English Court of Appeal calls a halt to the cross-border laundering of judgments

The eagerly anticipated decision of the English Court of Appeal in Strategic Technologies Pte Ltd v. Procurement Bureau of the Republic of China Ministry of National Defence¹ has confirmed that it is impermissible to register in England a judgment of a Commonwealth court which is itself derived from a judgment of a third state (“a judgment on a judgment”).

In doing so, the Court of Appeal settled a novel and previously undecided point of law which had been the subject of academic commentary for decades. It remains to be seen whether the decision will be the subject of an appeal to the Supreme Court.

Background

The Court of Appeal neatly summarised the issue which formed the crux of this appeal as follows:

"A claimant obtains a money judgment in the courts of a Commonwealth state which it then seeks to enforce by a common law action on the judgment in a second Commonwealth state. The issue arising on this appeal is whether the judgment thus obtained in the second Commonwealth state (“a judgment on a judgment”) can be registered for enforcement here pursuant to the Administration of Justice Act 1920 (“the 1920 Act”)."

The history of the underlying dispute was complex but the critical facts were that the Respondent had obtained a default judgment against the Appellant in the Singapore courts in 2002. It obtained recognition of that judgment in the Cayman Islands in 2009, and then sought to register the Cayman Islands judgment in England under the Administration of Justice Act 1920 (“the 1920 Act”). In choosing to proceed in this way, the Respondent was no doubt trying to circumvent the fact that due to the passage of time it would have required special permission before it could attempt to enforce the Singapore judgment in the English courts.

The 1920 Act provides a statutory regime for the reciprocal enforcement of judgments between the English courts and the courts of many Commonwealth nations and British Overseas Territories, including the Cayman Islands and Singapore. This case is understood to be the first attempt at enforcing a judgment on a judgment in this jurisdiction.

The First Instance Decision

Following a hearing in the High Court earlier this year, the judge had found that the definition of “judgment” in the 1920 Act was sufficiently broad to permit enforcement of a judgment on a judgment.²

However, recognising the importance and novelty of this point of law, the judge gave the Appellant permission to challenge her ruling in the Court of Appeal.

The Appeal Decision

On 30 November 2020 the Court of Appeal handed down a unanimous decision in the Appellant’s favour, finding that a judgment on a judgment cannot be registered in England under the 1920 Act. The Court declined to reach a conclusion on whether English common law too prohibits recognition of such judgments, but helpfully set out the rationale as to why the 1920 Act must do so.

Key factors in the Court of Appeal’s reasoning were the importance of reciprocity in the recognition of judgments between English and overseas courts, and a concern that permitting the “laundering” of judgments would undermine or bypass those reciprocal arrangements. The Court of Appeal highlighted that interpreting the 1920 Act so as to permit registration of a judgment on a judgment would have the unsatisfactory consequence that:

"… a judgment given in a state with which no such [reciprocal] arrangements existed and which was not even in the Commonwealth (for example, the United States) could in effect be registered for enforcement here by the expedient of an action to enforce that judgment in an intermediate state to which the 1920 Act does apply, an expedient sometimes described somewhat pejoratively as ‘judgment laundering’."

The Court of Appeal also appeared keen to avoid the potential practical issues and inconsistencies which might arise should enforcement of a judgment on a judgment be permitted under the 1920 Act, including circumstances where “interest runs either before or after judgment at different rates in the initial and the intermediate courts and where different costs awards are made in the two jurisdictions.”

This decision brings the 1920 Act into line with the other statutory regimes for the enforcement of foreign judgments in England which also prohibit the enforcement of judgment on a judgment, including the Brussels Recast Regulation and The Foreign Judgments (Reciprocal Enforcement) Act 1933.

Conclusion

This decision gives welcome clarity to the 1920 Act’s framework for the enforcement of judgments of many Commonwealth nations and British Overseas Territories, which is often a key weapon in the armoury of judgment creditors seeking to enforce and recover in England. The Court of Appeal has also helpfully reinforced the principle of reciprocity when determining if a foreign judgment will be recognised in this jurisdiction, and highlighted how judgments on a judgment and “judgment laundering” tend to unbalance that reciprocity.

This clarification of the English statutory enforcement regime should be welcomed by commercial litigants in the UK and overseas when considering how to recover, or resist the recovery of, foreign judgment debts in England.

In the event of the Respondent obtaining permission to appeal the decision to the Supreme Court, Dechert will provide a further update in due course.

How Dechert can help

Dechert’s market leading international complex commercial litigation practice has substantial experience advising claimants and defendants in high value, cross-border enforcement proceedings relating to both judgments and arbitral awards.

The authors of this article – Andrew Hearn (Partner), Tom Ainsworth (Associate), and Suzi Cocksedge (Associate) – represented the successful Appellant throughout these proceedings.
 

¹ [2020] EWCA Civ 1604
² [2020] EWHC 362 (QB)