Irish Supreme Court Ruling Will Be of Interest to Litigation Funders

Introduction

In a decision that will be of particular interest to third party litigation funders, the Irish Supreme Court has reinforced the principle that Irish courts will only in very exceptional circumstances refuse to recognise judgments of other EU Member States under the Brussels Recast Regulation on public policy grounds. 

The decision in Scully v Coucal clarifies how Irish courts should approach recognition where an EU judgment is obtained on foot of an assignment of a bare cause of action which, although valid in the Member State where the judgment was obtained, would be unlawful in Ireland because to assign a bare cause of action savours of champerty and is contrary to Irish public policy.

Background

In Scully v Coucal, the respondent, Mr Scully, was subject to a Polish Court of Appeal judgment awarding approximately €6.33 million to Coucal Limited (“Coucal”). The dispute related to an investment in a Polish shopping centre, where various investors assigned their claims to Coucal, enabling it to pursue proceedings in Poland against Mr Scully. The wording of the assignments also allowed for the possibility of their onward sale to an unconnected third party.

The assignments of a bare cause of action at issue in this case were valid under Polish law, where the assignment of a right to litigate, even to an unconnected third party, is permissible[1].  However, as a matter of Irish law, an assignment of a bare cause of action has been regarded as savouring of champerty and contrary to Irish public policy.  Mr Scully therefore sought to prevent enforcement of the Polish judgment in Ireland, arguing that it was “manifestly contrary to public policy,” a recognised basis for refusing recognition under Article 45(1)(a) of the Brussels Recast Regulation.

Although the High Court initially refused his application, the Court of Appeal reversed that decision, concluding that because an assignment of a bare cause of action is impermissible and is in contravention of Irish public policy, this rendered the judgment unenforceable.

This was then appealed to the Supreme Court.

Supreme Court judgments

The Supreme Court, in a unanimous decision, restored the High Court’s ruling and confirmed that the Polish judgment can be recognised in Ireland. Two separate judgments were delivered by Mr Justice O’Donnell, Chief Justice and Mr Justice Hogan.

Both judgments include a reminder that, as a general rule, EU Member State judgments will be enforced within the EU under the Brussels Recast Regulation and that it would only be in very exceptional circumstances that recognition would be refused on public policy grounds, with Article 45 to be construed narrowly.

O’Donnell J highlighted that the Irish court was not being asked to enforce the assignment, but rather a judgment from another Member State court where such an assignment was lawful.  He said “The test here is not the validity in Irish law of the particular assignment: it is whether or not Irish law should require refusal of recognition to a valid Polish assignment, which has been enforced in the Polish Courts, to whose judgments we are generally bound to give effect”. 

Given the high hurdle for the public policy exception as outlined in Article 45, requiring “something offensive to basic, fundamental, and essential provisions of the legal order”, O’Donnell J concluded that standard was not reached in this case.  In reaching that conclusion, he took the following factors into account:  

• Different public policy requirements must be balanced: The public policy considerations against enforcement of an assignment are “substantially balanced if not outweighed” by those public policy considerations in support of enforcing judgments of Member State courts. 
• Evolving nature of Irish law on assignments of a bare cause of action: In relation to assignments, it was never the case that all assignments were impermissible.  The law in relation to the public policy against the assignment of a bare cause of action is a developing area, with the scope of what is regarded as impermissible narrowing; and
• Absence of commodification: This case lacks the characteristics of commodification or trading in litigation that underpins the public policy objection of Irish law in relation to assignments of a bare cause of action, particularly as no onward transfer to an unconnected third party had in fact taken place in this case.

Critical for Hogan J was the prohibition in Brussels Recast preventing an Irish court from looking behind the Polish judgment or questioning its merits.  The public policy concerns addressed in cases such as SPV Opus [2018] IESC 4 (which confirmed that assignments of bare causes of action are void under Irish law) are to safeguard the administration of justice in the Irish courts up to the delivery of judgment.  That the assignment in this case was valid under Polish law was not in issue and the Irish courts should not look behind this. Hogan J specifically noted that the recognising state is “generally indifferent as to the procedural and adjectival law of the forum save where it is manifest that such procedures operated in a demonstrably unfair fashion. At least in the case of other European Union countries, one would expect that these cases would have to be exceptional”.

In light of the Supreme Court’s findings, the High Court decision that the judgment is enforceable is restored.  (A secondary issue about judicial independence in the Polish courts was not adjudicated upon by the Supreme Court, leaving it to be addressed separately.)

Implications

The Supreme Court’s judgment in Scully v Coucal reaffirms that recognition of EU judgments will be refused on public policy grounds under Article 45(1)(a) of the Brussels Recast Regulation in only the most exceptional circumstances.

The ruling in Scully v Coucal will be of particular interest to third party litigation funders insofar as it suggests a third party funded case, that results in a judgment in an EU Member State where third party litigation funding is lawful, would not be rendered unenforceable in Ireland on public policy grounds based merely on differences in procedural law.  However, each case will be determined on its own facts, and if in another case there are, for example, traits of commodification or trading in litigation, it is possible the Supreme Court decision in Scully v Coucal could be distinguished.

Whilst this decision is very relevant to the issue of recognition and enforcement in Ireland of judgments arising out of funded litigation brought elsewhere in the EU, the Supreme Court did not address the domestic issue of whether an assignment of a bare cause of action such as the assignment in this case should savour of champerty and be contrary to Irish public policy.  It also remains to be seen whether the Court will take a similar approach to recognition of non-EU judgments. 

Third party litigation funding in Ireland remains under active consideration by the Law Reform Commission, whose recommendations are expected later this year.  For further discussion of the status third-party litigation funding in Ireland more generally see our previous updates, including here.

If you would like to discuss any of the issues addressed in this article, please contact Commercial Litigation and Dispute Resolution partners, Julie Murphy-O'Connor, Michael Byrne or Angela Brennan or your usual Matheson contact.