Last Updated October 08, 2019

Law and Practice

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Winston & Strawn London LLP provides a wide range of legal services through its banking and finance practice, to public and private companies, leading financial institutions, multilateral and development finance institutions, private equity and investment funds, alternative funding sources, investors and emerging companies, on investment grade, leveraged and mezzanine financings. The firm advises on high-profile transactions and matters ranging from cross-border transactions, initial public offerings (IPOs) and project finance matters, to distressed acquisitions and creative “first-of-their-kind” financings. Clients include leading international funding sources which provide senior, subordinated, secured and unsecured debt, and hybrid (equity/debt) products, as well as institutional investors who regularly participate in senior debt markets, equity sponsors, and borrowers in both developed and emerging economies. Additional thanks to partners Ed Denny and Dan Meagher and associate Shaheer Momeni, among others, for their contributions to this chapter.

The "self-help" principle applies in relation to the enforcement of security. The security holder may take steps (either itself, or by the appointment of an agent or receiver) to enforce its security over the asset encumbered in its favour by its borrower without recourse to the courts or the realisation of the asset by means of a public auction or other court-administered sale process. Although a court order is not required for enforcement, in the context of security over real property, in order to realise (eg, to sell) the property, it may be necessary to evict the chargor, which requires a court order.

Typically, the relevant security document will set out when and how a lender may enforce its security. The enforcement method to be used, once a lender’s entitlement to enforce security has arisen, will depend upon the nature and terms of the security package. The main methods of enforcing security in England are:

  • taking possession;
  • selling the collateral;
  • appointing a receiver who realises the collateral; and
  • foreclosure and appropriation. 

Where the security provider is solvent, the lender will normally be able to appoint a receiver to realise any assets subject to fixed security. Where a lender holds security over assets subject to a floating charge, the lender will be able to appoint a receiver once the charge has crystallised. The events which trigger crystallisation will be set out in the security agreement and will normally include the taking of steps in relation to enforcement, such as the appointment of a receiver. 

If the security was created prior to 15 September 2003, an administrative receiver may be appointed. The role of the receiver in this case is to identify the charged assets and realise them in the same way as with fixed security. However, if the security was created after 15 September 2003, the lender can only appoint an administrator who, in contrast to an administrative receiver, must act in the interests of all creditors to achieve the purposes of the administration.

Where the security provider is insolvent, it is still possible that enforcement can take place through the appointment of a receiver, but it is also possible, particularly where the security package is more comprehensive and includes more of the security provider’s assets, that the security provider could be subject to a formal insolvency procedure such as an administration.

English courts will uphold the parties’ express choice of law as the governing law of the contract save for certain circumstances in which the parties’ choice of law may be modified by law (in respect of contractual obligations under the Rome Convention or the Rome I Regulation, or non-contractual obligations under the Rome II Regulation). For example, where the choice of forum is England and Wales, English mandatory rules will apply irrespective of the parties’ choice of law in respect of both contractual and non-contractual obligations. Expert evidence as to non-English law must be adduced at trial where English courts consider disputes based on foreign law.

Submission to a Foreign Jurisdiction

As to submission to a foreign jurisdiction, English courts look to uphold exclusive jurisdiction clauses (including where in favour of non-English jurisdiction) subject to the application of the European regime (which comprises the 2001 Brussels Regulation, the 2007 Lugano Convention and the Recast Brussels Regulation) and English common law.

Where a "foreign" jurisdiction, chosen by the parties, is within the European regime, it will have jurisdiction (save in certain cases set out in the Convention and Regulations, eg, where the proceedings relate to rights in rem). The European regime provides for a mechanism to address competing claims to jurisdiction which is broadly based on which jurisdiction was first "seised" of the claim and (from January 2015) whether an exclusive jurisdiction agreement exists between the parties. Where the foreign jurisdiction is not within the European regime, English courts have been willing to stay English proceedings in favour of foreign proceedings, usually as long as the European regime does not expressly reserve jurisdiction to itself in the particular case, although this may depend on whether the foreign court was first "seised".

In future, the legal framework relating to choices of law and jurisdiction may change as a result of Brexit. In particular, in the case of a “no-deal” Brexit, and following the UK's independent accession to The Hague Convention on Choice of Court Agreements (the Hague Convention), the Hague Convention will apply to mutual recognition between the UK and EU member states of exclusive jurisdiction clauses. The Hague Convention is discussed below in 6.3 A Judgment Given by a Foreign Court. Any foreign or Commonwealth state may waive its right to sovereign immunity by submitting to the jurisdiction of the English courts. 

English courts will generally give effect to a foreign judgment without a retrial of the underlying merits of a case. Broadly, foreign judgments will be enforced using one of four principal avenues:

  • judgments of the courts of EU member states and other European countries will be enforced via the European regime, which consists primarily of the 2001 Brussels Regulation and the Recast Brussels Regulation (the Brussels Regime). In order to enforce a judgment pursuant to the Brussels Regime, the enforcing party must apply to the English court by filing the judgment (and a certified translation). There is very limited scope for defending an enforcement action under the Brussels Regime. Such grounds include arguing that the judgment is irreconcilable with an earlier judgment in a third member state covering the same course of action, or fundamentally contrary to public policy in the enforcing member state (only in exceptional circumstances). Certain “uncontested claims” brought in the courts of EU member states can be enforced using the EEO Regulation, in which the enforcing party applies for a certificate from the originating court. Following issuance of the certificate, the judgment is treated as if it were the judgment of an English court;
  • judgments of the courts of Norway, Switzerland and Iceland (European Free Trade Association countries) will be enforced pursuant to the 2007 Lugano Convention. The process of enforcement and the grounds for resisting enforcement are similar to the Brussels Regime;
  • judgments of certain Commonwealth countries (such as Australia, India and New Zealand) will be enforced pursuant to the Foreign Judgments (Reciprocal Enforcement) Act 1933 and the Administration of Justice Act 1920. In order to enforce pursuant to the above acts, the relevant judgment must be:
    1. final and conclusive; and
    2. for a sum of money (but not for a tax, fine or other penalty).

A defendant may resist enforcement if it can prove that the original court did not have jurisdiction (according to English conflicts of law rules), or if it can establish certain matters (eg, that the judgment would be contrary to public policy, or that the judgment was obtained by fraud); and

  • foreign judgments not covered by the above instruments can be enforced at common law by suing the foreign judgment as a debt. This typically involves applying for summary judgment which, except in very limited circumstances (such as fraud), will not require retrial of the merits of the case. However, there are additional grounds under common law for defending an enforcement action than with other mechanisms. For example, a defendant may seek to argue that the original proceedings breached the rules of natural justice, that enforcement would be contrary to public policy or the Human Rights Act 1998, or that the judgment is for multiple damages and is, therefore, unenforceable pursuant to the Protection of Trading Interests Act 1980.

Similarly, pursuant to the Arbitration Act 1996, English courts will give effect to arbitral awards, without re-examination of the merits of an underlying case. In particular, Part III of the Arbitration Act gives effect to the New York Convention, meaning that arbitral awards made abroad are enforceable in England and Wales (with limited scope for the party against which the enforcement applies, to object).

The prevalence of directly-applicable EU law within English law means that, following Brexit, the English law framework regarding the enforcement of foreign judgments will change. As a result, in a “no-deal” scenario, the enforcement of EU judgments in England will continue under the existing regime for any judgments obtained on or before exit day, and similarly, for any EU judgment obtained where the relevant EU court was seised of the proceedings on or before exit day. However, that same regime will not apply within the EU for English proceedings already underway as of exit day nor for English court judgments obtained prior to exit day. Any later proceedings, and enforcements of English court judgments in the EU will be governed by a different regime under the Hague Convention, which envisages mutual recognition of exclusive jurisdiction clauses and a judgment enforcement regime. However, in the case of a no-deal Brexit there will be no substantial change to the enforcement of arbitral awards, as that is governed by the New York Convention, to which the UK is a separate signatory and which convention therefore exists entirely outside the EU legal structure.

There are no restrictions applicable to foreign lenders specifically.

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Winston & Strawn London LLP provides a wide range of legal services through its banking and finance practice, to public and private companies, leading financial institutions, multilateral and development finance institutions, private equity and investment funds, alternative funding sources, investors and emerging companies, on investment grade, leveraged and mezzanine financings. The firm advises on high-profile transactions and matters ranging from cross-border transactions, initial public offerings (IPOs) and project finance matters, to distressed acquisitions and creative “first-of-their-kind” financings. Clients include leading international funding sources which provide senior, subordinated, secured and unsecured debt, and hybrid (equity/debt) products, as well as institutional investors who regularly participate in senior debt markets, equity sponsors, and borrowers in both developed and emerging economies. Additional thanks to partners Ed Denny and Dan Meagher and associate Shaheer Momeni, among others, for their contributions to this chapter.

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