Enforcement of foreign judgment and bankruptcy: petition based on unlawful execution under the Lugano Convention dismissed

The writ of control remained unsatisfied and the creditor presented a bankruptcy petition. The petition was founded on the debtor’s inability to pay his debts, as defined in section 268(1)(b) of the Insolvency Act 1986 (“IA 1986”) – namely that “execution or other process issued in respect of the debtor on a judgment or order of any court in favour of the petitioning creditor….has been returned unsatisfied in whole or in part”.

The ICC Judge dismissed the petition, and this decision was upheld by the High Court. The High Court decided that the Lugano Convention and the Civil Jurisdiction and Judgments Act 1982 (“CJJA 1982”) precluded enforcement of judgments during the one month appeal period and the debtor was therefore entitled to set aside the writ of control. Unlawful enforcement by reason for the invalid writ of control could not be “execution” for the purposes of the IA 1986.

The creditor appealed to the Court of Appeal.

The Court of Appeal held that the judge was correct. The purpose of the Lugano Convention was to ensure a balance between the rights of the creditor seeking to enforce and the rights of the debtor. The debtor had the benefit of an appeal period and the debtor’s rights should not be undermined by permitting steps which were taken unlawfully by the creditor during that period. The defect in the process was not a technicality – it was fundamental. Enforcement which was invalid under one statute (the CJJA 1982) could not be valid execution for the purposes of another statute (IA 1986). 

Islandsbanki HF and others v Standford [2020] EWCA Civ 480