A special relationship: how to enforce American judgments in England
This article was co-authored by Isaac Chulu Chinn, Trainee Solicitor, London office.
International law firms such as Kennedys are often involved in commercial disputes involving multiple jurisdictions. However, cross-border dispute resolution often comes with a problem – how to enforce the judgment in the losing party’s jurisdiction in order to make a commercial recovery. Although the United States is the country the UK trades with the most, no bilateral enforcement regime exists. In contrast, the Recast Brussels Regulation applies to companies operating in EU Member States. Notwithstanding the lack of a formal enforcement regime between England and America, a number of strategies can be employed to secure recovery.
One method is issuing a claim in the English courts under the foreign judgment common law enforcement regime. There are a number of elements that must be satisfied for this to be successful.
- The initial judgment must be final and conclusive: In most cases, if a US judgment is open to appeal in the US, the English courts will be reluctant to enforce it.
- For a quantifiable sum of money: The American court must have awarded the victorious party money. Therefore, other judicial reliefs such as injunctions or orders for specific performance cannot be enforced. Penal awards such as fines or awards for taxes will also not be enforced.
- Territorial jurisdiction: The American court must have had jurisdiction to award the judgment. For this to apply the losing party must either operate in America, or have a representative operating on its behalf in America. Alternatively, the unsuccessful party must have agreed to submit to the jurisdiction of the American courts.
This can be a long and costly process, with no guarantee of success. Fortunately, a number of other options exist:
- Alternative dispute resolution: ADR mechanisms such as arbitration, mediation and negotiation can be explored to enforce American judgments in England, without needing the matter to be subject to the formal court process. Such mechanisms have the benefits of saving time, cost, and in most cases, come with confidentiality. ADR is also typically far less adversarial than litigation, which can enable commercial relationships to be maintained and/or salvaged.
- Statutory demand: A statutory demand to wind up a company for unpaid debts may be served on an English company even if the debts originate from an American judgment. If successful, the debtor company will be placed into liquidation and its assets distributed to its creditors (when there are sufficient assets to do so). Often and before the winding up petition is issued, the serving of a statutory demand can prove to be a useful tool for obtaining payment and/ or prompting a discussion on payment terms and settlement, meaning that the involvement of the courts can often be avoided.
- Applying for a summary judgment: Although this does involve a claim being issued, generally, if all the common law regime elements are satisfied and the debt is not disputed or a judgment has already been entered into another jurisdiction, the applicant may be able to successfully seek a summary judgment meaning the claim will not need to proceed to full trial, vastly reducing cost and time. The judgment will then be enforceable using the mechanisms a domestic judgment could rely on, such as applying for a charge on assets, attachment of earnings or instructing high court enforcement agencies (amongst other things).
Kennedys acted for a US company which had numerous judgments for outstanding invoices against English companies operating in the US. Rather than re-litigate the claims - that were non contested in the US - in England, an alternative strategy of serving statutory demands based on the undisputed debt was employed. This led to healthy ADR discussions, obviating the need for an arduous and costly litigation process.
Given the high volume of trade between the UK and USA it is surprising that no bilateral enforcement regime exists between the two nations. It is possible that a system could be established in association with a post-Brexit transatlantic trading agreement, though as of yet this does not seem to be high on the list of priorities for either nation.
Therefore, enforcing an American judgment in the English courts can be complex and time consuming. Fortunately, Kennedys’ global team - which includes six offices in the USA and five in England - are well-rehearsed in enforcing foreign judgments in England and Wales using other mechanisms, with the ultimate goal of reaching the most commercial outcome for our clients.