Decision of the Court of Appeal on the interaction between the Brussels I Regulation and the Insolvency Regulation

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On December 2, 2021, the Court of Appeal delivered its judgment in Windhorst v Levy [2021] EWCA Civ 1802, which concerned a challenge against the registration of a German judgment and a request for a stay of execution. Brexit notwithstanding, the ruling is relevant for cases involving (i) judgments in proceedings initiated before December 31, 2020 and (ii) insolvency proceedings initiated before December 31, 2020.

The original registration order concerned a 2003 German judgment for the sum of US $ 2 million plus interest (” the 2003 judgment‘). Due to the age of the decision, Council Regulation 44/2001 / EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (‘the Brussels I regulation‘) applied in its original form (rather than recast).

On appeal to Judge Eady in the Queen’s Bench Division of the High Court, the judgment debtor challenged the registration of the 2003 judgment on the grounds that he subsequently entered into an insolvency plan German. This was approved by German courts in 2007 and stipulated that creditors (including the judgment creditor) waived their rights to more than a small portion of the judicial debt. Pursuant to Article 25 (1) of Council Regulation 1346/2000 / EC of 29 May 2000 on insolvency proceedings (“The insolvency regulation“), the foreign compositions had to be recognized in the other Member States. In the alternative, the judgment debtor requested a stay of execution under r.83.7 of the CPR.

It was common ground that under German procedural law, the 2003 judgment remained formally enforceable unless and until it was declared unenforceable following a request accepted under Article 767 of the Code of German procedure. Such a claim was filed in 2019 and has, at the time of writing, not yet been finally decided by German courts. In the meantime, German courts have ordered a stay of execution on condition that the judgment debtor posts a security of $ 3.44 million. No such payment had yet been made, although the possibility of doing so remained open to the judgment debtor. The judgment creditor opposed the s767 claim on the grounds that subsequent acknowledgments of debt in the form of partial payments meant that the judgment debtor could no longer avail itself of the waiver referred to in the insolvency plan.

On May 6, 2021, Eady J dismissed the judgment debtor’s appeal against the registration of the judgment and his request for a stay. He appealed to the Court of Appeal arguing that (1) the English court was in a position to make its own assessment of whether the German judgment remained enforceable in the relevant sense after approval of the plan insolvency, (2) the effect of the insolvency plan (which was to be recognized under the European Insolvency Regulation) was that the 2003 judgment was no longer enforceable in the relevant sense, and (3) Eady J erred in not ordering a stay.

Arnold LJ (with which judgment Newey LJ and Stuart-Smith LJ subscribed) agreed with Eady J below that all the insolvency settlement required was for the English courts to give the insolvency plan the same effect as he had in Germany. Since the judgment was still enforceable in Germany until the security was paid or the s767 claim was successful, it follows that it was enforceable in the relevant sense and the registration should be maintained ([33]-[34]).

In light of this conclusion, it was not necessary to determine the extent to which English courts could make their own assessment of enforceability on an appeal for registration ([29]). The question arose because Article 45 of the Brussels I Regulation stipulated that a registration decision should only be refused or revoked for the reasons listed in Articles 34 to 35, a list that the CJEU qualified as “of exhaustive nature ”(Case C-139/10 Prism Investments BV v van der Meer [2011] ECR I-9511 at [33] and Case C-157/12 Salzgitter Mannesman Handel GmbH v SC Laminorul SA [EU:C:2013:597], [2014] 1 WLR 904 to [28]). The list did not include the enforceability of the foreign judgment. He was argued on behalf of the appellant, citing Percival v Motu Novu LLC [2019] EWHC 1391 (QB) To [19]-[24], that certain questions not appearing on the list had to be able to be decided (for example if the decision had been given in a Member State) because the English courts had to be able to verify whether the Brussels I Regulation applied. Arnold LJ, without settling the issue, observed that the issue of enforceability might be different because the Brussels I Regulation required the courts of the home Member State to certify that the decision was enforceable in that Member State, which might seem to indicate that enforceability in that state rested with the competent foreign court rather than with the court with which registration was sought ([29]).

As to the stay, the appellant’s main argument that the insolvency plan and the obligation to recognize it imposed on Eady J the obligation to order an unconditional stay of execution was rejected ([36]). However, it was ruled that a stay conditional on the payment of a bond of $ 3.44 million should be ordered ([37]-[38]). This reflected the order of the German courts. Accordingly, the stay appeal was allowed and a conditional stay was imposed.

In the appeal to the High Court and the appeal to the Court of Appeal, Adam Al-Attar officer Paul Fradley of South Square Chambers appeared for the appellant and Nora Wannagat of 9 Stone Buildings appeared for the respondent.

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