The second in our ongoing Disputes Essentials breakfast seminars explored the intricacies of domestic and cross-border enforcement of judgments and arbitration awards, with our four experts providing a practical insight into what parties can do to maximise their chances of recovery and avoid throwing good money after bad.
Enforcement is a fundamental consideration for any party considering litigation or arbitration. While a party may obtain a judgment or award in their favour, payment of the judgment/award debt by the opponent is not guaranteed.
How to be enforcement-ready
Even if enforcement may seem a distant prospect, particularly at the outset of a contractual relationship, it is important to think strategically about your counterparty's ability to pay an eventual judgment or award in the event of a dispute arising.
- Ask the right questions about your counterparty: Where are they based, where do they hold assets, and what are those assets? It may be appropriate to take foreign law advice on enforcement in another jurisdiction and/or to seek a third-party payment guarantee.
- Consider background checks: Corporate reports and specific desktop searches can provide an insight into the profile of a company, their financial health and obligations, insurance position and reputation.
- Don't leave your dispute resolution clause to the last minute: Where do you want any disputes to be heard, and who do you want to hear them?
If a dispute does arise, it may be appropriate (if you end up as claimant seeking damages and/or recovery of money) to seek interim relief in the form of a freezing order, in order to secure the assets of the opponent. This can ensure the assets are available in the event of a determination in your favour. However, bear in mind that such an order will only be made where there is a real risk of dissipation.
The involvement of a litigation funder can be particularly beneficial, not least given the thorough due diligence processes that funders require prior to taking on a claim. Meanwhile, the variety of different funding models available in the context of enforcement, from traditional funding of the entire claim, through to taking an assignment of the judgment or award, provides a range of options for parties seeking to offset a risk of enforcement failure.
Enforcing judgments in England and Wales
An English judgment for a sum of money can be enforced relatively straightforwardly in England and Wales once it has become due and enforceable. For example, the judgment creditor may obtain a writ or warrant of control to enable the seizure and sale of the judgment debtor's goods; a third-party debt order requiring money owed to the judgment debtor to be redirected to the judgment creditor; or a charging order placing a charge over land or securities owned by the judgment debtor.
Meanwhile, non-money judgments such as a judgment for an injunction may be enforced by way of contempt of court proceedings which can result in committal and the confiscation of assets.
Asset recovery techniques
Where a judgment debtor takes active steps to put the assets beyond reach, various powerful tools may be available to the judgment creditor from the English court. These include post-judgment freezing orders and ancillary disclosure orders, through to search and seizure orders, and orders against third parties. Tracing assets through complex structures and across borders frequently requires the expert assistance of investigators and forensic accountants.
Cross-border enforcement
Enforcing an English judgment abroad, or enforcing a foreign judgment in England and Wales, is more complex and requires consideration of the effect of various international agreements. However, it is usually possible for foreign money judgments which are final and conclusive to be enforced in England and Wales, subject to any defences to enforcement, for example, on the grounds the judgment was obtained by fraud. Similarly, enforcing an English judgment abroad may fall under a reciprocal regime, but foreign law advice should always be taken.
Arbitration awards
Although separate rules govern enforcement of arbitration awards in England and Wales (depending on where abroad the arbitration was seated), obtaining an order to enter judgment in terms of an award (which can then be enforced like any other English judgment) is usually straightforward. Enforcement may be refused on various grounds, and awards in English-seated arbitrations are subject to challenge under the Arbitration Act 1996, but the English courts tend to take a pro-arbitration attitude, and successful challenges are unusual. Enforcement of an English arbitral award abroad, at least in a contracting state to the New York Convention, is also likely to be relatively straightforward although, as ever, foreign law advice will usually be required.
Key tips for enforcement
- Bear in mind proportionality: The costs of enforcement might not always be proportionate to recovery. Consider what assets to target and bear in mind that enforcement in some jurisdictions is more straightforward than others.
- Remember alternative strategies: In appropriate circumstances, consider whether negotiation with the judgment debtor may be more effective in securing payment.
- Co-ordination and timing are key: A multi-pronged approach, adopting various enforcement tools in multiple jurisdictions, can be particularly effective, particularly when dealing with judgment debtors that are taking active measures to put their assets beyond reach. However, beware of tipping off.