Seeking justice across borders: enforcing foreign judgments amid contemporary armed conflicts

Johan Mohlin
Magnusson, Stockholm
johan.molin@magnussonlaw.com

Yaroslava Sushinets
Magnusson, Stockholm
yaroslava.sushinets@magnussonlaw.com

In the contemporary global landscape, international armed conflicts have become an unfortunate reality, inevitably engendering an escalation of disputes involving what are commonly termed as ‘foreign elements’. These elements may encompass diverse factors such as differing places of domicile or nationality of the involved parties, the presence of the object of dispute within the territory of a foreign state, or a legal fact occurring in foreign jurisdictions. Civil and commercial disputes arising from armed conflicts stem from a multitude of causes, ranging from torts and delicts committed during combat to breaches of contractual obligations, fully or partially brought about by sanctions regimes targeting individuals and entities associated with the aggressor. Typically, such disputes inherently present distinctive challenges and intricacies, including issues surrounding state immunity and the imperative of attaining recognition and enforcement of judgments in foreign jurisdictions, particularly when the aggressor’s assets within the jurisdiction of judgment origin prove inadequate to satisfy the damages awarded.

The enforcement of foreign judgments has historically been characterised by inconsistency and ambiguity, particularly in those countries that normally do not permit the enforcement in the absence of a bilateral or multilateral treaty with the state where the original judgment was granted. However, the advent of the 2019 Hague Judgments Convention (the Convention) marks a pivotal advancement in this domain. Ratified by the EU (excluding Denmark), Ukraine, and Uruguay, with imminent ratification expected from the UK, the Convention represents a substantial stride forward. It establishes a framework for a streamlined, reliable, and predictable mechanism for the mutual recognition and enforcement of foreign judgments and judicial settlements in civil and commercial matters among the contracting states.[1]

The instrument delineates precise procedures, enforcement criteria, and clear grounds for refusal. Consequently, the Convention serves as a valuable resource for judgment creditors, particularly in cases involving damages stemming from the inability to meet financial obligations due to sanctions. It is important, however, to stress that the Convention includes several exceptions that courts may consider when determining whether the foreign judgment should be recognised and enforced. For example, pursuant to Article 10 thereof, a court of the requested state is allowed to refuse recognition and enforcement if, and insofar as, the judgment awards punitive or exemplary damages, i.e. non-compensatory ones. The compensatory portion of the judgment will still be enforceable.[2] Additionally, under Article 6 of the Convention, judgments where a ruling on rights in rem in immovable property was the main object of the proceedings will only be recognised and enforced if the property is located in the state where the judgment originated. This condition cannot be circumvented by any other provision of the Convention or by the national laws of the involved states.[3]

Moreover, Article 2.1 of the Convention specifically lays down certain matters falling beyond its ambit, notably encompassing the ‘activities of armed forces, including the activities of their personnel in the exercise of their official duties’. Whether the concerned activities are deemed acta iure imperii,[4] or acta iure gestionis[5] by either the requested state or the state of origin, any verdict against or in favour of the armed forces is categorically excepted, while a judgment concerning their personnel is only excluded if it adjudicates a dispute arising from the discharge of their official duties.

In this regard, it is worth mentioning that, in accordance with Article 2.2 of the Convention, if an issue falling within the scope of exceptions ‘arose merely as a preliminary question in the proceedings’ and was not the primary object thereof, the judgment would not fall outside the Convention’s purview. Nevertheless, the Convention remains ineffective in pursuing recognition and enforcement of a judgment awarding, for instance, compensation for damages incurred by private individuals and entities due to hostilities.

Given the non-applicability of the Convention to verdicts against the armed forces of an aggressor state or their personnel, at present, the individuals and enterprises affected by armed conflicts face constrained avenues for recovering their losses in foreign states. This predicament is particularly salient in light of the ongoing Russian aggression against Ukraine resulting in extensive destruction of, inter alia, Ukrainian businesses, infrastructure, and private property, with direct damages already estimated at nearly US$152bn.[6]

Typically, Ukrainian enterprises pursue restitution through local courts, where they encounter two distinctive hurdles: the Russian Federation’s state immunity and the exigency of the subsequent enforcement of any resulting judgments abroad. While the former obstacle is partially mitigated by legal precedents invoking, among others, Article 6.1 of the European Convention on Human Rights,[7] the ‘clean hands’ doctrine, and specific decisions by the Civil Cassation Court of the Supreme Court of Ukraine,[8] which have recognised the tort exception to state immunity[9] in cases of compensation for damage stemming from the Russian aggression since 2014, the latter challenge remains largely unresolved.

The Convention does not apply in such scenarios, and many states’ legal doctrines do not utilise the principle of reciprocity in dealing with the requests for recognition and enforcement of foreign judgments absent relevant treaties. Consequently, the jurisdictions where Ukrainian natural and legal persons can enforce judgments against the Russian Federation are effectively limited to countries that have concluded bilateral treaties on legal assistance with Ukraine, which, to a varying extent, provide for the compensation of damages caused by a crime. Notable among these are Poland, the Baltic States, the Czech Republic, Italy, Croatia, North Macedonia, Hungary, Romania, Greece, Bulgaria, and Cyprus.

Furthermore, during the enforcement phase in foreign jurisdictions, the judgment creditor may confront an additional challenge. Specifically, the Russian Federation is expected to contest recognition and enforcement, reiterating the claim of state immunity. It is likely to argue that recognising and enforcing a judgment entailing the waiver of state immunity contravenes the ordre public of the requested state. Therefore, the efficacy of enforcing the judgment, even in the jurisdictions listed above, hinges on the stance taken on state immunity and public policy within each respective country.

In conclusion, despite the array of legal mechanisms currently accessible for seeking restitution, the prospects for victims of Russian armed aggression, whether they are large enterprises or individuals, to obtain compensation for their losses remain exceedingly challenging due to the restricted opportunities of enforcing the decisions against the aggressor in foreign jurisdictions.