English High Court decisions confirm stance on foreign money judgments

The English High Court has ruled that unregistered and time-barred foreign judgments can found the basis of insolvency proceedings in England.

The threat of insolvency proceedings can be a strong form of leverage to obtain a successful outcome on enforcement of a judgment debt, as judgment debtors will often pay up when faced with the prospect of being found insolvent. 

Foreign money judgments

The English High Court In two recent decisions – Re a Company and Drelle v Servis-Terminal LLC – has confirmed that foreign money judgments do not need to be registered in order for a judgment creditor to be able to rely on the judgments as giving rise to unsatisfied debts for the purposes of bringing winding-up or bankruptcy proceedings.

The court also confirmed that the insolvency proceedings do not constitute "an action" and, therefore, are not caught by the six-year limitation period in the Limitation Act 1980. Accordingly, judgment creditors who are out of time to enforce a judgment can potentially bring insolvency proceedings.

Recognition and enforcement

Several different regimes apply to the recognition and enforcement of a foreign judgment in England. These provide for different rules depending on which foreign jurisdiction rendering the judgement is involved.

Typically, where the European, treaty or statutory regimes apply, an application is made by the judgment creditor for the foreign judgment to be recognised (or registered), following which it can be enforced as if it were an English judgment. Where no European, treaty or statutory regime applies, a claim must be brought in England as a new action on the debt created by the foreign judgment.

The two recent judgments considered the issue of whether a judgment creditor could rely on an unrecognised foreign judgment to wind up a company (Re a Company) or bankrupt an individual (Drelle v Servis-Terminal LLC).

In both cases, the court confirmed that, under the Insolvency Act 1986, insolvency proceedings do not need to be founded on a final order or judgment of the English court. They can be based on trade or other debts to which there was no real defence.

Accordingly, an unrecognised foreign judgment, incontrovertibly owed, satisfies the requirements of being a "debt" for the purposes of the  Insolvency Act 1986. No registration or recognition is required.

Limitation Act 1980

Furthermore, in Re a Company, the court also considered whether a judgment creditor would be prevented from pursuing insolvency proceedings based on an unsatisfied foreign judgment which could not be enforced at common law owing to it being time-barred under the Limitation Act 1980.

Firstly, the court found that a foreign judgment was a 'judgment' within the meaning of the Limitation Act 1980. Accordingly, the court went on to consider section 24(1) of the Limitation Act 1980 which provides: "An action shall not be brought upon any judgment after the expiration of six years from the date on which the judgment became enforceable."

The court held that the term “action on a judgment” does not apply to bankruptcy or winding-up proceedings based on judgment debts and that, as a consequence, the limitation period in section 24(1) of the Limitation Act 1980 does not apply to insolvency proceedings.

Osborne Clarke comment

The effect of these important decisions is that a foreign judgment debt which cannot be enforced at common law (for procedural reasons or because of a time bar) may still be relied on by a judgment creditor to bring proceedings to bankrupt (in the case of an individual) or wind-up (in the case of a company) a judgment debtor.

Insolvency can be an important tool in a judgment creditor's armoury that should not be ignored and may prove pivotal (particular in cases where a time-bar prevents enforcement).