South African businesses are increasingly providing goods and services in foreign markets; unfortunately this can often cause cross-border disputes and international confrontation between companies and individuals.
All too often this is as result of a misunderstanding on the company’s part of the foreign market’s legal framework or of the trade agreement itself. We at Dingley Attorneys endeavour to assist our clients in pre-empting such situations and preventing problems before they arise. Of course this is not always possible and even small disputes can quickly result in costly litigation abroad.
There are a number of reasons why a dispute might be governed by a foreign court; the most common of which is a conflict of law clause contained within the trade agreement. These clauses have the effect of placing the dispute under the foreign country’s laws and should they be required, that country’s courts. This brings us to the subject of this article: the enforcement of foreign judgements in South Africa.
Once the matter has been ruled on by the foreign court, the issue of enforcement becomes relevant. It is not enough for a foreign company to rely on the court’s order as that court has no jurisdiction in South Africa and consequently cannot be enforced on that authority alone (Note: if your company holds assets within the jurisdiction of the foreign court, then these may be liable to seizure in the event of non-compliance with the order).
Currently, South African legislation only provides for the enforcement of Namibian civil judgements, being the sole ‘designated country’ in terms of the Enforcement of Foreign Civil Judgements Act. Further the Act only empowers the district magistrate’s court which, having regard to its limited monetary jurisdiction, means that no claims over R200 000 can be enforced in this way.
This means that judgement creditors often have to apply to the High Court for recognition and enforcement according to the common law. The judgement of Jones v Krok 1995 (1) SA 677 (A) sets out the requirements for a judgment to be enforced using this process:
“(i) that the Court which pronounced on the judgment had jurisdiction to entertain the case according to the principles recognised by our law with reference to the jurisdiction of foreign courts (sometimes referred to as ‘international jurisdiction or competence’);
(ii) that the judgment is final and conclusive in its effect and has not become superannuated;
(iii) that the recognition and enforcement of the judgment by our courts would not be contrary to public policy;
(iv) that the judgment was not obtained by fraudulent means;
(v) that the judgment does not involve the enforcement of a penal or revenue law of a foreign state;
(vi) that enforcement of the judgment is not precluded by the provisions of the Protection of Business Act 99 of 1978 (as amended).”
The last requirement, (vi) essentially requires that the party seeking to enforce the judgement has to obtain consent from the Minister of Trade and Industry before enforcement can take place. The same legislation also expressly forbids the enforcement of punitive damages and imposes further evidentiary burdens on the Plaintiff in terms of proving liability.
Importantly, if the order of the foreign court includes punitive damages it must be noted that our courts do not recognise such claims. The quantification of damages under South African law is directly linked to the actual harm caused.
This means that if a judgement including punitive damages is enforced by a South African court, the amount thereof will likely be reduced.
Should you require any further advice on this subject or would like to engage our services on a related matter please do not hesitate to contact the author of this article.