Windhorst v Levy: German judgment enforceable in England despite inclusion in a binding German insolvency plan

Legal Background

The 2001 Brussels Regulation

Judgments from EU member states in civil and commercial proceedings commenced before 11pm on 31 December 2020 can still be enforced in England, and those commenced before 10 January 2015 are governed by the 2001 Brussels Regulation.

Article 38(1) of the 2001 Brussels Regulation provides that: “A judgment given in a Member State and enforceable in that State shall be enforced in another Member State when, on the application of any interested party, it has been declared enforceable there.” If a judgment creditor wishes to enforce a foreign judgment in England, they must apply for the registration of the judgment, which is the equivalent of a declaration of enforceability.

Under Article 41, if the necessary formalities are complied with, the judgment must be declared enforceable immediately, and the party against whom enforcement is sought is not, at that stage, entitled to make any submissions.

Article 43 permits an automatic right of appeal against the declaration of enforceability. Upon such an appeal, the Court is only able to revoke a declaration of enforceability on one of the grounds specified by Articles 34 and 35 (which cover matters such as public policy, natural justice, irreconcilability with certain other judgments, and some very limited jurisdictional grounds). Under no circumstances can it review the substance of the judgment in question.

The Insolvency Regulation

Notwithstanding the UK’s withdrawal from the EU, the Insolvency Regulation continues to apply where the main proceedings were opened before the end of the UK-EU transition period, at 11pm on 31 December 2020.

The purpose of the Insolvency Regulation is to provide for “recognition of judgments concerning the opening, conduct and closure of insolvency proceedings which come within its scope and of judgments handed down in direct connection with such insolvency proceedings” (Recital (22)).

The effect of such recognition is set out in Article 17(1) of the Insolvency Regulation: the judgment opening the insolvency proceedings shall produce the same effects in any other member state as under the law of the state of the opening of the proceedings.

Factual Background

In 1999, the Respondent (Mr Levy) agreed with the Appellant (Lars Windhorst) that he would invest $2 million in return for a substantial shareholding in Mr Windhorst’s companies. Although Mr Levy made the investment, Mr Windhorst failed to uphold his side of the deal and in 2003 Mr Levy issued a claim of unjust enrichment in the Regional Court Bielefeld, Germany. The Court held that Mr Windhorst was to repay the sum of $2 million plus interest to Mr Levy (the “2003 Judgment”).

Towards the end of the 1990s, Mr Windhorst’s businesses were in difficulties. In 2004 he therefore filed an application to open insolvency proceedings under German law, which were duly opened in January 2005.

In February 2005, Mr Levy applied for inclusion of the 2003 Judgment debt in the insolvency proceedings and attended the creditors’ meeting where a proposed insolvency plan was put forward under which creditors waived all their potential claims and would receive 1.9129% of their established claims (the “Insolvency Plan”).

In 2007, the insolvency proceedings were terminated based on the Court’s approval of the Insolvency Plan.

Even though the Court order approving the Insolvency Plan meant that it became binding on the parties, it did not automatically render the 2003 Judgment unenforceable. However, it was open to Mr Windhorst to apply to have the enforcement declared inadmissible under the German code of civil procedure (the “ZPO”).

In 2018, Mr Levy gave notice of his intention to enforce the 2003 Judgment in the UK, where he said more of Mr Windhorst’s assets were located. Mr Windhorst applied to the German Court for a declaration that the 2003 Judgment was unenforceable. On appeal, the Court of Appeal in Hamm made an interim order staying enforcement of the 2003 Judgment subject to Mr Windhorst providing security of $3.44 million. This was never provided. The German proceedings are still ongoing, with the next hearing listed for September 2021.

In the meantime, Mr Levy applied for the 2003 Judgment to be registered for enforcement in England pursuant to the 2001 Brussels Regulation, which was granted in August 2020 (the “Registration Order”). Mr Windhorst appealed.

The Parties’ Submissions

The Appellant’s primary argument was that the 2003 Judgment was not enforceable in the sense required by Article 38(1) of the 2001 Brussels Regulation. More specifically, a precondition for a declaration of enforceability under the 2001 Brussels Regulation must be that the judgment in question is enforceable in the jurisdiction in which it was given. Mr Windhorst claimed that enforceability has an autonomous meaning and it is for the Court to determine the legal effect of the decision in the state of origin of the Court-supervised insolvency. As the Insolvency Plan is a judicial act with automatic effect throughout the EU, it should be held to deny enforceability to the 2003 Judgment.

The Respondent submitted that the Court is only able to revoke a declaration of enforceability on one of the grounds specified by Articles 34 and 35 which do not include matters such as subsequent insolvency proceedings or even the enforceability of the judgment. The question was whether the 2003 Judgment is enforceable in character and the orders of the German Courts should be accepted as conclusive in this regard. Applying the Insolvency Regulation, recognition of the Insolvency Plan meant only accepting that it was to have the same effect in this jurisdiction as in Germany (per Article 17(1) of the Insolvency Regulation). As the Insolvency Plan under German law did not render the 2003 Judgment unenforceable, the answer must be the same in this jurisdiction.

Decision

On 6 May 2021, judgment was handed down, dismissing the Appellant’s appeal against the Registration Order.

Eady J held that she did not need to determine the point as to her jurisdiction and whether it was limited to revoking the Registration Order only on one of the grounds specified in Articles 34 and 35, because it was in any event clear that the precondition of enforceability was satisfied.

The Judge held the 2003 Judgment was enforceable under German law, and would remain so until declared inadmissible under the ZPO. That provided the complete answer to the question of enforceability.

She held that accepting that this Court must recognise the Insolvency Plan does no more than require that it is treated as producing the same effects as under German law (per Article 17(1) of the Insolvency Regulation), which did not impact on the enforceability of the 2003 Judgment.

Comment

It is perhaps unsurprising that the High Court refused to set aside registration of the 2003 Judgment when the judgment debt had later been included in a binding Insolvency Plan because there was clear evidence that the 2003 Judgment was still enforceable in Germany, and to ask the Court to go behind the determination of enforceability in the original jurisdiction would be counter to the purpose of the 2001 Brussels Regulation and precluded by Articles 34, 35 and 45.

However, this case highlights that there does remain an element of uncertainty as to the Court’s powers on an appeal against registration. A similar issue could arise in connection with the Recast Brussels Regulation[4] which introduced a new and simplified enforcement procedure and applies to judgments in proceedings commenced between 10 January 2015 and 31 December 2020. Notwithstanding the UK’s withdrawal from the EU, the English Courts are likely to be concerned with these European instruments, and therefore with these issues, for some time.

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[1] [2021] EWHC 1168 (QB)

[2] Council Regulation (EC) 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters

[3] Council Regulation (EC) 1346/2000 on Insolvency Proceedings

[4] Council Regulation (EU) 1215/2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters