Foreign Judgments and the Lugano Convention

This update considers the recognition and enforcement of foreign judgments in Poland under the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, which was signed in Lugano on September 16 1988 and took effect in Poland on February 1 2000.

The recognition and enforcement of foreign judgments are two distinct legal proceedings under the Lugano Convention.

Scope of Application of the Lugano Convention

The rules for the recognition and enforcement of foreign judgments set out in the Lugano Convention are supplemented by the Polish Code of Civil Procedure. On the basis of Article 91 of the Constitution and Article 1096 of the Code of Civil Procedure, the code applies to the recognition and enforcement of foreign judgments only when there are no specific rules in the Lugano Convention itself.

According to Article 1 of Protocol 2 on the Uniform Interpretation of the Lugano Convention, the courts of member states must consider the Brussels Convention of September 27 1968 on the Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters when applying and interpreting the provisions of the Lugano Convention.

The member states have appointed the registrar of the European Court of Justice to receive judgments from courts of last instance and the European Court of Justice, as well as other noteworthy judgments that have been handed down according to the Lugano or Brussels Conventions.

The provisions of the Lugano Convention may apply to any judgment given by a court or tribunal of a member state, including the determination of costs or expenses by an officer of the court. The convention applies to civil and commercial matters regardless of the nature of the court or tribunal.

The Lugano Convention does not apply to:

• revenue, customs or administrative matters;

• the status or legal capacity of individuals;

• property rights arising from matrimonial relationships, wills or succession;

• bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal entities, judicial arrangements, compositions and analogous proceedings;

• social security matters; and

• arbitration.

Recognition of Foreign Judgments

Recognition is required for judgments that are not enforceable (ie, those that create, establish or confirm the existence of legal rights or personal status). According to Article 26(1) of the convention a foreign judgment may be recognized in another contracting state without any special procedure. Thus, parties can rely on a foreign judgment as though it were a domestic judgment.

According to Article 26(2) if recognition of a foreign judgment is raised as the principal issue in a dispute, any interested party can ask a court to declare that the judgment is recognized. However, the party cannot apply for a decision on non-recognition. Should the outcome of the proceedings in a Polish court rely on the determination of an incidental question of recognition of the foreign judgment, that court has jurisdiction to decide on the judgment's recognition.

A foreign judgment cannot be reviewed in terms of its substance. Furthermore, according to Articles 27 and 28 of the convention, a judgment shall not be recognized in the following circumstances:

• if such recognition is contrary to public policy in the state in which recognition is sought;

• where judgment was given in default of appearance, if the defendant was not duly served with the document which instituted the proceedings in sufficient time to enable him to prepare a defence;

• if the judgment is irreconcilable with another given in a dispute between the same parties in the state in which recognition is sought;

• if the court of the state of origin, in order to arrive at a judgment, decided a preliminary question concerning the status or legal capacity of individuals, or rights in property arising from a matrimonial relationship, wills or succession, in a manner that conflicts with a rule of the private international law of the state in which recognition is sought, unless the same result would have been reached by applying the rules of private international law of that state;

• if the judgment is irreconcilable with an earlier judgment of a non-contracting state involving the same cause of action between the same parties, provided that the latter judgment fulfils the conditions necessary for its recognition in the state addressed;

• if the judgment conflicts with Articles 7 to 16 of the convention regarding jurisdiction in matters relating to insurance, consumer matters and exclusive jurisdiction;

• if recognition of the judgment conflicts with an obligation of the member state not to recognize judgments of other member states against defendants domiciled or habitually resident in the third state where, in cases provided for in Article 4 of the convention, the judgment could only be founded on grounds of jurisdiction specified in its Article 3(2); and

• in any case provided for in Articles 54B(3) and 57(4) of the convention.

Enforcement of Foreign Judgments

A judgment that has been handed down and is enforceable in a contracting state may be enforced in another member state when it has been declared enforceable there. Enforcement may be refused for the same reasons as for recognition. According to Article 33 of the convention, the application procedure for enforcement is governed by the law of the state in which enforcement is sought. Recognition proceedings are held according to the provisions relating to enforcement proceedings.

In conjunction with Government Statement of December 31 1999 concerning the Ratification by the Republic of Poland of the Convention on Jurisdiction and the Lugano Convention, Article 32 of the convention provides that applications must be filed with the relevant regional court, which is determined by reference to the debtor's place of domicile. According to Article 1151(1) of the Code of Civil Procedure the regional court that hears the case for enforcement must comprise three professional judges.

Parties seeking enforcement or recognition must produce the following:

• a copy of the relevant judgment, which satisfies the conditions necessary to establish its authenticity;

• in the case of a judgment given in default, a document establishing that the party in default was served with the document instituting the proceedings;

• in the case of enforcement, documentation establishing that the judgment is enforceable and has been served according to the law of the member state in which it was issued; and

• documentation establishing that the applicant is receiving legal aid, if appropriate.

The party seeking enforcement or recognition may be represented by a representative ad litem before the Polish court, in which case an application for enforcement or recognition should include a properly granted power of attorney. According to Article 49 of the convention no legalization or other formality is required in respect of a document appointing a representative ad litem. However, it is unclear whether the article refers to the power of attorney granted to the lawyer appearing before the court of the member state in which the judgment was issued, or the court of the member state where enforcement is sought. Therefore, it is recommended that a power of attorney be notarized and legalized so that its validity cannot be contested.

According to Article 34 of the convention, the regional court must give its decision without delay and the party against whom enforcement or recognition is sought may not make any submission on the application at this stage. This part of the proceedings should be ex parte without the debtor's presence but, due to the fact that the Code of Civil Procedure demands a hearing before a decision on the recognition or enforcement of a foreign judgment is made, the courts in Poland usually hold a hearing before making a final decision.

Appeal

Under Articles 1148 and 1151 of the Code of Civil Procedure a complaint may be made against a decision on enforcement and an appeal may be made against a decision on recognition. A complaint must be filed within seven days of (i) the decision being served or (ii) publication of the decision, if a party has not requested service of the decision. An appeal must be filed within 14 days of service of the decision with justification, or 21 days if justification of the decision is not requested within seven days of publication.

If a regional court authorizes enforcement or recognition, the party against whom enforcement or recognition is sought may file a complaint or appeal respectively to the Court of Appeal.

The convention specifies a special time limit for filing a complaint: one month from the date of serving the decision. If the party is domiciled in a member state other than that in which the decision authorizing enforcement was given, the time for appealing is two months, which runs from the date of service. As for recognition, a party may file an appeal within the same time limit.

Where an application for enforcement or recognition is refused by a regional court, the applicant may file a complaint or appeal against the decision to the Court of Appeal (Article 40 of the convention in conjunction with Government Statement of December 31 1999 and Article 1151 of the Code of Civil Procedure). Since the convention does not specify a time limit for completing these actions, the limits outlined in the Code of Civil Procedure apply.

According to Article 37 of the convention (in conjunction with Government Statement of December 31 1999) the judgment given on the complaint or appeal may be contested only by cassation to the Supreme Court.

Once a decision on enforcement becomes final, a regional court issues an enforcement seal stating that the judgment entitles the applicant to commence execution. A judgment with an enforcement seal may be executed against the debtor by the bailiff or the relevant district court.

Execution Proceedings

Execution proceedings are exercised by bailiffs and relevant district courts. The courts also hear complaints against bailiffs' actions. A debtor can also demand that the competent court stop or limit execution if it denies the events that are the basis for granting an enforcement seal, or claims that an event occurred after the judgment had been given, thus causing the creditor's claim to expire or become unenforceable. A third party may demand that execution be stopped if it violates its rights to objects seized during execution proceedings. Both claims may be accompanied by a request for an injunction in the form of staying the execution proceedings.

A creditor may initiate execution proceedings by filing a request together with the judgment and enforcement seal to the relevant bailiff or district court. The request should specify the claim to be executed and, in the case of financial claims, the amount to be executed and the method of execution. A creditor may indicate several methods of execution in one request.

An execution against movable and immovable assets is carried out in two stages - that is, seizure and sale, usually completed by auction. An execution against a debtor's claims (including its right to a salary and bank account) consists of informing the debtor's bank, employer or debtor that a certain amount of money must be paid directly to the bailiff or creditor. If more than one creditor exists and execution concerns immovable assets, or the amount of money received from the execution is insufficient to cover all debts, the bailiff or court divides the creditors into several groups according to priority of satisfaction.

Costs

The three stages during which an applicant seeking enforcement or recognition must pay costs are:

• the enforcement/recognition proceedings;

• the obtaining of an enforcement seal; and

• the execution proceedings.

Enforcement/recognition proceedings
The cost of recognition and enforcement proceedings consists of the court registration fee plus legal fees. The court registration fee for the following is payable in two parts by the initiating party:

• recognition of the foreign judgment;

• recognition of the foreign court settlement;

• enforcement of the foreign judgment; and

• enforcement of the foreign court settlement.

According to Section 5 of the Ordinance of the Minister of Justice of December 17 1996 on Determination of the Amount of Court Registration Fees, primarily the initiating party must pay a provisional court fee of between Z60 and Z200 (as determined by the court). The final court fee, set by the court in the decision declaring the recognition or enforcement, depends on the financial situation of the party obliged to pay it, and the manner and complexity of the case, but should amount to no more than:

• 8% of the value of the initial claim, if the value of the claim is equal to or less than Z10,000;

• Z800 for the first Z10,000 plus 7% of the sum above Z10,000 if the value of the claim is between Z10,001 and Z50,000;

• Z3,600 for the first Z50,000 plus 6% of the sum above Z50,000 if the value of the claim is between Z50,001 and Z100,000; and

• Z6,600 for the first Z100,000 plus 5% of the sum above Z100,000 with a cap at Z100,000 if the value of the claim exceeds Z100,000.

A full court fee is also payable for appeals and cassations. According to Section 8(3)(2) of the Ordinance on Determination of the Amount of Court Registration Fees, the fee payable for a complaint against the decision to enforce a foreign judgment is one-fifth of the full court registration fee.

The cost of legal representation in proceedings to be recovered from the other party is determined by the Ordinance of the Minister of Justice of December 12 1997 on the Legal Fees of Advocates and Legal Advisers. The costs of representation to be reimbursed cannot exceed four times the minimal rates provided in the ordinance, regardless of the rates decided by the client and advocate or legal adviser. The court may decide on higher rates according to the complexity of the case, but no more than six times the amount of minimum rates. Thus, the maximum reimbursement of legal fees that the court may award is Z36,000.

Enforcement seal
A secretarial fee is payable for an enforcement seal, the amount of which is regulated by the Ordinance of the Minister of Justice of November 15 1996 on Determination of the Amount of Secretarial Fee. According to Section 1 of the ordinance the relevant party must pay Z6 for each page of the court decision plus Z6 for the enforcement seal itself.

Execution proceedings
The costs of execution proceedings are determined by the Act on Court Bailiffs and Execution of August 29 1997. The creditor must pay an initial registration fee of 7% of the value of the claim against the debtor. This is fully recoverable from the debtor's assets once the proceedings are completed successfully. The total fee for execution is 21% of the value of the claim, and the remaining 14% is collected directly from the debtor together with the executed amounts proportionally to the sums recovered. If the execution is unsuccessful, the creditor recovers 50% of the registration fee. There is a cap for a total fee for execution of 30 average monthly salaries, which currently amounts to around Z48,000.

A major change in the cost of the execution proceedings will be introduced on January 1 2002. A fee for execution in the amount of 15% of the value of the claim will be collected directly from the debtor together with the executed sums, and the creditor need pay nothing to initiate enforcement proceedings. However, a bailiff will be entitled to request payment of part of the fee for execution from the creditor in advance of up to 25% of the lowest salary.

For further information on this topic please contact Pawel Pietkiewicz or Violetta Huryn at CMS Cameron McKenna by telephone (+48 22 520 5555) or by fax (+48 22 520 5556) or by email ([email protected] or [email protected]).