenegrin judgment in the Croatian courts, Mr Vrbica began enforcement proceedings in Croatian. The Croatian courts then declared the enforcement proceedings to be time-barred and therefore inadmissible.

Mr Vrbica complained to the European Court of Human Rights (ECHR), as he had begun his proceedings within the ten year period allowed in Croatia. In April 2010 (another 9 years later), the ECHR held that Croatia had violated Article 1 of Protocol 1 (protection of property) and Article 6 (right to a fair hearing). This is a useful decision for those who are commencing what can sometimes be a slow business of enforcing a foreign judgment.

If you are interested in pursuing a dispute abroad or registering a foreign judgment in this country, please contact our litigation and dispute resolution department.

Gordon Dadds