Can a judgment in default of defence be in breach of Article 6?

7 September 2012 by David Hart KC

C-619/10, Trade Agency Ltd v. Seramico Investments Ltd, CJEU, 6 September 2012

This case in the EU Court of Justice may sound rather abstruse, but is actually quite important. When someone starts a claim in the English courts for, say, a debt owed, and the defendant does not put in a defence, the claimant can simply ask the court to enter judgment for the sum claimed, and can bring enforcement proceedings based upon that judgment. In this procedure, the court is acting administratively, and typically no judge will be involved in the process. All very simple then.

But that is not what happened in this case. The complication was that  the claimant wished to enforce the English judgment in Latvia. It could do this using an EU Regulation about the enforcement of judgments. But the Latvian court was concerned by two aspects of the case, firstly that, according to the debtor, it had not been informed of the commencement of the English proceedings, and secondly that the default judgment gave no reasons. So they asked the EU Court for its guidance. Hence this judgment of today.

This raised some ticklish problems. To what extent was it right for a Latvian court to go looking into the merits of the English judgment? And did English domestic civil procedure comply with Article 6(1) of ECHR, and its EU equivalent, Article 47 of the  Charter? In part this involved looking at the terms of the EU Regulation, which told the enforcing court (here, Latvia) that it should not recognise the judgment if it was manifestly contrary to public policy in the enforcing country or where the defendant was not served with the proceedings (which is what this defendant alleged) – see Article 34. Hence, the EU Court ruled that it was part of the Latvian court’s job to carry out an independent assessment of whether the defendant was served, and in sufficient time and in such a way to enable him to arrange for his defence [38].

Even more sensitive was the reasons point, given that no English default judgment contains reasons, and, as I have explained, no judicial (rather than administrative) brainpower is applied to the entering of all such judgments. The difficulty is that EU case law says that all judgments must be reasoned. As the CJEU put it

53      In that connection, the Court has held that the observance of the right to a fair trial requires that all judgments be reasoned to enable the defendant to see why judgment has been pronounced against him and to bring an appropriate and effective appeal against it….

54      It follows that the Member State in which enforcement is sought is entitled to take the view, in principle, that a judgment given in default of appearance which does not contain any assessment of the subject-matter, basis and merits of the action, is a restriction on a fundamental right within the legal order of that Member State.

55      In that connection, however, the Court has held that fundamental rights do not constitute unfettered prerogatives and may be subject to restrictions, provided that the restrictions in fact correspond to objectives of general interest pursued by the measure in question and that they do not constitute, with regard to the objectives pursued, a manifest and disproportionate breach of the rights thus guaranteed…

But the EU Court then considered the other side of the coin, namely the interest in a swift and cost-effective system where defendants do not appear to want to defend a claim, and the fact that such an objective might justify some restriction of the right to a fair trial insofar as the right requires judgments to be reasoned.

So far, a judgment from the EU court which may appear to be the classic ‘on the one hand, on the other” sitting on the fence.

So what then is the answer? Er, there isn’t one. This is because whilst the EU Court gives guidance to domestic courts when they ask for it, that guidance does not necessary answer the question. Hence, it will be for the Latvian court to decide whether the English system stacks up – or in the more measured tones of the EU Court

59      That being the case, it is nevertheless for the referring court to verify, in the light of the specific circumstances in the main proceedings, whether the restriction introduced by the procedural system in England and Wales is not manifestly disproportionate as compared with the aim pursued…..

60      From that perspective, it must be held, as the Advocate General noted in point 83 of her Opinion, that the extent of the obligation to give reasons may vary according to the nature of the decision and must be examined, in the light of the proceedings taken as a whole and all the relevant circumstances, taking account of the procedural guarantees surrounding that decision, in order to ascertain whether the latter ensure that the persons concerned have the possibility to bring an appropriate and effective appeal against that decision….

Perhaps the case will be decided on its facts – the Latvians may decide that, say, the defendant was indeed properly served with the court papers, and that may be the end of it. But a more worrying spectre for UK Court administrators is the one in which a Latvian, or indeed any other EU state, court decides that our default judgments should contain some reasons – at which point chaos breaks out across the EU when anyone relies on an English default judgment abroad. Whether a similar argument about lack of reasons advanced before an English Court would get the thousands of domestic litigants anywhere, in, say, trying to set aside a credit card judgment must be somewhat open to doubt – to put it mildly. Anyway, I dare say someone will try.

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