Court of Appeal affirms the position on the enforcement of foreign judgments and the conflicts between Arbitration and Court Jurisdiction clauses

On 5 March 2021, the Court of Appeal handed down judgment in Adactive Media Inc. v Ingrouille [2021] EWCA Civ 313.

Ashfords LLP successfully defends foreign judgment enforcement

Ashfords’ Dispute Resolution Team, along with Prof. Gerard McMeel QC of Quadrant Chambers, represented the defendant appellant, on appeal from Adactive Media Inc v Ingrouille [2020] EWHC 2266 (Comm), concerning the construction of jurisdiction clauses and arbitration clauses, and the impact of section 32 of the Civil Jurisdiction and Judgments Act 1982 on the recognition in England and Wales of a US$11 million judgment entered against the defendant in the United States District Court for the Central District of California.

The Background

The US proceedings arose from a dispute into a consultancy agreement between the Respondent, Adactive Media Inc, and the Appellant, Mark Ingrouille. In 2014, the Appellant was engaged to provide services as part of the expansion of the Respondent’s digital media network in South East Asia. The Respondent terminated the agreement and commenced the US proceedings in 2018, claiming damages for breach of contract, breach of fiduciary duty, fraud, embezzlement, interference with contractual relations and interference with economic advantage. The Respondent obtained judgment in California for US$11m in August 2019. The Respondent subsequently sought to enforce the US judgment in England & Wales, and in July 2020, obtained summary judgment in the High Court for approximately £8.5m, plus interest and costs.

The Agreement

The agreement was governed by the laws of the State of California, and contained jurisdiction provisions for both arbitration and for the US District and State Courts in California. The arbitration clause in the agreement provided for “all claims, disputes, controversies, differences or misunderstandings” to be settled or determined by arbitration under the rules of the American Arbitration Association, and to be conducted in Los Angeles. It expressly excluded any claims by the Respondent as to clauses including those which contained covenants against the misuse and unauthorised disclosure of confidential information.

The Respondent instigated proceedings in the US Court only, and went on to obtain judgment in default owing to the defendants in the US proceedings not entering a plea. Judgment in default against the Appellant was obtained in the US for breaches of contract and of fiduciary duty, comprising disclosure of the Respondent’s confidential information, and misappropriation of the Respondent’s funds by the payment of an unauthorised bonus.

High Court Proceedings

The Respondent commenced proceedings in England and Wales to enforce the US judgment obtained against the Appellant, and sought judgment for the equivalent of the debt owed under the US judgment. The Respondent pleaded that on the basis of the proper jurisdiction of the US Court to have determined all of the claims under the agreement. The Appellant argued that the US Court lacked jurisdiction by reason of the express arbitration clause in the agreement.

The Appellant relied on section 32(1) of the Civil Jurisdiction and Judgments Act 1982, in seeking that the US judgment not be recognised or enforced in the United Kingdom. Section 32(1)(a) of the Act provides that a judgment given by a court of an overseas country in any proceedings shall not be recognised or enforced in the United Kingdom, if the bringing of those proceedings in that court was contrary to an agreement, under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country.

At a summary judgment hearing in July 2020, the High Court determined that the Respondent did not act contrary to the arbitration provision, in bringing claims in the US courts, of which some of those claims were expressly provided for in the agreement to be arbitrated. Further, the High Court determined that, in the conflict between the arbitration clause and the court jurisdiction clause in the circumstances, the arbitration clause was inconsistent and therefore not enforceable for the purposes of section 32(1) of the Act. The High Court awarded summary judgment in favour of the Respondent.

Court of Appeal Proceedings

On appeal, the Court of Appeal, determined that the High Court erred in relation to excluding the arbitration clause. The Court of Appeal considered leading authorities, Fiona Trust [2007] UKHL 40 and Enka [2020] UKSC 38, in determining that an arbitration clause in an agreement between parties should start from the assumption that they likely intended for any dispute arising out of the relationship to be decided by the same tribunal.

Secondly, the Court of Appeal determined that, upon the Respondent’s submissions, it was not correct for the Court to hold that the claims advanced by the Respondent in the US did not matter for the purposes of section 32(1), but rather the claims for which US judgment was given. Instead, the Court agreed with the Appellant’s arguments that, the express terms of section 32(1)(a) precludes the English court from recognising or enforcing a judgment given by a foreign court in any proceedings “if the bringing of those proceedings” was contrary to an agreement under which “the dispute in question” was to be settled otherwise than by proceedings in the courts of the foreign country.

The Court went on to say that it was the bringing of the proceedings in breach of the relevant agreement which prevents the English court from recognising or enforcing any judgment obtained in those proceedings. The Court summarised that the Act “recognises a clear distinction between the judgment on the one hand and the bringing of the proceedings and the dispute in question on the other”.

Following the Court of Appeal’s determination, parties must ensure that they are clear as to their intentions, and terms, on which they enter into a relationship upon. This judgment provides a warning and reminder that parties should be clear as to what rights and obligations are provided for regarding jurisdiction and dispute resolution. Even where proceedings are successfully brought in another jurisdiction, the English Courts will only have regard to the enforcement of a foreign judgment under the application of English Law, and will readily refuse the enforcement of a foreign judgment if it offends the principles of English public policy and the provisions of the Civil Jurisdiction and Judgments Act 1982.

For any more information please contact our Dispute Resolution team.

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