Non-recognition Of Foreign Liquidation Judgments In Flightlease

High Court decision Supreme Court decision

The courts recently considered the issue of enforceability in Ireland of an order if made by Swiss courts in Swiss liquidation proceedings.1 The order would require the return of monies paid – at a disadvantage to creditors – to Irish company Flightlease which had since been liquidated in Ireland.

High Court decision

The Irish High Court2 had decided that although it found a real and substantial connection between Switzerland and the cause of action before the Swiss court, as Flightlease was not present or carrying on business through an agent in Switzerland when the proceedings were instituted and had not submitted to the jurisdiction of the Swiss courts, it would be inappropriate for the Irish court to recognise any judgment on the relevant matter in the Swiss liquidation proceedings. The High Court rejected the real and substantial connection test developed in Canada3 and followed common law principles.4 The court found that while it is inherent in the common law that it will necessarily evolve to meet new circumstances, caution is needed given the possibility of adversely affecting in a retrospective way parties which had ordered their affairs (eg, by not participating in foreign proceedings) on the basis of a reasonable understanding of what the law currently was; the courts cannot engage in an alteration to the common law which amounted to legislation.

Supreme Court decision

The decision was appealed to the Supreme Court which upheld5 the High Court decision and rejected the real and substantial connection test.

Justice Finnegan stated:

"Central to the issue is whether the claim sought to be maintained in the Swiss proceedings is to be categorised under Irish law as a claim in the liquidation or as a claim in personam. If the former an order of the Swiss Court would not be recognised and enforced by the Irish Courts. If the claim before the Swiss Court is a claim in personam then the issue is whether Rule 36 in Dicey represents the law in Ireland and if it does whether the Court should declare and/or develop the common law of Ireland in accordance with contemporary requirements of private international law and the principles of comity and adopt the principles of international law and principles of international comity in accordance with Canadian jurisprudence. According to Rule 36 of Dicey if a judgment debtor was, at the time the proceedings were instituted present in a foreign country or if the judgment debtor submitted to the jurisdiction of the courts of the foreign country the Irish Courts would recognise and enforce a judgment of a Court of that country. Under the Canadian jurisprudence Canada applies a real and substantial connection test." The Supreme Court referred to an action in personam as an action with a view to enforcing the doing of some particular thing, including actions on contract and tort, rather than the insolvency process itself involving the gathering in of assets and their distribution in accordance with the appropriate insolvency law.

The Supreme Court stated:

"The effect of any order made in the Swiss proceedings will be to require repayment by Flightlease of a sum of money. The nature of that order is that it is an order in personam. Insolvency proceedings are concerned with collective execution. They are not concerned with establishing a liability. The nature of the Swiss proceedings is to establish a liability on Flightlease to repay monies. Such an order will only be enforced in this jurisdiction if Flightlease is present in Switzerland at the commencement of the action or has submitted to the jurisdiction of the Swiss Court. Neither is the case. Proceedings which seek to establish a liability to pay a sum whether taken within insolvency proceedings or separately...