Associate Kate Gee discusses the issue of cross-border “judgment laundering” and the Court of Appeal’s recent decision in Strategic Technologies v Procurement Bureau of the Republic of China.
Kate’s article was published in LexisNexis, 4 December 2020, and can be found here.
Addressing a novel point of law, the Court of Appeal has unanimously held that it is impermissible to register in England a judgment of a Commonwealth court which is itself derived from a judgment of another Commonwealth state. The Court took a purposive approach to interpreting the Administration of Justice Act 1920 (the AJA) and concluded that to permit registration of a “judgment on a judgment” would unbalance the principle of reciprocity that is central to that legislation. Here, the claimant obtained a judgment in Singapore, which it then sought to enforce by a common law action on the judgment in the Cayman Islands. The question before the Court of Appeal was whether it was permissible to register that Cayman judgment in England. By declining to do so, the Court of Appeal has put a stop to cross-border judgment laundering.
What are the practical implications of this case?
The AJA provides a statutory regime for the reciprocal enforcement of judgments between many Commonwealth states and British territories, and is a key tool for the enforcement of foreign judgments in England. This Court of Appeal decision provides helpful guidance on the scope and interpretation of the AJA, which will be welcomed by parties considering how to recover foreign judgment debts in England – or indeed to resist such recovery.
Acknowledging that the common law position regarding the enforceability of judgments on judgments has never been decided, the Court of Appeal nonetheless declined to consider what answer the common law would give to the question. The Court instead noted that neither the AJA nor the Foreign Judgments (Reciprocal Enforcement) Act 1933 purport to codify the common law. The judges chose to consider the AJA on its own terms and in the context of the intention and purpose of the legislation at the time it was passed.
The Court of Appeal judgment provides an interesting and thorough analysis of the legal principles at the heart of the recognition and enforcement of foreign judgments in England. The Court placed significant emphasis on the need for balance and reciprocity, which would be undermined if it were permissible to register “judgments on judgments” in England under the AJA. This accords with the consensus among commentators who have considered the issue, including Dicey, Morris & Collins (15th Edition, 2018) and Briggs, Civil Jurisdiction and Judgments (6th Edition, 2015).
What was the background?
The history of the underlying dispute between the parties was complex and dates back to a dispute that was first brought in May 1998. For the purpose of this appeal, the key facts were as follows:
1. In 1996, the respondent (ST) agreed to supply a measuring system to an underground firing range in Taiwan to the appellant, the Procurement Bureau of the Republic of China Ministry of National Defence (the MND).
2. A dispute arose in 1998, through which ST obtained judgment in default in the amount of US$1.57 million in December 2002 before the Singapore Court (the Singapore Judgment).
3. ST sought recognition of the Singapore Judgment in the Cayman Islands. The MND did not participate, and in June 2009 the Cayman Court entered a default judgment against the MND in the amount of US$1.57 million (the Cayman Judgment).
4. In February 2016, ST sought to register the Cayman Judgment in England under the AJA. The permissibility of this had never previously been decided. At first instance, Mrs Justice Carr found that the definition of “judgment” in section 12(1) of the 1920 Act (being “any judgment or order given or made by a court in any civil proceedings”) was sufficiently broad to permit enforcement of a judgment on a judgment. Carr J granted permission to appeal on this particular point only.
The MND’s appeal was successful, and judgment addressing this novel point of law was handed down on 30 November 2020.
What did the court decide?
Despite submissions on the position under common law, the Court of Appeal took a purposive approach and considered the AJA on its own terms and in light of the purpose and scheme of the legislation at the time it was passed. The Court cited two main reasons in support of its purposive approach:
1. The fundamental principle on which the AJA is based is one of reciprocity. Judgments of foreign courts will only be recognised in courts of the United Kingdom if reciprocal provisions have been made by the legislature of the Commonwealth state in which the judgment was given – rather than solely relying on “mutual trust”. The Court held that to interpret the AJA as permitting registration of a judgment on a judgment would unbalance this reciprocity. It would mean that a judgment given in a state with which no such reciprocal provisions existed and which was not even in the Commonwealth (for example, the United States) could in effect be registered for enforcement in England by an action to enforce that judgment in an intermediate state to which the AJA does apply – an expedient sometimes described as “judgment laundering”. That would in itself be contrary to the purpose of the AJA.
2. Under the AJA, registration of a judgment is not possible if any of the conditions set out in Section 9(2) apply. The judges described these as safeguards, which only make sense if they refer to the proceedings in the court which gave judgment on the underlying dispute. The Court of Appeal found that this confirmed that the AJA only contemplated two stages – the initial judgment on the merits of the underlying dispute, and the registration of that judgment in England – but not a third stage involving an intermediate court. It was considered fundamental to the operation of the AJA that the courts of England and Wales should be able to scrutinise the proceedings in the court which gave judgment on the underlying dispute in order to ensure that the conditions for registration under Section 9(2) of the AJA are satisfied.
The Court of Appeal found in favour of the MND and unanimously held that it was not permissible to extend interpretation of the AJA to permit registration of a judgment given by a court in one state (here, the Cayman Judgment) in an action to enforce a judgment given by a court in another state (the Singapore Judgment). It therefore set aside the order registering the Cayman Judgment, meaning that ST is now unable to enforce that judgment against the MND in England. It remains to be seen if the Court of Appeal’s decision will be appealed before the Supreme Court.
- Court: Court of Appeal (Civil Division)
- Judge: Lord Justice Males, Lady Justice Elisabeth Laing and Lord Justice David Richards
- Date of judgment: 30 November 2020