Enforcement of foreign judgments: Invest Bank v El-Husseini

Key takeaways

This case is of practical significance for creditors who have obtained judgments in foreign jurisdictions that have introduced statutory protection for certain debtors, such as the United Arab Emirates (UAE).

This decision will impact enforcement strategy in some cases. The common law may offer a more favourable route than statutory schemes for registering and enforcing foreign judgments in England and Wales: it does not recognise any defence to enforcement based on the local non-enforceability of a foreign judgment, as long as the judgment is final and conclusive in its jurisdiction of origin. That is in contrast to the position under s.2(1) Foreign Judgments (Reciprocal Enforcement) Act 1933, which provides that a foreign judgment cannot be registered and then enforced here if it "could not be enforced by execution in the country of the original court".

However, the decision may be subject to challenge or clarification by a higher court, as the court in this case indicated that it might have granted permission to appeal on this issue if it had been dispositive of the outcome.

Background

The claimant, Invest Bank PSC, is a licensed financial institution in the UAE. It had obtained two judgments in Abu Dhabi against the first defendant, Mr El-Husseini, for amounts due under two personal guarantees he had given in respect of credit facilities granted by the bank to two UAE-registered companies. The bank had also commenced proceedings in England against Mr El-Husseini, his former wife and four adult sons, alleging that he had transferred various assets to them for nil or insufficient consideration in order to avoid enforcement of the judgments. The bank sought relief under sections 423-425 Insolvency Act 1986, as well as declaratory relief as to the beneficial ownership of two properties in England.

The bank obtained a default judgment against Mr El-Husseini in England for the outstanding debt, plus interest, on the basis of the Abu Dhabi judgments, after he failed to file a defence. However, in the meantime, a legislative amendment had taken effect in the UAE, which prevented enforcement of any credit facility provided to a physical person or a private individual enterprise, unless the lender had obtained sufficient in-kind security. This provision, Article 121b of UAE Federal Decree Law No.14 of 2018, was introduced by the UAE Government to protect certain borrowers from recourse against their general assets or other forms of personal execution measures.

Mr El-Husseini relied on Article 121b to seek orders from the execution courts in Abu Dhabi prohibiting the bank from executing the judgments against him or the corporate borrowers. He succeeded in obtaining such orders, which were upheld on appeal, on the basis that the guarantees were not sufficient security for the purposes of Article 121b and that the provision applied to all credit facilities regardless of when they were entered into. The bank challenged the validity and effect of these orders in the English proceedings, and also resisted an application by the sixth defendant, Mr El-Husseini's former wife, to set aside the default judgment.

The court's decision

The court held that the default judgment should not be set aside, and that the bank had established its capacity to pursue its claims against all the defendants. The court determined that the Abu Dhabi judgments were enforceable in England and Wales under the common law, as they were final and conclusive in their jurisdiction of origin, and that the local non-enforceability of the judgments due to Article 121b was irrelevant to their recognition and enforcement in this jurisdiction. The court also found that Article 121b did not apply to the guarantees as a matter of UAE law, as they were given as security for corporate borrowing, not consumer borrowing, and that the provision did not have retroactive effect to prevent execution of judgments that pre-dated its inception.

The court recognised that its conclusion on the enforceability of the Abu Dhabi judgments at common law was contrary to the position under the Foreign Judgments (Reciprocal Enforcement) Act 1933, which requires that a foreign judgment must be enforceable by execution in the country of origin in order to be registered and enforced in England and Wales. The court also acknowledged that there was no clear authority on the common law position, and that there may be a case for appellate exposition on this issue. However, the court noted that its conclusion on this issue was not essential to the outcome of the case, as the bank had an alternative basis for its claim based on the guarantees. The court therefore declined to set aside the default judgment, as it would achieve nothing of practical value, and confirmed that the bank had capacity to pursue its statutory and equitable claims against the other defendants.