Just two days after losing to LOSC Lille in the Champions League, Real Madrid suffered another defeat against a French opponent. Among the 44 (!) judgments published this Friday by the CJEU – a flurry of decisions reminiscent of the madness that is the current Champions League format –, the Court decided a true ‘clásico’ of European private international law in Case C-633/22 Real Madrid Club de Fútbol.
This post is kindly provided by Dr. Meng Yu, lecturer at China University of Political Science and Law, and co-founder of China Justice Observer.
Key Takeaways:
I. Introduction
The decision presented in this post was rendered in the context of a case previously reported here. All of the comments I made there, particularly regarding the possibility of enforcing a foreign enforcement judgment and other related issues, remain particularly relevant. However, as I have learned more about the procedural history preceding the decisions of the Dubai Supreme Court (“DSC”), which was not available to me when I posted my previous comment, greater emphasis will be placed on the general factual background of the case. The decision presented here raises a number of fundamental questions related to the proper understanding of foreign legal concepts and procedures and how they should be integrated within the framework of domestic law. Therefore, it deserves special attention.
I would like to thank Ed Morgan (Toronto, ON Canada) who, at the time when my previous comment was posted, brought to my attention the text of the Ontario judgment whose enforcement was sought in Dubai in the present case.
II. Facts:
1. Background (based on the outline provided by the DSC’s decisions)
X (appellant) obtained a judgment in the United States against Y (appellee), which then sought to enforce it in Canada (Ontario) via a motion for summary judgment. After the Ontario court ordered enforcement of the American judgment, X sought enforcement of the Canadian judgment in Dubai by filing an application with the Execution Court of the Dubai Court of First Instance.
2. First Appeal: DSC, Appeal No. 1556 of 16 January 2024
The lower courts in Dubai admitted the enforceability of the Canadian judgment. Unsatisfied, Y appealed to the DSC. The DSC admitted the appeal and overturned the appealed decision, remanding the case for further review.
According to the DSC, the arguments raised by Y to resist the enforcement of the Canadian judgment – i.e. that the Court of Appeal erred in not addressing his argument that the foreign judgment was a “summary judgment [hukm musta’jil][i] declaring enforceable a rehabilitation order (hukm rad i’tibar)[ii] and an obligation to pay a sum of money rendered in the United States of America that cannot be enforced in the country [Dubai]” – was a sound argument that, if true, might change the outcome of the case.
3. Second Appeal: DSC, Appeal No. 392/2024 of 4 June 2024
The case was sent back before the court of remand, which, in light of the decision of the DSC, decided to overturn the order declaring enforceable the Ontario judgment. Subsequently, X appealed to the DSC.
Before the DSC, X challenged the remand court’s decision arguing that (i) the rules governing the enforcement of foreign judgments do not differentiate by types or nature of foreign judgments; (ii) that under Canadian law, “summary judgment” means a “substantive judgment on the merits”; and that (iii) Y actively participated in the proceedings and the lack of a full trial did not violate Y’s rights of defense.
III. The Ruling
The DSC admitted the appeal and confirmed the order declaring enforceable the Canadian judgment.
After stating the general principles governing the enforcement of foreign judgments in the UAE and recalling some general principles of legal interpretation (such as the prohibition of personal interpretation in the presence of an absolutely unambiguous text, and the principle that legal provisions expressed in broad terms should not be interpreted restrictively), the DSC ruled as follows (all quotations inside the text below are added by the author):
“[it appears from the wording of the applicable legal provision[iii] that] exequatur decrees are not limited to “judgments” (ahkam) rendered in foreign countries but extends to foreign “orders” (awamir) provided that they meet the requirements for their enforcement. Furthermore, the [applicable legal provision][iv] has been put in broad terms (‘aman wa mutlaqan), encompassing all “judgments” (ahkam) and “orders” (awamir) rendered in a foreign country without specifying their type (naw’) or nature (wasf) as long as the other requirements for their enforcement are satisfied. Moreover, there is no evidence that any other legal text pertaining to the same subject specifies limitations on the aforementioned [the applicable legal provision]. To the contrary, and unlike the situation [under the previously applicable rules],[v] the Legislator has expanded the concept of enforceable titles (al-sanadat al-tanfidhiyya),[vi] which now includes criminal judgments involving restitution (radd), compensations (ta’widhat), fines (gharamat) and other civil rights (huquq madaniyyah). […]
Given this, and considering that the appealed decision overturned the exequatur decree of the judgment in question on the ground that the [Canadian] judgment, which recognized a judgment from the United States, was a “summary judgment” (hukm musta’jil) enforceable only in the rendering State, despite the broad wording of [the applicable provisions],[vii] which covers all judgments (kul al-ahkam) rendered in a foreign State without specifying their type (naw’) or nature (wasf) provided that the other requirements are met. In the absence of any other specification by any other legal text pertaining to the same subject, the interpretation made by the appealed decision restricts the generality of [the applicable rules] and limits its scope [thereby] introducing a different rule not stipulated therein.
Moreover, the appealed decision did not clarify the basis for its conclusion that the [foreign] judgment was a “summary judgment” (hukm musta’jil) enforceable only in the rendering State. [This is more so], especially since the submitted documents on the Canadian civil procedure law and the Regulation No. 194 on [the Rules of Civil Procedure] show that Canadian law recognizes the system of “Summary judgment”[viii] for issuing judgments through expedited procedures, and that the [foreign] judgment was indeed rendered following expedited procedures after Y’s participation by submitting rebuttal memoranda and hearing of the witnesses.[…]
Considering the foregoing, and upon reviewing the [Canadian] judgment… rendered in favor of the appellant as officially authenticated, it is established that the parties (X and Y) appeared before the [Canadian] court, [where] Y presented his arguments … and the witnesses were heard. Based on these proceedings [before the Canadian court], the court decided to issue the aforementioned “summary judgment” (al-hukm al-musta’jil) whose enforcement is sought in [this] country. [In addition, the appellant presented] an officially authenticated certificate attesting the legal authority (hujjiyat) [and the finality][ix] of the [Canadian] judgment. Therefore, the requirements stipulated [in the applicable provisions][x] for its enforcement have been satisfied. In addition, it has not been established that the courts [of the UAE] have exclusive jurisdiction over the dispute subject of the foreign judgment, nor that the [foreign] judgment is [rendered] in violation of the law of the State of origin or the public policy [in the UAE], or that it is inconsistent with a judgment issued by the UAE courts. Therefore, the [Canadian] judgment is valid as a an “enforceable title” (sanad tanfidhi) based on which execution can be pursued.
IV Comments
The decision presented here has both positive and negative aspects. On the positive side, the DSC provides a welcome clarification regarding the meaning of “foreign judgment” for the purposes of recognition and enforcement. In this respect, the DSC aligns itself with the general principle that “foreign judgments” are entitled to enforcement regardless of their designation, as long as they qualify as a “substantive judgment on the merits”. This principle has numerous explicit endorsements in international conventions dealing with the recognition and enforcement of foreign judgments[xi] and is widely recognized in national laws and practices.[xii]
However, the DSC’s understanding of the Canadian proceedings and the nature of the summary judgment granted by the Canadian court, as well as its attempt to align common law concepts with those of UAE law are rather questionable. In this respect, the DSC’s decision shows a degree of remarkable confusion in the using the appropriate legal terminology and understanding fundamental legal concepts. These include (i) the treatment of foreign summary enforcement judgments as ordinary “enforceable titles” (sanadat tanfidhiyya – titres exécutoires) under domestic law including domestic judgments rendered in criminal matters; (ii) the assimilation between summary judgment in common law jurisdictions and hukm musta’jil (“summary interlocutory proceedings order” – “jugement en référé”); and (iii) the confusion between summary judgment based on substantive legal issues and summary judgment to enforce foreign judgments.
For the sake of brevity, only the third point will be addressed here for its relevant importance. However, before doing so, some light should be shed on the proceedings before the Canadian court.
1. The proceedings before the Canadian Court and the nature of the Canadian Judgment
The unfamiliarity with DSC with the proceedings in Canada and underlying facts is rather surprising for two reasons: i) the proceedings were initiated by the American government in the context of a bilateral cooperation in criminal matters; and ii) the Canadian proceedings was a proceeding to enforce a foreign judgment rendered in criminal matters and was not simply a proceeding dealing with substantive legal issues. Therefore, a detailed review of the proceedings before the Ontario is necessary to better understand the peculiarities of the case commented here.
i) Proceedings in the context of mutual cooperation in criminal matters. The case originated in Ontario-Canada as a motion brought by the United States of America represented by the Department of Justice as plaintiff for summary judgment to recognize and enforce a “Restitution Order”[xiii] made against Y (defendant). The Restitution Order was part of Y’s sentence in the USA for securities fraud and money laundering. It “included terms as to payment and listed the victims and amounts to which they were entitled under the order” [para. 16].
The general procedural context of the Canadian judgment is of utmost relevance. Indeed, the USA sought the enforcement of the Restitution Order on the basis of the Mutual Legal Assistance in Criminal Matters Act. The Act, as it describes itself, aims “to provide for the implementation of treaties for mutual legal assistance in criminal matters”. According to the Ontario Court, The Act is a “Canadian domestic legislation enacted to meet Canada’s treaty obligations for reciprocal enforcement in criminal matters” [para. 6]. These treaty obligations are based on the Canada-USA Treaty on Mutual Legal Assistance in Criminal Matters of 1990 [para. 6].
This is why, before the Canadian Court, one of the main questions [para. 25] was whether the “Restitution Order” could be regarded as “fine” within the meaning of the Act [para. 26]. If this is the case, then the Restitution Order could be enforced as a “pecuniary penalty determined by a court of criminal jurisdiction” in the meaning of article 9 of the Act.
On the basis of a “broad, purposive interpretation of “fine” … aligned with Canada’s” international obligation under the Treaty, the Ontario court considered that “proceeds of crimes, restitution to the victims of crime and the collection of fines imposed as a sentence in a criminal prosecution” can be regarded as “fine” for the purpose of the case [para. 30]. In addition, the court characterized the restitution order as “a pecuniary penalty determined by a court of criminal jurisdiction” [para. 35], and also described it as an “order made to repay the individual members of the public who were encouraged to purchase stock at an inflated price by virtue the criminal activity” [para. 39]. The court ultimately, concluded that “the Restitution Order made against [Y] is a “fine” within the meaning of… the Act” [para. 41].
From a conflicts of laws perspective, the question of whether the “Restitution Order” is of a penal nature is crucial. Indeed, it is generally accepted that penal judgments are not eligible to recognition and enforcement. However, nothing prevents derogating from this principle by concluding international conventions or enforcing the civil law component of foreign judgments rendered by criminal courts in criminal proceedings, which orders the payment of civil compensation.[xiv]
Interestingly, before the Canadian court, Y argued that the “Restitution Order” made against him was not a “fine” because it was a “compensatory-type” order [para. 27]. However, it is clear that it was an attempt to exclude the enforcement of Restitution Order from the scope of application of the Mutual Legal Assistance in Criminal Matters Act. In any event, despite the crucial theoretical and practical importance of the issue, this is not the place to discuss whether the “Restitution Order” was penal or civil in nature. What matters here is the nature of the proceeding brought before the Canadian court which is a summary proceeding to recognize and enforce a foreign judgment. This leads us to the next point.
ii) Nature of the Canadian judgment. It is clear from the very beginning of the case that the USA did not bring an action on the merits but sought “an order for summary judgment recognizing and enforcing a judgment a Restitution Order made against [Y] as part of his sentence in [the USA] for securities fraud and money laundering” [para. 1]. Therefore, the case was about a motion for a summary judgment to enforce a foreign judgment. In this respect, one of the interesting aspects of the case is that Y also relied on the enforcement of foreign judgments framework and raised, inter alia, “a defence of public policy” at common law [para. 79] citing Beals v, Saldanha (2003), a leading Canadian Supreme Court judgment on the recognition and enforcement of foreign judgments in civil and commercial matters.[xv] The court however dismissed the argument considering that there was “no genuine issue for trial on the question of a public policy defence against the enforcement in Canada of the Restitution Order” [para. 82].
Accordingly, if one puts aside the question of enforceability of foreign penal judgments, it is clear that the Canadian judgment was a judgment declaring enforceable a foreign judgment. The very conclusion of the Canadian court makes it even clearer when the court granted USA’s motion for summary judgment by ordering the enforcement in Canada of the Restitution Order [para. 84]. Accordingly, as discussed in my previous comment on this case, and taking into account the nature of the Canadian judgment, it can be safely said that the Canadian enforcement judgment cannot be eligible to recognition and enforcement elsewhere based on the adage “exequatur sur exequatur ne vaut”.
2. No… a summary judgment to enforce a foreign judgment is not a summary judgment based on substantive legal issues!
It is widely known that the procedural aspects of the enforcement of foreign judgments largely differ across the globe. However, it is fair to say that there are, at least, two main models (although other enforcement modalities do also exist). Generally speaking, civil law jurisdictions adopt the so-called “exequatur” proceeding the main purpose of which is to confer executory power to the foreign judgment and transforms it into a local “enforceable title”. On the other hand, in common law jurisdictions, and in the absence of applicable special regimes, the enforcement of foreign judgments is carried out by initiating a new and original action brought before local court on the foreign judgment.[xvi] The purpose of this action is to obtain an enforceable local judgment that, while recognizing and enforcing the foreign judgment, is rendered as if it were a judgment originally issued by the local court.[xvii] Both procedures result in similar outcome:[xviii] what has been decided by the foreign court will be granted effect in the form. However, technically, in civil law jurisdiction it is the foreign judgment itself that is permitted to be enforced in the forum,[xix] while in common law jurisdictions, it is the local judgement alone which is enforceable in the forum.[xx]
Such an enforcement in common law jurisdictions is usually carried out by way of summary judgment procedure.[xxi] However, this procedure should not be confused with the standard summary judgment procedure used to resolve disputes on the merits within an ongoing case. In fact, it is a distinct process aimed specifically at recognizing and enforcing foreign judgments,[xxii] which is the functionally equivalent counterpart in common law jurisdictions to the exequatur procedure.
This is precisely the confusion that the DSC encountered. The Court regarded the Canadian summary judgment as “a civil substantive judgment on the merits”, although it was not. Therefore, – and as already explained – the summary judgment rendered in result of this proceeding cannot be regarded as “foreign judgment” eligible for recognition and enforcement abroad in application of the principle “exequatur sur exequatur ne vaut”.
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[i] In my previous post, I translated the term “hukm musta’jil” as “summary judgment to highlight the nature of the Canadian procedure. However, from the purpose of UAE law, I think it is better that this word be translated as “summary interlocutory judgment – jugement en référé”. This being said, for the purpose of this post the terms “summary judgment” will be used to highlight the terminological confusion committed by the DSC.
[ii] In my previous post, I was misled by the inappropriate terminology used in the DSC’s decision which referred to this American order as “Rehabilitation order” (hukm rad i’tibar). The term “rehabilitation order” is maintained here as this is the term used by the DSC.
[iii] The DSC made reference to article 85 of Cabinet Resolution No. 57/2018 on the Executive Regulations of Law No. 11/1992 on Civil Procedure Act (hereafter “2018 Executive Regulation”), which was subsequently replaced by article 222 of New Federal Act on Civil Procedure (Legislative Decree No. 42/2022 of 3 October 2022) (hereafter “New 2022 FACP”).
[iv] Ibid.
[v] The DSC referred the former Federal Act on Civil Procedure of 1992 (Federal Act No. 11/1992 of 24 February 1992)
[vi] The DSC referred to article 75(2) of the 2018 Executive Regulation as subsequently supplanted by article 212(2) of the New 2022 FACP.
[vii] Supra n (3).
[viii] In the original. Italic added.
[ix] In the words of the DSC, the foreign judgment “was not subject to appeal”.
[x] Supra n (3).
[xi] See Article 3(1)(b) of the HCCH 2019 Judgments Convention; article 4(1) of the HCCH 2005 Choice of Court Convention; article 25(a) of the 1983 Riyadh Convention.
[xii] See eg. the Japanese Supreme Court Judgment of 28 April 1998 defining foreign judgment as “a final judgment rendered by a foreign court on private law relations… regardless of the name, procedure, or form of judgment” “[e]ven if the judgment is called a decision or order”.
[xiii] Supra n (2).
[xiv] On UAE law on this issue, see my previous post here and the authorities cited therein.
[xv] On this case see, Janet Walker, “Beals v. Saldanha: Striking the Comity Balance Anew” 5 Canadian International Lawyer (2002) 28; idem, “The Great Canadian Comity Experiment Continues” 120 LQR (2004) 365; Stephen G.A. Pitel, “Enforcement of Foreign Judgments: Where Morguard Stand After Beals” 40 Canadian Business Law Journal (2004) 189.
[xvi] Trevor C. Hartley, International Commercial Litigation (3rd ed. 2020) 435.
[xvii] Adrian Briggs, “Recognition of Foreign Judgments: A Matter of Obligation” 129 LQR (2013) 89.
[xviii] Briggs, ibid.
[xix] Peter Hay, Advance Introduction to Private International Law and Procedure (2018) 110.
[xx] Briggs, supra n (17).
[xxi] Adeline Chong, Asian Principles for the Recognition and Enforcement of Foreign Judgments (2021)13.
[xxii] Cf. Hartley, supra n (16) 435 pointing out that “Procedurally, therefore, a new action is brought; in substance, however, the foreign judgment in recognized and enforced” (italic in the original).
I. Introduction
Contingency fee agreements are arrangements whereby lawyers agree with their clients to receive a percentage of the final awarded amount in terms of payment of legal services. Such payment typically depends upon the lawyer winning the case or reaching a settlement. The admissibility of contingency fee agreements varies from one jurisdiction to another, ranging from complete prohibition to acceptance. For example, in the MENA Arab region, jurisdictions such as Bahrain prohibit contingency fee arrangements (see below). However, in other jurisdictions such as Saudi Arabia, contingent fees are not only permitted but also have been described as established practice in the country (cf. Mekkah Court of Appeal, Ruling No. 980/1439 confirming the Ruling of Jeddah Commercial Court No. 676/1439 of 3 Rajab 1439 [20 March 2018] considering that receiving a percentage of the awarded amount that ranges between 15% to 30% as “an established judicial and customary practice among lawyers”).
With respect to the enforcement of foreign judgments, a crucial issue concerns whether a foreign award ordering the payment of contingent fees would be enforced abroad. In a country where contingent fees contracts are prohibited, the presence of such elements in foreign judgments is likely to affect their enforceability due to public policy considerations. The Bahraini Supreme Court (hereafter ‘BSC’) addressed this particular issue in what appears to be an unprecedented decision in the MENA region. The Court held that a foreign judgment ordering payment of contingent fees as agreed by the parties is contrary to public policy because contingency fee agreements are forbidden in Bahrain (Supreme Court, Ruling No. 386/2023 of 20 February 2024).
II. Facts
The case concerned an action for the enforcement of a Saudi judgment brought by X (a practicing lawyer in Saudi Arabia) against Y (the appellee, owner of a sole proprietorship, but no further indications as to Y’s nationality, habitual residence or place of business were mentioned in the judgment).
According to the underlying facts as summarized by the Supreme Court, both X and Y agreed that X would represent Y in a case on a fee of 10% of the awarded amount (105,000 USD). As Y failed to pay, X brought an action in Saudi Arabia to obtain a judgment against Y requiring the latter’s sole proprietorship to pay the amount. Later, X sought the enforcement of the Saudi judgment in Bahrain. The first instance court ordered the enforcement of the foreign judgment, but its decision was overturned by the Court of Appeal. There, X filed an appeal to the BSC.
Before the BSC, X argued that the Court of Appeal erred in its decision as it declared the (contingency fee) agreement between the parties null and void on public policy grounds because it violated article 31 of the Bahraini Attorneys Act (qanun al-muhamat), which prohibits such agreements. According to X, the validity of the agreement is irrelevant in casu, as the court’s function was to examine the formal requirements for the enforcement of the Saudi judgment without delving in the merits of the case. Therefore, since the foreign judgment satisfies all the requirements for its enforcement, the refusal by the Court of Appeal to order the enforcement was unjustified.
III. The Ruling
The BSC rejected the appeal by ruling as follows:
“It stems from the text of the provisions of Articles 1, 2 and 7 of the [1995 GCC Convention on the Enforcement of Foreign Judgments] as ratified by Bahrain in [1996], and the established practice of this Court, that judgments of a GCC Member State rendered in civil, commercial, administrative matters as well as personal status matters that become final [in the State of origin] shall be enforced by the courts and competent judicial authorities of the other GCC Member States in accordance with the procedure set forth in [the] Convention if it was rendered by a court having jurisdiction according to the rules of international jurisdiction of the requested State or according to the provision of the present Convention. [In this respect,] the role of the judicial authority of the requested State shall be limited to examination of whether the [foreign] judgment meets the requirement set forth in the Convention without reviewing the merits of the case. [However,] if it appears that the [foreign] judgment is inconsistent with the rules of Islamic Sharia, the Constitution or the public policy of the requested State, the [requested court] shall refuse to enforce the foreign judgment as a whole or in part.
Public policy is a relative (nisbi) concept that [can be interpreted] restrictively or broadly [as it varies with] time, place and the prevailing customs, and it [is closely linked in terms of] existence or not with public interest. It [public policy] encompasses the fundamental principles that safeguard the political system, conventional social agreements, economic rules and the moral values that underpin the structure of the society as an entity and public interest. [In addition,] although public policy is often embodied in legislative texts, however, it transcends these texts to form an overarching and independent concept. [Thus,] when a legislative text contains a mandatory or prohibitive rule related to those fundamental principles and aims at protecting public interest rather than individual interests, [such a rule] should not be disregarded or violated. [This is because, such a rule is] crucial for preserving the [public] interests associated to it and takes precedence over the individual interests with which it conflicts as it falls naturally within the realm of public policy, whose scope, understanding, boundaries and reach are determined in light of those essential factors of society so that public interest is prioritized and given precedence over the interests of certain individuals.
[This being said,] it is established that the judgment whose enforcement is sought in Bahrain ordered Y to pay X 105,000 USD as [contingent fees], which represent 10% of the amount awarded to Y. [It is also established that] the parties’ [contingency fee] agreement, which was upheld and relied upon [by the foreign court] violates article 31 of the Attorneys Act, which prohibits lawyers from charging fees based on a percentage of the awarded amount. This provision is a mandatory one that cannot be derogated from by agreement, and judgments inconsistent with it cannot be enforced. Consequently, the [contingency fee] agreement upon which the [foreign] judgment to be enforced is based is absolutely void, [rendering] the [foreign] judgment deficient of one of the legally prescribed requirements for its enforcement. This shall not be considered a review of the merits of the case but rather a [fundamental] duty of the judge to examine whether the foreign judgment meets all the requirements for its enforcement.
IV. Comments
1. General remarks
To the best of the author’s knowledge, this is an unprecedented decision not only in Bahrain, but in the MENA region in general. In addition to the crucial issue of public policy (4), the reported case raises a number of interesting questions regarding both the applicable rules for the enforcement of foreign judgments (2) and révision au fond (3). (on the applicable rules in the MENA Arab jurisdictions including Bahrain, see Béligh Elbalti, “Perspectives from the Arab World”, in M. Weller et al. (eds.), The 2019 HCCH Judgments Convention – Cornerstones, Prospects, Outlook (Hart, 2023) 182, 196, 199. On révision au fond, see ibid, 185. On public policy, see ibid, 188-190).
2. The Applicable rules
As the reported case shows, the enforcement of the Saudi judgment was examined on the basis of the 1995 GCC Convention, since both Bahrain and Saudi Arabia are Contracting States to it. However, both countries are also parties to a more general convention, the 1983 Riyadh Convention, which was also applicable (on these conventions with a special focus on 1983 Riyadh Convention, see Elbalti, op. cit., 195-198). This raises a serious issue of conflict of conventions. However, this issue has unfortunately been overlooked by the BSC.
The BSC’s position on this issue is ambiguous because it is not clear why the Court preferred the application of the 1995 GCC Convention over the 1983 Riyadh Convention knowing that the latter was ratified by both countries in 2000, i.e. after having ratified the former in 1996 (see Elbalti, op. cit. 196)! In any case, since the issue deserves a thorough analysis, it will not be addressed here (on the issue of conflict of conventions in the MENA region, see Elbalti, op. cit., 200-201. See also my previous post here in which the issue was briefly addressed with respect to Egypt).
3. Révision au fond
In the reported case, X argued that the decision to refuse the enforcement of the Saudi judgment on public policy grounds violated of the principle of prohibition of the review of the merits. The BSC rejected this argument. The question of how to consider whether a foreign judgment is inconsistent with public policy without violating the principle of prohibition of révision au fond is very well known in literature. In this respect, it is generally admitted that borderline should be that the enforcing court should refrain from reviewing the determination of facts and application of law made by the foreign court “as if it were an appellate tribunal reviewing how the “lower court” decided the case” (Peter Hay, Advance Introduction to Private International Law and Procedure (Edward Elgar, 2018) 121). Therefore, it can be said the BSC rightfully rejected X’s argument since its assessment appears to be limited to the examination of whether the judgment, “as rendered [was] offensive” without “reviewing the way the foreign court arrived at its judgment” (cf. Hay, op. cit., 121).
4. Public policy in Bahrain
i. Notion & definition. Under both the statutory regime and international conventions, foreign judgments cannot be enforced if they violate “public policy and good morals” in Bahrain. In the case reported here, the BSC provided a lengthy definition of public policy. To the author’s knowledge, this appears to be the first case in which the BSC has provided a definition of public policy in the context of the enforcement of foreign judgments. This does not mean, however, that the BSC has never invoked public policy to refuse the enforcement of foreign judgments (see, e.g., BSC, Appeal No. 611/2009 of 10 January 2011 in which a Syrian judgment terminating a mother’s custody of her two daughters upon their reaching the age of 15, in application of Syrian law, was held to be contrary to Bahraini public policy). Nor does this mean that the BSC has never defined public policy in general (see, e.g., in the context of choice of law, Béligh Elbalti & Hosam Osama Shabaan, “Bahrain – Bahraini Perspectives on the Hague Principles”, in D. Girsberger et al. (eds.), Choice of Law in International Commercial Contracts – Global Perspectives on the Hague Principles (OUP, 2021) 429 and the cases cited therein).
What is remarkable, however, is that the BSC has consistently used for the definition of public policy in the context of private international law the same elements it uses to define public policy in purely domestic cases. This is particularly clear in the definition adopted by the BSC in the case reported here since it described public policy in terms of “ordinary mandatory rules” that the parties are not allowed to derogate from by agreement. It is worth noting in this regard that the BSC’s holding on public policy appears, in fact, to have been strongly inspired by the definition given by the Qatari Supreme Court in a purely domestic case decided in 2015 (Qatari Supreme Court, Appeal No. 348 of November 17, 2015).
Defining public policy in the way the BSC did is problematic, as it is generally admitted that “domestic public policy” should be distinguished from public policy in the meaning of private international law (or as commonly referred to as “international public policy”). It is therefore regrettable that the BSC did not take into account the different contexts in which public policy operates.
ii. Public policy and mandatory rules. As mentioned above, the BSC associates public policy with “mandatory rules” in Bahrain, even though it recognizes that public policy could “transcend” these rules “to form an overarching and independent concept”. This understanding of public policy is not in line with the widely accepted doctrinal consensus regarding the correlation between public policy and mandatory rules. This doctrinal consensus is reflected in the Explanatory Report of the HCCH 2019 Judgments Convention, which makes it clear that “it is not sufficient for [a state] opposing recognition or enforcement to point to [its] mandatory rule of the law […] that the foreign judgment fails to uphold. Indeed, this mandatory rule may be considered imperative for domestic cases but not for international situations.” (Explanatory Report, p. 120, para. 263. Emphasis added). The Explanatory Report goes on to state that “[t]he public policy defence […] should be triggered only where such a mandatory rule reflects a fundamental value, the violation of which would be manifest if enforcement of the foreign judgment was permitted” (ibid. emphasis added).
The BSC’s holding suggests that it is sufficient that the foreign judgment does not uphold any Bahraini mandatory rule to justify its non-enforcement, without a sufficient showing of how that the mandatory rule in question “reflects a fundamental value, the violation of which would be manifest if enforcement of the foreign judgment was permitted”. By holding as it did, the BSC unduly broadens the scope of public policy in a way that potentially undermines the enforceability of foreign judgments in Bahrain.
iii. Contingency fee arrangements and Bahraini Public Policy. As noted above (see Introduction), although contingency fee arrangements are prohibited in Bahrain, they are permitted in Saudi Arabia, where they appear to be widely used. From a private international law perspective, the presence of elements in a foreign judgment that are not permitted domestically does not in itself justify refusal of enforcement. In this sense, the non-admissibility of contingent fees in Bahrain should not in itself automatically lead to their being declared against public policy. This is because contingency fee arrangements should not be assessed on the basis of the strict rules applicable in Bahrain, but rather on whether they appear to be manifestly unfair or excessive in a way that violates “fundamental values” in Bahrain. Otherwise, the implications of the BSC’s decision could be overreaching. For example, would Bahraini courts refuse to enforce a foreign judgment if the contingent fees were included as part of the damages awarded by the foreign court? Would it matter if the case has tenuous connection with forum (for example, the case commented here, there are no indication on the connection between Y and Bahrain, see (II) above)? Would the Bahraini courts apply the same solution if they had to consider the validity of the contingent fee agreement under the applicable foreign law? Only subsequent developments would provide answers to these questions.
V. Concluding Remarks
The case reported here illustrates the challenges of public policy as a ground for enforcing foreign judgments not only in Bahrain, but also in the MENA Arab region in general. One of the main problems is that, with a few exceptions, courts in the region generally fail to distinguish between domestic public policy and public policy in the context of private international law (see Elbalti, “Perspectives from the Arab World”, op.cit., 189, 205, and the references cited therein). Moreover, courts often fail to establish the basic requirements for triggering public policy other than the inconsistency with the “fundamental values” of the forum, which are often referred to in abstracto. A correct approach, however, requires that courts make it clear that public policy has an exceptional character, that it has a narrower scope compared to domestic public policy, and that mere inconsistency with ordinary mandatory rules is not sufficient to trigger public policy. More importantly, public policy should also be assessed from the point of view of the impact the foreign judgment would have on the domestic legal order by looking at the concrete effects it would have if its recognition and enforcement were allowed. The impact of the foreign judgment, in this case, would largely depend on the intensity of the connection the case has with the forum.
Introduction:
I have been reporting on this blog some recent cases from the Dubai Supreme Court (DSC) regarding the recognition and enforcement of foreign judgments (see here, here and here). Reading these posts may have given the legitimate impression that the enforcement of foreign judgments in the UAE, and especially in Dubai, is particularly challenging. This post aims to mitigate that perception by shedding light on a very recent case in which the Dubai courts, with the approval of the DSC, ruled in favor of the enforcement of an English judgment. As the comments below indicate, this is probably the very first case in which the DSC has positively ruled in favor of the enforcement of an English judgment by declaring that the judgment in question met all the requirements set out in UAE law, and in particular, the reciprocity requirement.
In Yin v Wu [2023] VSCA 130, the Court of Appeal of the Supreme Court of Victoria set aside a judgment[1] which had affirmed the enforcement a Chinese judgment by an Associate Justice of the Supreme Court.[2] This was a rare instance of an Australian court considering the defence to enforcement of a foreign judgment on the basis that the judgment debtor was denied natural justice—or procedural fairness—before the foreign court.
The dispute concerned a payment made by a Chinese national living in China, Di Wu, to a Chinese national living in Australia, Ke Yin. The payment was made pursuant to a foreign exchange agreement: Yin had promised to pay Wu a sum of US Dollars in exchange for Wu’s Chinese RMB.
The arrangement was made unusually through a series of Telegram and WhatsApp messages, from accounts with different numbers and aliases. (In Australia, we would say that the arrangement sounded ‘suss’.) The agreement was seemingly contrary to Chinese law, which may have contributed to the clandestine character of communications underlying the agreement; see [30].
Judicial mediation is a unique dispute resolution mechanism in Chinese civil procedure. Wherever civil disputes are brought to the court, the judge should, based on parties’ consent, mediate before adjudicating. Judicial mediation, therefore, is an ‘official’ mediation process led by the judge and if successful, the judge will make a document to record the plea, the fact and the settlement agreement. This document is called ‘judicial mediation settlement’ in this note.
On 7 June 2022, the Supreme Court of New South Wales recognized and enforced two Chinese judicial mediation settlement issued by the People’s Court of Qingdao, Shandong Province China in Bank of China Limited v Chen. It raises an interesting question: is Chinese judicial mediation settlement recognisable as a foreign ‘judgment’ and enforceable in the other country? Two commentors provide different views on this matter.
Judicial Mediation Settlement can be classified as ‘Judgment’
Zilin Hao, Anjie Law Firm, Beijing, China
In Chinese civil trial practice, there are two types of legal document to merits issued by courts that has the res judicata effect, namely Minshi Panjue Shu (“MPS”) (civil judgment) and Minshi Tiaojie Shu (“MTS”). The MTS refers to the mediation settlement reached by the parties when a judge acts as a mediator and as part of the judicial process. It has been translated in various ways: civil mediation judgment, civil mediation statement, civil mediation, mediation certificate, mediation agreement, written mediation agreement, written mediation statement, conciliation statement and consent judgment, civil mediation statement, mediation agreement and paper of civil mediation. In order to distinguish it from private mediation settlement, the mediation settlement reached during the court mediation process is translated into the ‘judicial mediation settlement’.
No matter how the translation of MTS is manifested, the intrinsic nature of a judicial mediation settlement should be compared with the civil judgment, and analysed independently in the context of recognition and enforcement of judgments (“REJ”). Take the HCCH 2019 Judgments Convention as an example in an international dimension, Article 4 Paragraph 3 of the Convention provides that “A judgment shall be recognised only if it has effect in the State of origin, and shall be enforced only if it is enforceable in the State of origin.” In terms of REJ, a foreign judgment shall be effective and enforceable. While the validity of a foreign judgment specifically means when the judgment is made by a court has competent jurisdiction, the parties’ rights in proceedings are not neglected or violated, and the judgment is conclusive and final; the enforceability is more associated with types of judgments, such as fixed sum required in monetary judgments.
1. What is a judicial mediation settlement
Firstly, judicial mediation settlement is granted effectiveness by Chinese court in accordance with Article 100 of Civil Procedure Law of China (revised in 2021), which stipulates that “When a mediation agreement is reached, the people’s court shall prepare a written mediation statement, stating the claims, the facts of the case and the result of the mediation. The written mediation statement shall be signed by the judicial officers and the court clerk, be affixed with the seal of the people’s court and shall be served on both parties. A written mediation statement shall come into force immediately upon signatures after receiving by both parties.” In the civil trial proceedings of China, judges are encouraged to carry out mediation on a voluntary and lawful basis, failing which, a judgment shall be rendered forthwith. Article 125 also affirms that for a civil dispute brought by the parties to the people’s court, if it is suitable for mediation, mediation shall be conducted first, unless the parties refuse mediation. According to Article 96 of Civil Procedure Law of China, in trying civil cases, a people’s court shall conduct mediation to the merits of case under the principle of voluntary participation of the parties and based on clear facts. Article 97 Paragraph 1 states that mediation conducted by a people’s court may be presided over by a single judge or by a collegiate bench. Thus, with the consent of parties, judges are entitled to make a judicial mediation settlement. Once a written mediation statement based on the mediation agreement reached by parties is made by the judges and served to litigant parties, the judicial mediation settlement shall come into effect.
Secondly, the effective judicial mediation settlement has the enforceability. As paragraph 3 of Article 52 of Civil Procedure Law represented, the parties must exercise their litigation rights in accordance with the law, abide by the litigation order, and perform legally effective judgments, rulings and mediation decisions. Therefore, assumed China is the state of origin to make a judicial mediation settlement, which has effect, and it is enforceable in the state of origin.
2. Similarity between judicial mediation settlement and judgment
Although the mediation and judgment exist under different articles of the Chinese Civil Procedure Law (an MTS under art 97, an MPS under art 155), the judicial mediation settlement has more common points than difference compared with a civil judgment. First of all, in terms of adjudicative power, the judicial mediation settlement is not only a verification of the parties’ agreement as the judges are involved in the whole of mediatory process and they exercise the power of adjudication. The consent of parties to mediation is a premise, but the judicial mediation settlement is not only to do with the parties’ consent. For example, according to Article 201 of the Civil Procedure Law of China, where a mediation agreement is reached through mediation by a legally established mediation organization and an application for judicial confirmation is to be filed, both parties shall jointly submit the application to the prescribed court within 30 days from the date when the mediation agreement takes effect. After the people’s court accepts the application and review it, if the application complies with the legal provisions, the mediation agreement will be ruled as valid, and if one party refuses to perform or fails to perform in full, the other party may apply to the people’s court for enforcement; if the application does not comply with the legal provisions, the court will make a ruling to reject the application. Moreover, the written mediation statement shall be signed by the judicial officers and the court clerk, be affixed with the seal of the people’s court, which also means the judges or courts are responsible for the mediation decision they have made.
Secondly, the judicial mediation settlement has the almost same enforceability with the civil judgment. On the one hand, the judicial mediation settlement and other legal documents that should be enforced by the people’s court must be fulfilled by the parties. If one party refuses to perform, the other party may apply to the people’s court for enforcement. On the other hand, a legally effective civil judgment or ruling must be performed by the parties. If one party refuses to perform, the other party may apply to the people’s court for enforcement, or the judge may transfer the execution to the executioner.
Thirdly, the judicial mediation settlement has the legal effect of finality similar with a final civil judgment. According to article 102, if no agreement is reached through mediation or if one party repudiates the agreement prior to service of the mediation settlement, the people’s court shall promptly make a judgment. Therefore, once a written mediation statement (MTS) served and signed by both parties, it has the same binding force as a legally effective judgment.
It is worth noting that mediation can take place in several different stages: if mediation is possible before the court session, the dispute shall be resolved in a timely manner by means of mediation; after the oral argument is over, a judgment shall be made in accordance with the law. If mediation is possible before the judgment, mediation may still be conducted; if mediation fails, a judgment shall be made in a timely manner. The people’s court of second instance may conduct mediation in hearing appeal cases. When an agreement is reached through mediation, a mediation statement shall be prepared, signed by the judges and the clerk, and affixed with the seal of the people’s court. After the judicial mediation settlement is served, the judgment of the first instance and original people’s court shall be deemed to be revoked. Therefore, the mediation is a vital part of adjudication power of people’s court has in China.
Additionally, under the common law, a “judgment” is an order of court which gives rise to res judicata. According to Article 127 (5) of Civil Procedure Law of China (2021): “if a party to a case in which the judgment, ruling or civil mediation has become legally effective files a new action for the same case, the plaintiff shall be notified that the case will be handled as a petition for a review…” , which represents that a legally effective civil mediation by the court establishes res judicata and embodies a judgment.
3. Conclusion
To conclude, Chinese civil mediation could be recognized and enforced by foreign countries as a judgment. For now, China and Australia have neither signed a bilateral judicial assistance treaty, nor have they jointly concluded any convention on the recognition and enforcement of foreign court judgments, but de facto reciprocity should have been established between China and Australia (or at least the states of Victoria and NSW). Although there was the precedent of Bao v Qu; Tian (No 2) [2020] NSWSC 588 judgment recognized and enforced by the Supreme Court of New South Wales, the civil mediation judgment marks the first time that foreign courts of common law jurisdictions may recognize and enforce Chinese mediation judgments, which means important reference for other common law jurisdictions. Also, it has broadened the path for many domestic creditors who have obtained judicial claims through civil mediation, especially financial institutions, to recover and enforce the assets transferred by the debtor and hidden overseas.
Chinese Judicial Mediation Settlement should not be treated as ‘judgment’
Jingru Wang, Wuhan University Institute of International Law
1. Applicable Law
Whether a foreign document that seeks recognition and enforcement is a ‘judgment’ is a question of law. Therefore, the first question one needs to consider is which law applies to decide the nature of the foreign document. In Bank of China Limited v Chen, Harrison AsJ held that this matter should be determined under the law of Australia, which is the country where recognition is sought.
Interestingly, the Singapore High Court gave a different answer to the same question. In Shi Wen Yue v Shi Minjiu and another, the Assistant Registrar held that it was indeed the law of the foreign country where an official act occurs that determines whether that official act constitutes a final and conclusive judgment. Therefore, he applied Chinese law to determine the nature of the judicial mediation settlement.
It is argued applying the law of the state of origin is more appropriate. When the parties seek recognition of a foreign judgment, they anticipate that the foreign judgment is viewed as having the effect it has in its state of origin. But by applying the law of the state of recognition, a document may have greater or less effect in the state of recognition than in the state of origin. In Bank of China Limited v Chen, the plaintiff advocated for applying the Australian Law, stating that applying the law of the state of origin may lead to absurd mistakes. For example, if a ticket were regarded as a judgment by a foreign state, the Australian would have to treat it as a judgment and enforce it. The argument can hardly be the case in reality. Firstly, it is suspicious that a civilized country in modern society may randomly entitle any document as “judgment”. Secondly, even if the state of origin and the state of recognition have different understandings of the notion of judgment, a state usually will not deny the effect of a foreign state’s act in order to preserve international comity, unless such classification fundamentally infringes the public order of the state of recognition in some extreme occasions. Therefore, out of respect for the state of origin, the nature of the judicial mediation settlement shall be determined by Chinese law as a question of fact.
2. The Nature of Judicial mediation settlement
In Bank of China Limited v Chen, Harrison AsJ made an analogy to a consent judgment in common law jurisdiction when determining the nature of judicial mediation settlement. It was held that both were created by the parties’ consent but nevertheless are judgments being mandatorily enforceable and having coercive authority. On the contrary, the Assistant Registrar in Shi Wen Yue v Shi Minjiu and another specifically pointed out that “a common law court must be conscious of the unexamined assumptions and biases of the common law”. The common law and civil law view the notion of judicial power differently. The common law embodies an adversarial system of justice. Thus, the common law courts do not take issue with settlement agreements being given the imprimatur of consent judgments. However, in civil law countries, judges play an active inquisitorial role. They are “responsible for eliciting relevant evidence” while party-led discovery is anathema and seen as a usurpation of judicial power. Therefore, it is the proper and exclusive province of judges to judge and issue judgments. It would almost be a contradiction in terms for a party-negotiated settlement to be given the moniker of a consent judgment. For these reasons, judicial mediation settlements are not labelled as judgments.
Chinese law explicitly differentiates the judicial mediation settlement from judgment. Primarily, court judgments and judicial mediation settlements fall under different chapters in the Chinese Civil Procedure Law, while the former belongs to Part II “Adjudication Process”. It is further evidenced by the principle that the parties reaching an agreement during judicial mediation cannot request the court to make a judgment based on such an agreement.
A judgment reflects the court’s determination on the merits issue after adjudication. The judicial mediation settlement is a document issued by the court which records the settlement agreement reached between the parties during the judicial mediation. The differences between them are as follows. Firstly, the judicial mediation settlement shall be signed by the judicial officers and the court clerk, be affixed with the seal of the people’s court and shall be served on both parties. It comes into force once the parties sign after receiving. The parties are entitled to repudiate the agreement prior to service of the mediation agreement. Namely, the court’s confirmation per se is insufficient to validate a judicial mediation settlement. The effectiveness of judicial mediation settlement depends on the parties’ consent. Conversely, a judgment does not require the parties’ approval to become effective.
Secondly, a judicial mediation settlement could be set aside if it violates the law or party autonomy, which are typical grounds for invalidating a contract. The grounds for nullifying a judgment include erroneous factual findings or application of law and procedural irregularities, which put more weight on the manner of judges.
Thirdly,the content of the judicial mediation settlement shall not be disclosed unless the court deems it necessary for protecting the national, social or third parties’ interests. However, as required by the principle of “Public Trial” and protection for people’s right to know, a judgment shall be pronounced publicly. Disclosing the judgment is important for the public to supervise the judicial process. Compared to court judgments, since a judicial mediation settlement is reached internally between the parties for disposing of their private rights and obligations, naturally, it is not subject to disclosure.
Fourthly, while the judicial mediation settlement is a document parallel to judgment in the sense of putting an end to the judicial proceedings, the effect of the judicial mediation settlement is more limited. An effective judicial mediation settlement settles the parties’ rights and obligations on the merits and refrains them from filing another lawsuit based on the same facts and reasons. A judicial mediation settlement is enforceable against the debtor immediately without requiring further order or judgment from the Chinese court. However, unlike judgments, judicial mediation settlements lack the positive effect of res judicata. In other words, matters confirmed by judicial mediation settlements cannot be the basis of the lawsuits dealing with different claims afterwards.
It is fair to say that the judicial mediation settlement combines party autonomy and the court’s confirmation. But it would be far-reaching to equate the court’s confirmation with exercising judicial power. Judges act as mediators to assist the parties in resolving the dispute instead of making decisions for them. The judicial mediation settlement is intrinsically an agreement but not barely a private agreement since it has undertaken the court’s supervision.
3. Conclusion
It is understandable that the plaintiff sought to define judicial mediation settlements as judgments. The judgment enforcement channel is indeed more efficient than seeking enforcement of a private agreement. However, considering the nature of the judicial mediation settlement, it is doubtful to define it as court judgment. In the author’s opinion, since the original court has confirmed the justification of the judicial mediation settlement, it shall be recognized by foreign states. At the same time, a different approach to recognition is worth exploring.
By Stephen G.A. Pitel, Western University
The Supreme Court of Canada has granted leave in H.M.B. Holdings Limited v Attorney General of Antigua and Barbuda. Information about the appeal is available here. The decision being appealed, rendered by the Court of Appeal for Ontario, is available here. In the usual course the appeal will be heard in the late spring or early fall of 2021. The grant of leave is notable because Canada’s top court only hears a small handful of conflict of laws cases in any given year.
In 2014 the Privy Council rendered a judgment in favour of HMB against Antigua and Barbuda for over US$35 million including interest. In 2016 HMB sued at common law to have the Privy Council judgment recognized and enforced in British Columbia. Antigua and Barbuda did not defend and default judgment was granted in 2017. HMB then sought to register the British Columbia decision (not the Privy Council decision) under Ontario’s statutory scheme for the registration of judgments of other Canadian common law provinces. This required the Ontario courts to engage in a process of statutory interpretation, with one of the central issues being whether the scheme applied to the recognition and enforcement judgment or only to what have been called “original judgments”.
The procedure used by HMB for getting the Privy Council decision enforced in Ontario might seem odd. The Ontario application judge referred to the process as involving a “ricochet judgment”. As to why HMB did not bring a common law action on the Privy Council judgment in Ontario, as it had done in British Columbia, there appears to be some issue that such an action could be outside the applicable limitation period. British Columbia (10 years) has a longer limitation period than Ontario (2 years) for common law actions to enforce foreign judgments.
The Ontario courts held that the scheme did not apply to the British Columbia judgment or, in the alternative, if it did, Antigua and Barbuda were entitled to resist the registration on the basis that it was not “carrying on business” in British Columbia (which is a defence to registration under the Ontario scheme). The majority of the Court of Appeal for Ontario, perhaps proceeding in an inverted analytical order, held that because Antigua and Barbuda was not carrying on business in British Columbia it did not need to address the (more fundamental) issue of the scope of the scheme. The dissenting judge held Antigua and Barbuda was carrying on business in British Columbia and so did address the scope of the scheme, finding it did apply to a recognition and enforcement judgment.
In my view, it is unfortunate that all of the Ontario judges focused quite particularly on the language of various provisions of the statutory scheme without greater consideration of the underlying policy question of whether the scheme, as a whole, truly was meant to allow knock-on or ricochet enforcement. Ontario’s scheme is explicitly limited to allowing registration of judgments of other Canadian common law provinces. It strikes me as fundamentally wrong to interpret this as covering all foreign judgments those other provinces themselves choose to enforce. Nevertheless, it will be interesting to see whether the Supreme Court of Canada resolves the appeal solely on the basis of the intended scope of the registration scheme or instead devotes significant attention to addressing the meaning of “carrying on business”.
The EU has opened a Public Consultation into a possible accession to the 2019 HCCH Judgments Convention. The Consultation will run from 22 June 2020 – 05 October 2020 (midnight, Brussels time).
The Consultation is expansive and the target audience is described as follows: businesses and citizens involved or likely to get involved in international trade and investment; public authorities (including justice professionals); social partners organisations (trade unions and employers organisations), trade, business and professional associations, including consumer and business organisations, as well as professional organisations representing lawyers and members of research or academic institutions.
Importantly, the Consultation is not limited to EU Stakeholders. Rather, the EU expressly invites non-EU Stakeholders to participate and have their say.
Given the importance of being able to manage cross-border enforcement risks and validate rights through a predictable, effective and efficient international enforcement mechanism, this Consultation should attract many submissions from around the globe.
The questionnaire, which is available, and can be filled in, in any official EU language, as well as further information concerning the Consultation, can be found following this link.