End of Year Review: Cross Border Recognition and Enforcement of Judgments (Part 1 - Public Policy Objections)
In two judgments in 2021, the Irish Court of Appeal considered the public policy grounds for refusal of recognition and enforcement of a judgment under Regulation (EU) 1215/2012. The judgments provide helpful guidance on the application of the public policy objections to enforcement. In part 1 of this two-part review, we distil the key points from the most recent judgments. In part 2 we look at broader developments including the 2019 Hague Judgments Convention and the recently published European Parliament Think Tank's Report on the UK's possible re-joining of the Lugano Convention.

 

Regulation (EU) 1215/2012 (Brussels Recast) provides uniform rules for the recognition and enforcement of judgments between Member States in civil and commercial matters. Article 52 precludes review by the court of the receiving state of the substance of the underlying judgment. In-scope judgments given in a Member State should be recognised and enforced by other Member States, subject only to limited grounds allowing refusal of recognition provided in Articles 45 and 46.

Article 45(1)(a) provides that the recognition of a judgment shall be refused where it is manifestly contrary to public policy in the Member State addressed. This public policy exemption was the subject recent Irish Court of Appeal decisions.

Background 

Mr Gwyn–Jones (Appellant) applied to the Irish High Court for orders refusing the recognition and enforcement of Bulgarian judgments against him based on public policy and fraud grounds. The Bulgarian proceedings arose out of the acquisition of a shopping mall in Bulgaria and loan agreements entered into between the Appellant and Mr McDonald (Respondent). Two sets of proceedings were initiated before the Bulgarian courts against the Appellant in respect of monies due under the loan agreements.   Judgment was granted against the Appellant in both sets of proceedings, which he unsuccessfully appealed before the Bulgarian courts. He initiated two applications before the Irish High Court for orders refusing recognition and enforcement of the judgments, in part because of fraud perpetrated on him by the Respondent. Both applications were the subject of appeals to the Court of Appeal (COA).  

a) Brompton Gwyn-Jones v McDonald (First Judgment, July 2021)

In July 2021, the COA found that the Appellant had failed to establish the conditions for the application of the public policy exception on the grounds of fraud. The Appellant was not alleging that the judgment was procured by fraud in the sense that the court was deceived into giving it. Rather, the Appellant sought to attack the merits of the underlying judgment by claiming that the contract on which judgment was given was the consequence of a fraud. The Court of Appeal found that this was not an admissible public policy objection within the meaning of article 45(1)(a).

b) Brompton Gwyn-Jones v McDonald (No 2) (Second Judgment, November 2021)

The Appellant initiated proceedings before the Irish High Court for an order refusing recognition and enforcement of judgment in the sum of c€425,000 or for a stay on recognition and enforcement pending the outcome of arbitration proceedings before the International Court of Arbitration (ICC). He claimed that he was entitled to such orders because the underlying loan agreements were vitiated by a fraud perpetrated on him by the Respondent.   

The High Court refused the application and the Appellant appealed. In response, the respondent applied for a dismissal of the appeal contending that because of the First Judgment, the Appellant was precluded from prosecuting this appeal – on res judicata principles. The COA rejected the application because the cause of action was based on a different judgment.  

In respect of the substantive appeal, the COA found that the Appellant had not put forward any arguments to displace the court's view that the basis for his public policy objection to enforcement (i.e., fraudulent misrepresentation around the loans) was not a cognisable public policy exception, but was in fact an attack on the Bulgarian court judgment. Also, he had not identified any legal provision under which the court has jurisdiction to stay enforcement by reason of the ICC arbitration.

Critical factor

A critical factor in the appeal was that the Appellant had fully defended the original claim before the Bulgarian courts, but never raised any argument that the loan agreements were unenforceable because of fraud. His failure to do so, or offer any credible explanation for this failure, was fatal to his public policy objection.

The COA emphasised the exceptional nature of the public policy exception in article 45(1)(a). The COA was influenced by the principles underlying Brussels Recast, including:

(i) the enforcement of judgments should be effected swiftly;

(ii) it is the court of the state of origin that is best placed to determine the issues arising in the dispute before it, and the courts to whom a judgment is addressed, must defer to the process before the courts of the state of origin.

Therefore, the COA helpfully concluded that a public policy challenge will only be entertained where the challenge could not have been raised before the court of the state of origin, or the challenge was raised and rejected, and that rejection was not capable of being remedied on appeal.  

Postponement or Stay

The Appellant's argument for postponement or stay of enforcement engaged articles 44 and 51 of Brussels Recast. Article 44 allows a court to suspend enforcement proceedings, where an application for refusal of enforcement is pending. Article 51 halts challenges to enforcement where an "ordinary appeal" against the judgment is lodged in the Member State of origin.

The COA observed that article 44 was not a stand-alone power, but was based on the requirement of a pending challenge to enforcement on the grounds identified in Article 45.

The COA considered the meaning of an "ordinary appeal" under article 51.  It relied on the definition of the term in Industrial Diamond Supplies v. Luigi Riva Case 43/77 [1977] ECR I-2175 as:

"any appeal which is such that it may result in the annulment of the amendment of the judgment…and the lodging of which is bound…to a period…laid down by the law."

In this case, the Appellant argued that the stay should be placed on enforcement, because if the ICC arbitration found that the loan agreements were tainted by fraud, an application would be made to the Bulgarian courts to re-open the matter. The COA found that an application under the Bulgarian Civil Code to set aside the Bulgarian judgment was not subject to any time limit. According to the COA this meant that it was not an ordinary appeal for the purposes of article 51.

Aside from its jurisdiction under articles 44 and 51, the COA was not prepared to exercise any broader  discretion to stay or postpone enforcement, in part because it was open to the Appellant to apply to the Bulgarian courts for such a stay, but he failed to do so.  The COA therefore rejected the appeal and the stay and postponement applications. 

Conclusion

The COA decisions are welcome in clarifying the scope for the Irish courts to consider public policy objections against enforcement of judgments, and the approach of the court to stay or postponement applications. A fundamental principle underlying Brussels Recast is that judgment given by a Member State court cannot be reviewed as to its substance by the receiving Member State court. This decision from the COA upholds that principle. Where a party has fully engaged with the defence of a case at first instance, they will not be permitted to attack the substance of that judgment in an application for non-recognition or non-enforcement before another Member State court.  
For further information, or to discuss the recognition and enforcement of judgments in more detail please contact Richard Breen or Gerard James.

 

Contributed by Gail Nohilly

Key Contacts

Richard Breen Partner

Gerard James Senior Associate

Gail Nohilly Knowledge Lawyer

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