English High Court Recognises a NY Crypto Judgment

Crypto-litigation is an increasingly significant business. The “omniterritorial” nature of digital assets has led to judicial competition in this field. As Matthias Lehman usefully summarised in his recent post on this blog, English courts have taken several steps to position England as a (if not the) leading hub for crypto-litigation, including: allowing actions against persons unknown; permitting service of claim forms out of the jurisdiction on persons unknown based on relatively tenuous connections, such as the situs of a digital asset being determined by the domicile/habitual residence/place of business of the claimant in England; allowing the use of persons unknown as anchor defendants to obtain jurisdiction over foreign crypto exchanges or custodians under the necessary or proper party gateway of Practice Direction 6B, para 3.1(3)(b); issuing worldwide freezing orders; ordering foreign crypto exchanges or custodians to reveal the identity of persons unknown; and allowing service of documents by alternative means, including by airdrop.

One recent development that Matthias did not mention in his post, perhaps because it had been extensively reported, including in several posts on this blog (see, for example, here and here), is that the Law Commission of England and Wales is pursuing a project on digital assets in private international law. On 22 February 2024, the Law Commission published a call for evidence to help them identify the most challenging and prevalent issues of private international law that arise from the digital, online, and decentralised contexts in which modern digital assets and electronic trade documents are used.

The call for evidence is an impressive document that, in 284 pages, introduces the private international law in this area and seeks stakeholder input on key challenges and priorities. Despite its length, the call for evidence does not cover all potential issues. One obvious omission is the lack of discussion on recognition and enforcement of foreign judgments. One can only speculate about the reasons for this omission. One possible explanation is the lack of case law, which suggests that recognition and enforcement of foreign judgments is not, practically speaking, a sufficiently important topic for the Law Commission to consider in this project.

If this was indeed the reason for this omission, it no longer stands following the judgment of the High Court (Judge Pelling KC) of 17 May 2014 in Tai Mo Shan Limited v Persons Unknown [2024] EWHC 1514 (Comm) (for some reason the judgment is not yet available on the BAILII website, but is available via Westlaw), in which the court dealt with the recognition of a New York judgment in England.

The requirements for the recognition of a foreign judgment in England at common law are that the judgment must be given by a court of competent jurisdiction, be final and conclusive and be on the merits.

In personam foreign judgments are difficult to recognise because there are only two grounds of indirect jurisdiction in English law: presence of the defendant in the territory of the court of origin at the moment of commencement of proceedings and submission to the jurisdiction of the court of origin. In other words, if a foreign judgment is given against absent defendants (including persons unknown, who are treated as being absent from the jurisdiction), then, if there was no submission, the judgment cannot be recognised in England, even if the judgment was given in circumstances where an English court would have also allowed an action against persons unknown, permitted service of the claim form out of the jurisdiction on those persons and allowed the joinder of foreign crypto exchanges or custodians as necessary or proper parties.

However, foreign judgments come in two forms: in personam and in rem. The indirect jurisdiction requirements for in rem foreign judgments are different. According to the editors of Dicey, Morris and Collins, “a court of a foreign country has jurisdiction to give a judgment in rem capable of enforcement or recognition in England if the subject-matter of the proceedings wherein that judgment was given was immovable or movable property which was at the time of the proceedings situate in that country” (Rule 50, para 14R-108).

The judgment in Tai Mo Shan Limited v Persons Unknown was an in rem judgment as it included “a declaration as to the proprietary interests of the claimant” ([2]). The subject-matter of the proceedings resulting in the judgment was digital assets. Digital assets are neither immovable nor movable property in the sense in which these words are normally used. Nor are they choses in possession or choses in action, but rather a sui generis category of property (see the Law Commission’s consultation on draft legislation aiming to affirm the position that digital assets are a “third category of personal property rights” in English property law). Nevertheless, as the judgment in Tai Mo Shan Limited v Persons Unknown confirms, Dicey’s Rule 50 applies to judgments given in proceedings whose subject-matter was digital assets.

To determine the situs of the digital assets, the court applied the criteria set out in the preceding case law, which concerned the question of whether a digital asset was situated in England for the purposes of deciding whether the court should grant permission to serve the claim form out of the jurisdiction. That case law is not entirely consistent, but Judge Pelling KC thought that “it is at least arguable that New York was the situs of cryptocurrency stolen from the claimant at the time it was stolen, applying English law principles at any rate because although the claimant is a Cayman registered company at all material times its central management and control was located in New York” ([9]).

Since the other requirements for recognition were not problematic, the court held that the New York judgment should be recognised.

This judgment is notable for at least three reasons. First, it suggests that the Law Commission should address recognition and enforcement in its project on digital assets in private international law. It is not only the indirect jurisdiction requirements that should be looked at. As noted in the Law Commission’s final report on Digital Assets, some foreign courts give judgments denominated in crypto-tokens. For instance, the United States District Court in Titus Williams v Kasim Mahmood (2022, Case Number 6:21-cv-03074-RK), granted the defendant “conversion damages in the amount of 33.7398 bitcoin”. However, such a judgment cannot be enforced in England because of the requirement that only judgments “for a debt, or definite sum of money” can be enforced (Dicey, Morris and Collins, Rule 46, para 14R-024). Second, it shows that Dicey’s Rule 50, which only mentions “immovable and movable property” is outdated, since digital assets are a sui generis category of property that escapes traditional classifications. Third, it demonstrates that English courts are open to international cooperation and judicial dialogue in this field.