The Privy Council has held that a foreign default judgment can be enforced under the common law where a jurisdiction agreement in favour of that country can be implied or inferred. It is not necessary for there to be an express jurisdiction agreement: Vizcaya Partners Limited v Picard and another (Gibraltar) [2016] UKPC 5.

This is an issue on which there have been conflicting English decisions. Whilst the present decision is not binding on English courts, it will be highly persuasive, particularly as the judgment is given by Lord Collins, who is general editor of the leading text book on conflicts of laws (Dicey, Morris and Collins – which, interestingly, currently takes the view that an express jurisdiction agreement is necessary).

Enforcement at common law is significant as it is the regime which applies to enforcement of judgments from many important jurisdictions, including the USA, China and Japan. Different considerations apply where enforcement is under the Brussels or Lugano regimes (broadly, judgments from EU or EEA countries) or under the Hague Convention on Choice of Court Agreements (which currently only applies to Mexican judgments but may in due course apply to judgments from Singapore and the US).

The decision means that, in deciding whether to take part in proceedings in a relevant jurisdiction or to let them go by default and resist enforcement in England, a defendant will need to give careful consideration to whether an agreement to submit to the courts of that country can be implied or inferred. The absence of an express jurisdiction agreement will not be determinative. The circumstances in which a jurisdiction agreement will be implied or inferred are however likely to be rare; the mere existence of connections with the relevant country will not be enough.

The position will be particularly complicated where a contract is governed by a foreign law, as that law will determine the test the English court must apply in deciding whether a term is implied.

Background

The case concerned whether a New York default judgment could be enforced in Gibraltar. The New York proceedings were brought by the trustee in bankruptcy of a Bernie Madoff company against a BVI company, Vizcaya, pursuant to US anti-avoidance provisions under insolvency law. Vizcaya had substantial assets in Gibraltar.

Judgment

The Privy Council held that there had been no express or implied submission by Vizcaya to the courts of New York and, even if a jurisdiction agreement could be implied, it would not extend to insolvency proceedings such as these.

Lord Collins, who gave the judgment of the Board, reviewed all of the authorities on whether an express agreement to a jurisdiction was required in order to enforce a judgment from that jurisdiction under the common law. He concluded that in the face of the conflicting decisions and dicta it was necessary to step back and consider the question as a matter of principle and authority. In his judgment:

  • The question is whether the judgment debtor agreed to submit to the jurisdiction of the foreign court
  • That agreement need not be contractual in nature
  • It is commonplace that a contractual agreement or consent may be implied or inferred and there is no reason in principle why the position should be any different in the case of a contractual agreement or consent to the jurisdiction of a foreign court
  • On analysis in context, the authorities which deny the possibility of an implied agreement really meant that there had to be an actual agreement or consent

As there has to be an actual agreement, it cannot be implied or inferred from such matters as the judgment debtor being a shareholder in a foreign company or the fact that the contract was made in that country, or is governed by its law, or was to be performed there. Nor is it enough that the contract is governed by a foreign law and that law gives the court jurisdiction under its own rules.

As regards the role of a foreign governing law, the starting point on whether there has been a submission to the jurisdiction of the foreign court for the purposes of enforcement in England depends on English law. If it is argued that there is a jurisdiction agreement as a result of an implied term, the English court will need expert evidence on the rules of construction under the governing law (if it is a term implied as a matter of fact) and it will then be for the English court to interpret the contract in accordance with those rules. For a term to be implied as a matter of law, the expert evidence needs to show what terms would be implied under the applicable law.