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Recognition and enforcement of financial remedy orders in Switzerland

Roxane Reiser of 1 Hare Court considers the implications of the Akhmedov case for future financial remedy orders in Switzerland.

Roxane Reiser, barrister, 1 Hare Court


In a decision published last month the Swiss Supreme Court declined to declare the principal order of Mr. Justice Haddon-Cave in the Akhmedov saga enforceable under the Lugano Convention (ATF 5A_104/2019). This is a concerning decision for English family lawyers dealing with Anglo-Swiss matters. This article explains what happened, why, and what can be done to ensure that English financial remedy orders are recognised and enforceable in Switzerland.


Order of Mr. Justice Haddon-Cave ('the 2016 Order')

In 2016, Mr. Justice Haddon-Cave delivered the main judgment in the case of Akhmedov v. Akhmedova (AAZ v. BBZ and others [2016] EWHC 3234 (Fam)). He awarded the wife £350 million, £224,430,508 of which were specifically described as the wife's 'maintenance claim' for the purposes of enforcement under the Lugano Convention (cf. §132). This sum covered the following needs (§131):

1. The purchase of an English property: £39,268,750

2. The purchase of a foreign property: £27,885,630

3. A Duxbury fund to meet the wife's capitalised future annual living needs: £157,101,608

4. Outstanding professional costs: £174,520

The husband and one co-respondent, P Ltd were jointly and severally liable for the entire award. P Ltd was a Panama company, which Mr. Justice Haddon-Cave found to be a bare nominee for the husband. It held the majority of the husband's assets, which included large cash funds and investments administered by a Swiss bank, and an art collection located in Switzerland. P Ltd did not take part in the proceedings. However, Mr. Justice Haddon-Cave found that P Ltd had been properly served. The steps taken by the wife's solicitors to bring the proceedings to the company's attention constituted good service by an alternative method (§127). He added that the dates of service on P Ltd set out in the Annex V for enforcement under the Lugano Convention were valid (§128).


Recognition and enforcement of foreign decisions in Switzerland

The Lugano Convention ('LC') governs issues of jurisdiction, recognition and enforcement in civil and commercial matters between the UK and some EFTA States, including Switzerland. The Lugano Convention applies, amongst other things, to 'maintenance', but not to 'rights in property arising out of a matrimonial relationship' (i.e. sharing claims), just like Brussels IIA.

'Maintenance' under the Lugano Convention and Brussels IIA has been defined broadly by the CJEU in Van den Boogard v. Laumen (Case C-220/95) 1997 ECR I-1147. It encompasses any award 'designed to enable one spouse to provide for himself or herself' or any award for which 'the needs and resources of each of the spouses are taken into account'. This can include orders for periodical payments, capitalised maintenance, lump sums and property adjustment orders, provided that the aim of such orders is to meet needs. The definition of maintenance excludes any award 'solely concerned with dividing property between the spouses'. (cf. Van den Boogard v. Laumen at para. 22).

The distinction is important. Orders falling within the ambit of the Lugano Convention can be recognised 'without any special procedure being required' (Art. 33(1) LC) and are declared enforceable immediately upon producing a copy of the relevant decision and the relevant certificate (Annex V) in the foreign court (Art. 41 and 53 LC). The decision recognising the foreign order and the declaration of enforceability can then be challenged, but only on the grounds set out in Art. 34 and 35 LC. The main grounds are:

1. that recognition is manifestly contrary to public policy (Art. 34(1) LC);

2. that judgment was given in default of appearance where the respondent was not served in sufficient time to arrange a defence (Art. 34(2) LC);

3. that the decision is irreconcilable with a judgment given in a dispute between the same parties in the State in which recognition is sought (Art. 34(3) LC), and

4. Res judicata (Art. 34(4) LC).

By contrast, decisions falling outside the ambit of the Lugano Convention can only be recognised and enforced in Switzerland if the Swiss domestic rules on private international law (the Swiss Private International Law Act 1987 or 'SPILA') permit it. This requires a different procedure. Neither recognition nor enforceability is automatic. The grounds for refusing recognition and enforcement are wider. In particular, the Swiss court must be satisfied that the foreign court had jurisdiction under the rules of Swiss private international law, and that the decision is final (i.e. not capable of being appealed) (Art.25 ff. SPILA).

This highlights the advantages of the Lugano Convention regime, and explains Ms. Akhmedova's wish to ensure that she would be able to enforce Mr. Justice Haddon-Cave's order against P Ltd in Switzerland via the Lugano Convention.


Akhmedov v. Akhmedova: Swiss proceedings

In January 2017, Ms Akhmedova obtained a declaration of enforceability in respect of her 'maintenance claim' under the Lugano Convention in Switzerland. The Zürich cantonal court also granted a freezing order against P Ltd over £224,430,508 held in the company's Swiss bank accounts as part of two separate sets of debt recovery proceedings.

P Ltd appealed the grant of the declaration of enforceability. The matter came before the Zürich superior cantonal court. It held that the Lugano Convention was not applicable because the 2016 Order related to property rights arising from a matrimonial relationship. Further, the wife had assigned her claim to a third party (a debt-recovery company), which the court held prevented the application of the Lugano Convention. The Zürich court concluded that the declaration of enforceability had been improperly granted.

The wife appealed to the Swiss Supreme court. P Ltd argued that even if the Lugano Convention applied, the 2016 Order should not be recognised and declared enforceable because P Ltd had not been properly served with the English proceedings. P Ltd further argued that even if a declaration of enforceability were to be granted, it should only be in respect of the sums of £157,101,608 representing the wife's capitalised maintenance, and £174,520 representing her outstanding legal costs. P Ltd contended that only these sums related to "maintenance" and were enforceable under the Lugano Convention. The sums allocated to the purchase of real properties in England and abroad (£67,370,000) related to property rights arising out of the matrimonial relationship, and therefore were not enforceable under the Lugano Convention.

The Swiss Supreme Court reversed the decision of the Zürich superior cantonal court. It held that the Lugano Convention was applicable in so far as the 2016 Order related to 'maintenance', as defined by the jurisprudence of CJEU. The fact that the wife had assigned her claim to a third party was not a bar to the application of the Lugano Convention.

The Swiss Supreme Court held that the Zürich court should have investigated whether P Ltd had been properly notified of the English Proceedings. It stated that although the enforceability of the decision had been certified in the country of origin (England) by way of Annex V, the Swiss appeal court was not bound to conclude that P Ltd had been notified of the proceedings and given an opportunity to engage in the proceedings. It had to determine, as a matter of fact, whether or not these requirements had been met.

On the question of which provisions of the 2016 Order related to maintenance, the Swiss Supreme Court accepted that the interpretation of 'maintenance' was subject to the jurisprudence of the CJEU, and restated the definition given in Van den Boogard v. Laumen. The Swiss Supreme Court however held that the nature of the £67,370,000 awarded to W to purchase real properties "had to be clarified" by the Zürich court. Both issues have been remitted to the Zürich cantonal court for determination. A decision is awaited.

Analysis

This decision is concerning for English family lawyers. In his judgment, Mr. Justice Haddon-Cave made explicit reference to enforcement under the Lugano Convention, and clearly delineated the parts of the award that related to 'maintenance' in order to ensure that the wife would be able to enforce these provisions under the Lugano Convention (§129-§133).

It is unclear whether the judgment (as opposed to the order) of Mr. Justice Haddon-Cave was provided to the Swiss Supreme Court, or indeed to the Zürich cantonal court. If it was, one wonders how there could have been any doubt about the nature of the lump sum orders aimed at enabling the wife to purchase properties in England and abroad. If it was not, it should have been. Either way, by remitting the issue to the lower court, the Swiss Supreme Court appears to leave the door open to a possible review of the nature of the provisions of the 2016 Order. It is submitted that such a review would amount to a review of the substance of the English court's decision, which is impermissible under the Lugano Convention (Art. 36 LC).

Perhaps the Swiss and English conceptions of "needs" are so fundamentally different that the Swiss judiciary can hardly comprehend why anyone "needs" £67 million to buy, not just one but two homes, when one already enjoys a £157 million fund to meet one's other needs. Perhaps the Swiss judiciary is not alone. However, both the text (Art. 36 LC) and the spirit of the Lugano Convention strongly advocate in favour of leaving Mr. Justice Haddon-Cave's assessment of 'needs', and of the wife's corresponding 'maintenance claim', undisturbed.

As Mostyn J. commented in FF v KF [2017] EWHC 1093 (Fam): "In the very recent case of AAZ v BBZ [2016] EWHC 3234 (Fam) the court assessed the applicant-wife's "needs" in the remarkable sum of £224m. Plainly "needs" does not mean needs. It is a term of art. Obviously, no-one actually needs £25m, or £62m, or £224m for accommodation and sustenance." The assessment of 'needs' is part of the substance of an English court's decision in financial remedy proceedings. It is not simply a matter of categorisation. Thus, it should not be reviewed by a foreign court.

The Swiss Supreme Court's conclusion in relation to service is not surprising. It is for the court where the order is sought to be recognised and declared enforceable to determine whether any of the grounds for non-recognition under the Lugano Convention are met. However, one might have hoped that the conclusions of Mr. Justice Haddon-Cave on service at §116-128 of his judgment (if produced) would have carried greater weight.

In light of this decision, what follows is some practical guidance for English practitioners dealing with cases with Swiss assets or parties, in order to ensure as much as possible that financial remedy orders made in this jurisdiction can be recognised and declared enforceable in Switzerland.


Guidance

1. Seek advice from a Swiss lawyer at the earliest opportunity on what can and what cannot be enforced in Switzerland

Specific advice on recognition and enforcement should be sought from a Swiss lawyer at the earliest opportunity. Independently of the question of enforceability under the Lugano Convention, available enforcement measures are a matter of Swiss domestic law. Thus, practitioners should enquire not only about recognition and enforceability, but also about the effectiveness of available enforcement measures, and the costs and length of enforcement proceedings in Switzerland.

Advice should be sought from a lawyer practicing in the canton in which the enforcement proceedings are likely to be brought. They will be better able to advise on the practices of local courts. In the alternative, advice can be sought from lawyers practising in one of Switzerland's main cities in the first instance (Geneva or Zürich). They will be able to recommend lawyers practicing in different cantons.


2. Ensure that provisions relating to 'maintenance' are clearly set out in the court's judgement and on the face of the order

If the matter is resolved by the court at a contested hearing, the judge should be asked to set out in his/her judgment the provisions of the order relating to a spouse's needs. This should also be set out in recitals on the face of the order.

In the event that the dispute is resolved at an earlier stage, the matter could be agreed, or, in default of agreement, there parties could seek the court's assistance. This exercise may seem unnatural in our courts where judges are guided by 'fairness' rather than strict categories of 'maintenance' and 'matrimonial property'. However, there is no reason why a judge assisted by helpful submissions from counsel on the ambit of the Lugano Convention would not be inclined to ensure that their order will be enforceable in a different jurisdiction. After all, 'maintenance' in this context simply means provisions referable to a party's needs.

Although, as the Swiss Supreme Court's decision shows, these steps are no guarantee of speedy recognition and enforcement, they remain essential.


3. If one or several Swiss-based respondents do not participate in the proceedings, ensure that the court's conclusions in relation to service are set out in the judgment and on the face of the order

This will help to demonstrate to the Swiss court what concrete steps were taken by the applicant to bring the proceedings to the attention of the respondent(s), and to counter any argument that the order should not be recognised and declared enforceable pursuant to Article 34(2) of the Lugano Convention.

The rules for service out of the jurisdiction should be complied with (FPR Part 6, Chapter 4). Note that Switzerland is a party to the Hague Service Convention 1965, but not to the EU Service Regulation 2007 as it is not a member of the European Union.


4. Come to court armed with an Annex V Certificate

Annex V is the certificate that must be issued by the court of origin, at the request of any interested party, in order for a decision to be recognised and declared enforceable in another state bound by the Lugano Convention (Art. 54 LC). Annex V should be used both for orders made as part of contested proceedings, and for consent orders approved by the court (Art. 58 LC).

Annex V can be found in the appendices to the Lugano Convention. It should be filled in by legal representatives. It should then be signed, dated, and stamped by the judge.


5. Once proceedings in England have come to an end, liaise with the Swiss lawyers instructed in the enforcement proceedings in Switzerland

They will need a copy of the order and of the judgment. If an oral judgment was given at the conclusion of a final hearing, a transcript of the hearing should be obtained.