There are various routes for enforcing a foreign judgment in Ireland, and different rules apply depending on the circumstances. However, all of the available routes provide that recognition and enforcement of a foreign judgment may be refused if it would be incompatible with public policy. A recent High Court decision has considered public policy in an enforcement case from a number of particular perspectives. Commercial Disputes partners, Gearoid Carey and Gerard Kelly examine the decision.

There are various routes by which a foreign judgment may be enforced in Ireland. The jurisdiction which has issued the judgment is the main factor in determining which route applies. Although each route has its own specific conditions and qualifications for enforcement, one common feature is that recognition and enforcement of a foreign judgment may be refused if it is contrary to public policy. Irish case law on public policy grounds for refusing enforcement is limited. However, the High Court has recently determined a case where enforcement of a foreign judgment was resisted on various public policy grounds.[1] Although the case related to enforcement being pursued under Common Law rather than under any relevant international instrument[2], the assessment set out is not limited to that scenario. This decision is also of relevance to the enforcement of foreign arbitral awards.[3]

Background

The plaintiff brought summary proceedings in the High Court seeking the enforcement of a judgment it obtained against the defendant in the sum of over $192 million in the Supreme Court of the State of New York. It arose on foot of a personal guarantee given by the defendant. That guarantee was in relation to obligations due by a company beneficially owned by the defendant to the plaintiff as administrative and collateral agent for various lenders. The company had borrowed $185 million in accordance with a written agreement which set out the applicable interest rates, including in the event of default. The company defaulted on its obligations. Although forbearance agreements were entered into, repayment was not made in accordance with the relevant terms. By way of the last forbearance agreement, the defendant acknowledged his liability and he separately agreed to the entry of judgment against him in the amount of over $192 million. In October 2022, the clerk of the New York Supreme Court entered judgment against the defendant, and included costs and disbursements measured at $205. Enforcement was ultimately sought in Ireland as the defendant had assets here.

Public policy resistance grounds

Although the defendant raised various arguments aimed at resisting the proceedings, a number of separate public policy grounds were raised. These included:

• The plaintiff had secured company assets in the US with a market value substantially above the judgment debt. Therefore, allowing enforcement would unjustly enrich the plaintiff and its attempt to do so was contrary to Irish public policy.
• The amount claimed was comprised, to a significant extent, of punitive interest and penalty clauses, recovery of which was also contrary to Irish law.

The defendant also contended by way of written submission that the New York judgment had been obtained in a manner which lacked fair procedures and should not be enforced in Ireland as a matter of public policy.

Decision

Ms Justice Roberts acknowledged that a New York judgment was not enforceable automatically or in accordance with any international convention. She stated that:

1. She felt she did not need to consider whether the particular interest rates were or were not penalties which were impermissible under Irish law. She accepted the plaintiff’s proposition that the rule against penalties operated only for secondary obligations that are engaged as a result of breach, ie it only applied on default). It did not apply to a primary obligation to pay a specified amount by a specified date, which was the case here. The forbearance agreement relating to the agreed amount was a fresh agreement. Therefore, the court was not required to look behind it to see if the agreed settlement amount included an historic penalty component.
2. The acquisition by the plaintiff of the company’s assets as part of the company’s bankruptcy process was an auction process. The bankruptcy process was not engineered by the plaintiff. The possibility that the assets might be acquired for less than the value taken by the plaintiff on foot of its security had been expressly referenced and agreed to in the guarantee. The court also noted that the defendant had not challenged the New York judgment on this basis in New York. Further, there was no stay on enforcement.
3. Evidence was also put before the court as to the nature and effect of the Confession of Judgment entered into by the defendant. It was on foot of that document which judgment was entered in New York. Ms Justice Roberts was satisfied that the defendant, a sophisticated borrower, had acted with the benefit of legal advice.

Ms Justice Roberts also rejected the defendant’s final claim that enforcement should be allowed because the summary summons did not adequately plead the debt claimed. She accepted that the plaintiff had undertaken to give credit for payments made. Although the summons did not expressly deduct the credit on its face, it did clearly refer to the amounts involved so the defendant could easily understand the amounts due. She held that the plaintiff was entitled to summary judgment for over $159 million, being the amount of the New York judgment less the credit as specified in the summons.

Conclusion

Although the decision is to an extent specific to its facts, it does demonstrate that for enforcement of a foreign judgment to be refused, the incompatibility with public policy must be obvious. It also demonstrates that, depending on the complaint made, merely asserting a public policy issue will not be sufficient. Rather, it should be supported by affidavit evidence, as appropriate, or steps consistent with the complaint should be pursued before the courts which issued the judgment, if possible.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

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[1] MCC California LLC v Jacob Safra [2023] IEHC 658

[2] Such as the Brussels Recast Regulation, the Lugano Convention, the Hague Choice of Court Agreements or the Hague Judgments Convention. Common Law enforcement is the default route in the event none of those instruments apply.

[3] Both the UNCITRAL Model Law and the New York Convention provide that recognition and enforcement of an arbitral award may be refused if it would be contrary to public policy.