The enforcement of foreign judgments and arbitral awards in Australia under the Hague and New York Conventions - International Courts & Tribunals

In a recent article, we discussed the ramifications for the international enforcement of judgments of superior courts, having regard to Singapore's ratification of the Hague Convention on Choice of Court Agreements.

In this article, we consider the enforcement of foreign judgments in Australia under the Foreign Judgments Act 1991 (Cth) (FJA), at common law and under the Hague Convention, and we look at how this compares to the enforcement of arbitral awards under the New York Convention.

THE FOREIGN JUDGMENTS ACT: A SUMMARY

In Australia, there is a statutory regime for the recognition and enforcement of certain foreign judgments under the FJA.

The FJA provides for the enforcement, by way of registration, of judgments rendered by the superior courts (and some specified inferior courts) of those countries listed in the Foreign Judgments Regulations 1992. The basis of such enforcement is 'substantial reciprocity' in the enforcement of judgments between Australia and each country.

The statutory regime applies to the following jurisdictions: Bahamas, British Virgin Islands, Canada, Cayman Islands, Dominica, Falkland Islands, Fiji, France, Germany, Gibraltar, Grenada, Hong Kong, Israel, Italy, Japan, Korea, Malawi, Montserrat, PNG, Poland, St Kitts and Nevis, St Helena, St Vincent and the Grenadines, Seychelles, Singapore, Solomon Islands, Sri Lanka, Switzerland, Taiwan, Tonga, Tuvalu, United Kingdom, and Western Samoa.

New Zealand judgments are recognised in Australia under the Commonwealth Trans-Tasman Proceedings Act 2010 and Australian judgments are entitled to recognition and enforcement in New Zealand under the New Zealand Trans-Tasman Proceedings Act 2010.

As with New Zealand, the 33 jurisdictions the subject of the FJA have enacted laws to likewise provide for the enforcement of Australian court judgments.

Notable omissions from the scope of the FJA include the USA, Japan, China and India. These countries represent a significant proportion of the world economy and are significant trading partners with Australia. In the event a judgment rendered in one of those countries needs to be enforced, it is necessary to look to the common law, which is discussed below.

To be recognised and enforced under the FJA, a judgment must be:

a money judgment (i.e. a judgment whereby an amount of money is payable other than by way of tax or penalty);
final and conclusive (although an appeal may be pending).

The provisions of the Act may be, but have not been, extended by regulation to prescribed non-money judgments. Therefore, currently there is no scope to enforce non-money judgments from the courts of any country.

A plaintiff who has obtained a judgment to which the FJA extends may apply to the Supreme Court of a State or Territory within 6 years of the date of the judgment to have the judgment registered in that court. The court rules of each Australian State and Territory prescribe the formal requirements for registration. Once registered, the judgment has the same force and effect as a judgment of the local court and can be enforced in the same way.

Under the FJA, a judgment debtor may apply to the court of registration to have registration set aside. The court must set the registration aside if satisfied of one or more of the following (section 7(2)):

the judgment is not one to which the Act applies;
the judgment was registered for an amount which exceeds the amount payable under the judgment;
the judgment was registered in contravention of the Act;
the courts of the country of the original court had no jurisdiction – (section 7(3) set out when the foreign court is deemed to have jurisdiction);
the judgment debtor did not receive due notice of the original proceedings and did not appear;
the judgment was obtained by fraud;
the judgment has been reversed on appeal or set aside in the country of origin;
the rights under the judgment are not vested in the applicant for registration;
the judgment has been discharged or wholly satisfied; or
enforcement of the judgment would be contrary to public policy.

The court has discretion to set the registration aside if the matter in dispute has been the subject of a final and conclusive judgment by another court having jurisdiction in the matter.

The capacity to enforce a judgment from the 33 jurisdictions to which the FJA applies is likely to be similar to that available in respect of arbitral awards pursuant to the New York Convention. However, it relates to only 33 jurisdictions, whereas 156 States have ratified the New York Convention.

Accordingly, it remains the case that an arbitral award is enforceable in many more countries than a decision of a superior court from one of the jurisdictions nominated in the FJA. This is also true of the judgments of superior Australian courts.

Further, if the decision is reversed by an appeal conducted in the same jurisdiction as the original judgment, then the original judgment cannot be enforced in accordance with the FJA.

Pursuant to the New York Convention, the enforcing court has a discretion whether to enforce or refuse enforcement, where the award has been successfully challenged at the seat. The case of Chromalloy Aeroservices v Arab Republic of Egypt is an example of where an arbitral award, seated in Cairo, was successfully challenged at the seat, yet enforced in France and the USA. Accordingly, particularly where respondents have assets in numerous jurisdictions, the New York Convention provides a further advantage as it allows successful claimants to forum shop for the most effective enforcement jurisdiction.

THE ENFORCEMENT OF FOREIGN JUDGMENTS AT LAW

Where there is no statutory regime for the recognition and enforcement of court judgments between two jurisdictions, the local law at the place of recognition and enforcement will determine the issue.

To be entitled to recognition and enforcement at common law:

The foreign court must have had jurisdiction over the defendant (discussed below).
The judgment must be for a fixed (or readily calculable) sum (except money payable by way of tax or penalty) (although enforcement of certain non-money judgments may be available in equity¹).
The judgment must be final and conclusive (although it may be subject to appeal to a higher court).

The question of jurisdiction is not determined by reference to the rules of the foreign court. The Australian court must determine whether, according to Australian rules of private international law, jurisdiction existed in the foreign court.

Typically, the foreign court will have jurisdiction over the defendant:

where the defendant voluntarily submits to the jurisdiction of the court (e.g. by contractual agreement or by appearing as a party or otherwise participating in the proceedings);
where the defendant is a natural person, if he or she is served with an originating process while physically present in the jurisdiction of the court;
where the defendant is a corporation, if, at the time of service of the originating process, the corporation carried on business within the jurisdiction of the foreign court.

Section 11 of the FJA provides that a foreign court does not have jurisdiction merely because the judgment debtor appeared or participated in proceedings to the extent necessary to:

protect or obtain the release of property seized or threatened with seizure in the proceedings;
contest the jurisdiction of the court; or
invite the court in its discretion not to exercise its jurisdiction in the proceedings.

The period in which a common law action to enforce a foreign judgment is determined by the relevant State and Territory law relating to limitation periods. The limitation period for action upon a judgment is 12² or 15³ years from the date on which the judgment becomes enforceable depending on the jurisdiction.

Whereas the FJA provides for enforcement by registration, at law, the foreign judgment must be made a judgment of a local Australian court as a prerequisite to enforcement. This is a significant difference between the statutory regime and the process at law as a judgment creditor seeking enforcement of a foreign judgment must commence fresh proceedings in an Australian court. The judgment creditor can sue for the judgment amount as a debt and/or bring an action on the original cause of action for which judgment was obtained in the foreign court. The judgment creditor can rely on the foreign judgment as creating an estoppel which prevents the judgment debtor from raising any defence which was or could have been raised in the foreign proceedings.

It is a defence to the enforcement of a foreign judgment that:

it was obtained by fraud;
its enforcement would be contrary to public policy;
the defendant was denied natural justice before the foreign court.

THE GROUNDS OF CHALLENGE UNDER THE HAGUE AND NEW YORK CONVENTIONS

The Hague Convention

The general obligation of recognition and enforcement placed on Contracting States to the Hague Convention is set out in Article 8(1). It provides that a judgment of a court of a Contracting State shall be recognised and enforced in other Contracting States in accordance with the rules in Chapter III of the Convention and may be refused only on the grounds specified in the Convention.

The enforcement court may not review the merits of the judgment of the court of origin (Article 8(2)). It is bound by any findings of fact on which the court of origin based its jurisdiction unless the judgment was given by default.

A judgment shall only be recognised if it has effect in the Contracting State of origin, and shall be enforced only if it is enforceable in the Contracting State of origin (Article 8(3)). Further, provision is made for recognition and enforcement to be postponed or refused if the judgment is subject to review in the Contracting State of origin or if the time limit for seeking ordinary review has not expired (Article 8(4)).

Article 9 sets out seven limited grounds upon which recognition or enforcement may be refused. The grounds largely reflect those which are applicable to the recognition and enforcement of arbitration awards under the New York Convention. As with the New York Convention, should one of the grounds apply in any given case, refusal of recognition and enforcement is discretionary.

Article 9 of the Hague Convention provides as follows:

Recognition or enforcement may be refused if:
the agreement was null and void under the law of the State of the chosen court, unless the chosen court has determined that the agreement is valid;
a party lacked the capacity to conclude the agreement under the law of the requested State;
the document which instituted the proceedings or an equivalent document, including the essential elements of the claim,
1. was not notified to the defendant in sufficient time and in such a way as to enable him to arrange for his defence, unless the defendant entered an appearance and presented his case without contesting notification in the court of origin, provided that the law of the State of origin permitted notification to be contested; or
2. was notified to the defendant in the requested State in a manner that is incompatible with fundamental principles of the requested State concerning service of documents;

the judgment was obtained by fraud in connection with a matter of procedure;
recognition or enforcement would be manifestly incompatible with the public policy of the requested State, including situations where the specific proceedings leading to the judgment were incompatible with fundamental principles of procedural fairness of that State;
the judgment is inconsistent with a judgment given in the requested State in a dispute between the same parties; or
the judgment is inconsistent with an earlier judgment given in another State between the same parties on the same cause of action, provided that the earlier judgment fulfils the conditions necessary for its recognition in the requested State.

In addition, Article 11, which concerns damages, provides a further discretion to the enforcement court to refuse recognition and enforcement if the judgment awards damage which do not compensate a party for actual loss or harm suffered. That is, a court can refuse recognition or enforcement of a judgment which awards punitive or exemplary damages.

The New York Convention

Article V of the New York Convention provides as follows:

Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
1. The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
2. The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
3. The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
4. The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
5. The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
1. The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
2. The recognition or enforcement of the award would be contrary to the public policy of that country.

THE HAGUE V NEW YORK CONVENTIONS: A COMPARISON

Both Conventions:

set out exhaustive grounds on which enforcement may be refused (and neither permits a merits review as part of this process);
provide grounds which relate to the incapacity of the parties to the arbitration/jurisdiction agreement (as applicable), or the arbitration/jurisdiction agreement is (otherwise) invalid;
provide that a judgment/award will not be recognised or enforced if such recognition or enforcement would be contrary to the public policy of the country where recognition and enforcement is sought; and
provide grounds which relate to a violation of due process. The Hague Convention goes a step further and expressly provides that a judgment will not be recognised or enforced if "the judgment was obtained by fraud in connection with a matter of procedure". However, if an arbitral award was so obtained, it would likely be covered by Article V(1)(b), (d) or (2)(b) of the New York Convention depending on the circumstances.

The Hague Convention also provides relief where the judgment is inconsistent with a judgment given in the requested State in a dispute between the same parties or a judgment given in another State between the same parties on the same cause of action provided which can be recognised in the requested State.

The Hague Convention is currently ratified by the EU, Singapore and Mexico. Accordingly it has a long way to go before it provides serious competition for enforcement when compared with the New York Convention, which, as stated above, has been ratified by 156 countries.

As with the FJA, a judgment of a court will not be enforceable under the Hague Convention if it has been overturned on appeal. Accordingly, for claimants, an award from an arbitrator remains more enforceable in these circumstances.

Footnotes

¹ White v Verkouille [1990] 2 Qd R 191; Davis v Turning Properties Pty Ltd (2005) 222 ALR 676; Independent Trustee Services Ltd v Morris (2010) 79 NSWLR 425.

² Limitation of Actions Act 1974 (Qld) s10(4)-(4A); Limitation Act 1969 (NSW) s17; Limitation Act 1974 (Tas) s4(4); Limitation Act 1985 (ACT) s14; Limitation Act (NT) s15.

³ Limitation of Actions Act 1958 (Vic) s5(4); Limitation of Actions Act 1936 (SA) s34.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.