ECJ ruling on enforcement of default judgments in other EU Member States

10/10/12

The European Court of Justice has issued a significant ruling on the enforcement of default judgments in other Member States under EC Regulation No. 44/2001.

Seramico Investments Ltd, a British company, brought an action in the High Court against Trade Agency Ltd. Trade Agency failed to file a defence and Seramico obtained a default judgment in the sum of £293,582.98.

Seramico sought to enforce the judgment against Trade Agency in Latvia, and accordingly submitted an application to the Latvian court under Regulation 44/2001 on the recognition and enforcement of judgments in civil and commercial matters. The application was accompanied by a certificate issued by the High Court under Article 54 of the Regulation, which specified (amongst other things) the date on which Trade Agency had been served with originating process.

The district court granted Seramico's application for enforcement. Trade Agency appealed, alleging that it had not been informed of the commencement of proceedings in the High Court. The Supreme Court of Latvia referred two questions to the ECJ:

(1) If a defendant challenges the enforcement of a foreign default judgment and claims not to have been properly served with notice of the proceedings, can the enforcing court examine the evidence regarding service for itself, even when the foreign court has provided a certificate under Article 54?

(2) Does a default judgment, which does not contain any reasoning on the substance of a claim, infringe a defendant's right to a fair trial under Article 47 of the Charter of Fundamental Rights?

On the first question, the ECJ ruled that an enforcing court may examine for itself whether the information provided in the Article 54 certificate is consistent with the evidence. This ‘double review' is appropriate in light of the objectives of the Regulation, which aims to strike a balance between trust in the administration of justice throughout the EU and respect for the rights of the defence.

As to the second question, the ECJ took note of the procedural protections available to the defendant to a UK default judgment; and acknowledged that the objective of the default judgment system - ensuring the swift, effective and cost-effective handling of uncontested claims - was likely to justify a restriction of the right to a fair trial, insofar as that right requires that judgments be reasoned.

The ECJ concluded that the enforcing court must decide, in the light of the proceedings as a whole and the relevant circumstances, whether the defendant had the possibility of bringing an appropriate and effective appeal against the default judgment, including whether and to what extent Trade Agency knew of the statement of claim and the remedies available to it after the judgment was given, in order to seeks its amendment or to have it set aside.

The judgment is here.