The claimants applied for summary judgment for the enforcement at common law of two final judgments made in their favour by the courts of the Peoples’ Republic of China (PRC). In both judgments, a company of which the defendant was the beneficial owner and guarantor, entered into loan agreements with the claimants which the defendant later failed to pay. Pursuant to the judgments the defendant was ordered to pay the outstanding principal and interest payments on the loan, together with contractual interest of 24 per cent per annum until the date of payment. It was also ordered that in the event of non-payment within the timeframe given, the defendant would have to pay double the interest of the debt pursuant to Article 253 of the Civil Procedure Law of the PRC (the Default Interest).

The claimants sought to enforce the judgments in England once the appeal process in the PRC had been exhausted. The principal defence raised was that either the Default Interest portion of the judgments or the judgments in their entirety were unenforceable under section 5 of the Protection of Trading Interests Act 1980 (PTIA). This section provides that any foreign judgment which includes multiple damages shall be restricted from enforcement by the English courts. The PTIA was enacted to counteract what was perceived by the United Kingdom to be an excessive exercise of jurisdiction by the United States courts in anti-trust actions. The court clarified that “multiple damages” meant a situation where the sum awarded in a judgment was arrived at by multiplying an amount by way of compensation. The court found that the Default Interest portion was not a multiplier of the compensation awarded, but rather the sum awarded from an entirely separate breach – the non-payment of the compensation.

It was also argued by the defendant that under common law, the Default Interest portion of the judgments were punitive, ie contrary to public policy, and therefore rendered unenforceable. The court accepted that where a rate of interest applied was penal, it may offend English public policy. However, where a provision has the purpose of pursuing a legitimate policy of deterrence, it may be justified. The court concluded that the provision in the PRC law pursued a legitimate policy aim and that the English court should not interfere negatively with such an aim.

The court’s conclusion that there was no reason presented which was capable of justifying a refusal to enforce the judgments reinforces the general principle in favour of recognition and enforcement of foreign judgments at common law, as well as the high threshold to be met before the PTIA is engaged.

This blog post was written by Kayla Prendergast, Articled Clerk, and Gráinne King, Counsel.