Worldwide: Enforcement Of Foreign Judgments And Arbitral Awards From Asia In Offshore Jurisdictions

This article commences with an overview of the statutory and common law regimes allowing the enforcement of judgments and arbitral awards in the British Virgin Islands, Bermuda and the Cayman Islands. It then discusses the specific options available to Asia Pacific parties who wish to implement an enforcement strategy involving assets in those offshore jurisdictions, particularly where those assets are shares in companies incorporated there. Key considerations include the strategic merits of those options.

Introduction

However strong the claim, and however certain the likelihood of obtaining a favourable judgment or award, no litigation strategy is ultimately successful if it does not extend to enforcement and recovery.

It is common for Hong Kong and Mainland Chinese businesses and individuals, lenders, investors and other counterparties (as well as businesses and individuals from other jurisdictions in the Asia Pacific region), to include within the documents governing their relationships a term conferring jurisdiction on the Hong Kong courts or an arbitration agreement specifying Hong Kong-seated arbitration. Given that many Hong Kong and Mainland Chinese businesses and individuals use companies incorporated in the British Virgin Islands (BVI), Bermuda and the Cayman Islands (referred to collectively as 'offshore jurisdictions' in this article) as holding and investment vehicles, persons doing business with them need reassurance that, should things go wrong and a dispute arise, any award or judgment that they may secure will be readily enforceable against assets in those jurisdictions.

In practice, the BVI, Bermuda and Cayman courts frequently deal with enforcement proceedings brought by persons seeking to enforce judgments or awards issued by courts or arbitral tribunals within the Asia Pacific region against or in respect of assets held in the relevant offshore jurisdiction, commonly shares in companies incorporated within that jurisdiction. All three jurisdictions have well-developed procedures to enable such enforcement.

Foreign judgments

Enforcement

The statutory regimes for enforcement of judgments (collectively, the Reciprocal Enforcement Acts) in each of the offshore jurisdictions under discussion extend only to the following Asia Pacific jurisdictions:

(1) in the BVI, the Reciprocal Enforcement of Judgments Act 1922 extends to judgments from (inter alia) New South Wales (Australia);

(2) in Bermuda, the Judgments (Reciprocal Enforcement) Act 1958 is applicable to final monetary judgments from (inter alia) Hong Kong. The statutory regime was further extended by the Judgments (Reciprocal Enforcement) (Australia) Order 1988 to include judgments from the various Australian states and territories;

(3) in the Cayman Islands, the Foreign Judgments Reciprocal Enforcement Law (1996 Revision) extends only to judgments from Australia and its external territories.

Other jurisdictions in the Asia Pacific region are excluded from the statutory scheme. Judgments from those jurisdictions covered by the Reciprocal Enforcement Acts can be registered in the relevant offshore jurisdiction following a simplified application procedure. Following registration, the foreign judgment may be enforced in the same manner as any domestic judgment made by the court of that offshore jurisdiction.

None of the three offshore jurisdictions featured are parties to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 2019. Parties seeking to enforce judgments from Asia Pacific jurisdictions excluded from the statutory schemes in the BVI, Bermuda and the Cayman Islands will therefore have to rely on the common law regime for enforcement in these jurisdictions. While a detailed exposition of the procedural rules for initiating enforcement proceedings under the common law is beyond the scope of this article, suffice to say that fresh proceedings suing on the judgment debt must be commenced in the relevant offshore jurisdiction(s) and served on the judgment debtor. If the judgment debtor does not enter an appearance (including by acknowledging service or filing a defence), the judgment creditor can apply for judgment in default of appearance. If the judgment debtor does enter an appearance, the judgment creditor will usually apply for summary judgment. Again, once judgment is entered, it is enforceable as a domestic judgment in the relevant offshore jurisdiction(s).

Enforcement of foreign non-money judgments

The traditional common law position¹ is that only money judgments are enforceable at common law and that nonmoney judgments are not enforceable. However, if a party has a foreign non-money judgment based on a cause of action recognised by BVI, Bermuda or Cayman Islands law (as applicable) and from proceedings between identical parties with identical issues, it may also be possible to rely on a cause of action estoppel (res judicata), or on an issue estoppel. These would prevent the defendant from denying any matter of fact or law determined by the foreign court, allowing the plaintiff to obtain summary judgment in the relevant jurisdiction(s) on the basis that it would be an abuse of process for the claim to be relitigated.²

The position in the Cayman Islands has arguably diverged from the traditional common law position. In Bandone Sdn Bhd v Sol Properties Inc (Bandone), Henderson J, sitting in the Grand Court (the Cayman Islands' court of first instance), held that Cayman law would permit enforcement of non-money judgments, citing (1) policy reasons summarised by the Supreme Court of Canada in Pro Swing Inc v Elta Golf Inc³ and (2) the Privy Council decision in Pattni v Ali. ⁴ However, this is a developing area of law and any future case seeking to rely upon Bandone as authority for the principle that non-money judgments are enforceable may well be challenged.⁵

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Footnotes

1. Set out in Rule 46 of Dicey, Morris & Collins on the Conflict of Laws (16^th Edn, 2022).

2. Ibid, 14-036 to14-040 (issue estoppel); see also 14-044 ff (res judicata).

3. 2006 SCC 52. In that case, the Supreme Court of Canada held, contrary to the predecessor rule to Rule 46, that the Canadian courts could enforce non-money judgments on a discretionary basis provided that the enforcing court considered relevant factors to ensure that enforcement would not be contrary to the "structure and integrity of the Canadian legal system" (at [17], per Deschamps J). Editorial note: The rule current at the time of the judgment was Rule 35 in Dicey & Morris on the Conflict of Laws (13^th Edn, 2000).

4. In Pattni v Ali [2007] AC 285, the Privy Council held that: "where a court in state A makes, as against persons who have submitted to its jurisdiction, an in personam judgment regarding contractual rights to either movables or intangible property (whether in the form of a simple chose in action or shares) situate in state B, the courts of state B can and should recognize the foreign court's in personam determination of such rights as binding and should itself be prepared to give such relief as may be appropriate to enforce such rights in state B. The extent to which this was possible might be limited by the law of state B as the situs or, in the case of shares, as the place of incorporation of the relevant company (in this case, as both)." (Emphasis as provided by Henderson J in Bandone in italics, with author's further emphasis thereto underlined.) Henderson J concluded that: "The emphasized words in the quotation from Pattni v Ali, set out above, appear to alter the traditional rule that a foreign judgment in personam can be enforced directly in England (and, by extension, in the Cayman Islands) only if it is for a debt, or definite sum of money."

5. See Graeme Halkerston, Enforcement of foreign non-money judgments at common law in offshore jurisdictions: back to basics (2015) 21(9) Trusts and Trustees 969-980.

This article was published in the April 2023 issue of Asian Dispute Review, published by the Hong Kong International Arbitration Centre.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.