On 12 May 2020, the Court of Appeal of England and Wales delivered an interesting decision in SAS Institute Inc. v. World Programming Ltd.
This is a long and complex case, which has reached, inter alia, the European Court of Justice on certain issues of IP law. But the case also raises a number of issues of private international law (see already the reports of Geert van Calster here and here).
In this post, I would like to focus on one particular aspect of last month’s judgment, namely the territoriality of enforcement of judgments, but the case is also concerned with the conditions for issuing anti-enforcement injunctions.
The background of the enforcement issues is a dispute between a U.S. company (SAS) and a UK company (WPL) which resulted in a judgment delivered by a court of North Carolina and ordering WPL to pay about US$ 79 million. The American judgment, however, was denied enforcement in the UK on various grounds, including abuse of process and public policy.
The judgment creditor then initiated enforcement proceedings in a Californian court over assets located in various jurisdictions, including the U.K. The assets were debts of customers of WPL. The Californian enforcement orders required WPL to assign the debts to SAS (the Assignment Orders) and, for debts already paid, to turnover monies already paid to SAS (the Turnover Order).
Affecting Assets, Directly or Indirectly
The Court of Appeal started by recalling the basic principle, which is undoubtedly widely shared, according to which enforcement should be strictly territorial. Accordingly, in principle, the American enforcement orders were found to be exorbitant and infringe the sovereignty of the UK insofar as they affected the debts situated in the UK.
But, the judgment creditor argued, the territoriality principle really applied only to in rem enforcement proceedings. In contrast, the Assignment and Turnover Orders acted in personam. As many readers will know, English courts have a long tradition of using equitable remedies to do indirectly what they recognise they should not do directly. In recent times, the best example has certainly been the power to issue freezing orders with respect to assets situate abroad.
The admissibility of in personam remedies in this context was addressed by Lord Collins in Masri v Consolidated Contractors International (UK) Ltd (No. 2) in 2008. In this judgment, Lord Collins explained that in personam remedies would only be admissible if three conditions were met.
59. As I have said, the fact that it acts in personam against someone who is subject to the jurisdiction of the court is not determinative. In deciding whether an order exceeds the permissible territorial limits it is important to consider: (a) the connection of the person who is the subject of the order with the English jurisdiction; (b) whether what they are ordered to do is exorbitant in terms of jurisdiction; and (c) whether the order has impermissible effects on foreign parties.
In the SAS v. WPL case, the Court of Appeal found that there were connections between the English debtor and the U.S., as the WPL was conducting business in the U.S. But it found the foreign orders raised problems insofar as they required positive actions from the English debtor. Finally, the Court of Appeal insisted that the American orders did include any proviso protecting third parties, in particular by assuring them that their position would not be affected unless the American orders were declared enforceable by the court of the situs of the debt (ie here the English court).
The Court concluded:
83. In the circumstances, the proposed Assignment and Turnover Orders can properly be regarded as exorbitant, being contrary to the internationally accepted principle that enforcement of a judgment is a matter for the courts of the state where the asset against which it is sought to enforce the judgment is located.
The Court then moved on to discuss whether it should issue an anti-enforcement injunction.
And the Brussels Ibis Regulation?
It does not seem that the applicability of the Brussels I bis Regulation was raised at any point in this case.
One wonders, however, whether English courts were free to define territoriality of enforcement in a case concerned with enforcement of foreign judgments over assets situated in a Member State. There is no doubt that the jurisdiction of the English courts to rule on such matters was governed by Article 24(5) of the Brussels I bis Regulation, which applies irrespective of the domicile of the parties.
It could be that the Court of Appeal considered that the source of the territoriality principle did not matter, because it is so widely accepted. Lord Justice Males repeated several times that the principle is recognised internationally, and flows from rules of international law. Most unfortunately, however, he did not cite any source of international law in support of his position, but rather other English judges.
The devil is in the details. Everybody can agree on the existence and content of a principle of territoriality of enforcement when one remains at a high level of generality. But the doctrine developed by Lord Collins in Masri is sophisticated, and there is no particular reason indicating that it is representative of customary international law or, more importantly, EU autonomous law under Article 24(5) of the Brussels I bis Regulation.