CONTEMPT ORDERS AND JUDICIAL “ATTACHMENT” OF EQUITABLE PROPERTY

• Author: TAN Yock Lin BSc (London), BA BCL Dip Econ Devt (Oxon); Professor (National University of Singapore).
• Published date: 01 December 2017
• Date: 01 December 2017

Jurisdiction, Recognition or Choice of Law?

This article argues that a foreign contempt order is ordinarily not a judicial act and, therefore, not a fit subject for recognition by the domestic court as a final and conclusive judgment. It is an exercise of enforcement jurisdiction giving rise to concerns of extraterritoriality. Such orders are to be dealt with not in terms of abstention from exercising jurisdiction in cases which involve an attack on the validity of an act of a foreign nation state. They involve a different question of jurisdiction, the denial of jurisdiction to make orders absent reasonable connection. Concerns of non-justiciability may also exist and doctrines of act of state may also be relevant. In particular, a contempt sanction purporting to affect the contemnor's beneficial interest in property may also implicate choice of law considerations, calling for the domestic court's exercise of jurisdiction to protect pre-existing rights accrued under the domestic lex fori as well as those derived by imputation or ascription from applicable law.

I. Introduction

1 The recent case of The Republic of the Philippines v Maler Foundation1 (“ROP v Maler Foundation”) considered the obscure question whether effect could be given to involuntary judicially enforced beneficial transfers of property but left a concluded opinion for another day. The particular transfer in that case was an “attachment”, as it were, of the beneficial interest by way of assignment as a sanction for contempt of court. Such sanctions for contempt of court are uncommon. This article will discuss a number of questions to which they give rise such as: (a) whether there is a special quality in contempt orders that should make a difference between attachment for contempt and other involuntary public law transfers; and (b) whether the fact that the beneficial interest is involved and not legal ownership makes or should

make a difference. The significance of answers to these questions is not to be underestimated although the particular questions addressed are uncommon. What they reveal is a larger issue of general relevance about whether the conflict of laws is well equipped to deal with involuntary public law transfers. The same quest for answers has to be pursued for other involuntary public transfers of title such as those effectuated under the UK Trading with the Enemy Act 1939,2 Fraudulent Conveyance Act or the UK Financial Services and Markets Act 2000.3 Such transfers are also increasingly common where settlors who have secreted their wealth in overseas asset protection trusts are ordered to repatriate their assets for the purposes of satisfaction of judgment awards against them.4 The answers sought will not, however, be needed for contractual “transfers” coerced by a public authority. Those are regarded as consensual and to be dealt with in terms of choice of law rules for contract.5

2 For the sake of addressing the more general issues which are raised in the first part,6 the discussion in the second part of the article7 contains an appraisal of the three essential processes for solving conflict of laws problems. These are the jurisdictional, choice of law and recognitional analyses. Others which are interpolated under these essential analyses include public international law rules internalised or engrafted into the conflict of laws.8 Jurisdictional analysis looks at the relevance and impact of exercise of public authority and power on private justice. It, of course, defines and prescribes the jurisdictional space in which choice of law considerations are operative. But it also plays a crucial role in mediating between regulatory state interests for the sake of private justice. Choice of law analysis seeks to make a choice

between relevant legal solutions to the same problem of legal rights and duties, for the sake of appropriateness and situationality. Appropriateness concedes the absence of a right answer in legal substantive solutions while situationality acknowledges the importance of situating the problem in one legal order to the exclusion of others. Recognitional analysis is different again. It considers the relevance and weight of a prior exercise of adjudicative authority for the purposes of achieving finality in private justice. Each aspect of the international conflicts problem is, thus, different. Two aspects may interweave or intrude on one another but a fundamental point when it comes to operational characteristics is that each inhabits different dimensions or domains along the same plane. No analysis is moving up or down one level although one may be anterior and another posterior.

3 In the third part,9 this article argues after a brief discussion of the choice of law process that involuntary beneficial transfers straddle the boundaries of jurisdiction and choice of law and concludes that the answer to the problem of contempt orders is a two-tiered analysis in which the jurisdictional analysis plays the primary role with an embedded secondary role for choice of law. First, the making of a contempt order depends on an exercise of enforcement jurisdiction and the jurisdictional analysis is right to ensure that it falls within the metes and bounds of international law jurisdiction. If it does, the domestic court will not block it and the order can be served on third parties in the domestic forum for such effects as may be created in the foreign court. But then, there may be a subsidiary choice of law question whether the contemnor or implicated third party has rights which the order denies but which are exercisable because the domestic court has jurisdiction to vindicate those rights on his behalf. The arguments in support are situated in the context of the Court of Appeal decision in ROP v Maler Foundation.

II. ROP v Maler Foundation in outline

4 In ROP v Maler Foundation, there were conflicting claims to proprietary interests in certain deposits which had been transferred from Swiss Banks to an account of the Philippine National Bank (“PNB”) held at WestLB AG (“WestLB”) in Singapore. This account was held on escrow pending determination by the Supreme Court of the Philippines (“SCP”) as to ownership of the deposits. The deposits were allegedly the ill-gotten gains of the former President Ferdinand Marcos of the Republic of the Philippines and the competing claims were made in interpleader proceedings initiated by WestLB. The initial competing

claimants were: (a) several Foundations as nominee legal owners holding for the Marcos Estate; (b) PNB as account holder and escrow agent; and (c) the successful judgment creditors (victims of the ex-President Marcos's human rights violations, hereafter “HRVs”) of the defendant Marcos Estate. The Philippines was a relative latecomer. Its purported interest in the funds was derived from SCP's judgment that the moneys in the Swiss accounts were forfeited to the Philippines. Relying on that judgment, the Philippines first intervened in 2006, claiming sovereign immunity in the interpleader proceedings in respect of the deposits and seeking a stay of the proceedings with an added prayer for release of the deposits.10 If the claim to sovereign immunity had succeeded, that would have been the end of all the competing claims in Singapore. But not only did it not succeed,11 the Philippines found itself to have voluntarily submitted to the jurisdiction of the Singapore court.12 As a result, it became a party to the interpleader proceedings whether it had intended this or not.13

5 In the resumed substantive hearings, there were, therefore, four claimants including the Philippines as the fourth claimant. The trial judge rejected all claims and held for PNB. On appeal, the Court of Appeal, agreeing with the trial judge, first dealt with the Philippines' claim which was based on the in rem judgment of SCP. The claim was rejected on the ground that the judgment had been pronounced over property outside the jurisdiction of the Philippines.14

6 The interest in this article is in the claims made by the HRVs, who relied on the “Chinn Assignment” as the authentic source of their property rights in the deposits. The HRVs who had sued the defendant Marcos Estate to success in the US had the benefit of ancillary Mareva protection over all the defendant's assets including the Swiss accounts. Following contempt of court through violation of those orders, Walter Chinn, Clerk of the US District Court (“DC”) for Hawaii, signed the

Chinn Assignment at the direction of the DC purportedly assigning all right, title and interest of the Marcos Estate in the Swiss accounts to Robert Swift (hereafter “the Chinn assignee”) for the benefit of the HRVs.15 This occurred prior to the transfer of the deposits to WestLB in Singapore. Apparently, the fact was not drawn to the attention of the Singapore Court of Appeal that a prior attempt by the HRVs to obtain a declaration from a US court that the Chinn Assignment was valid and binding on the pertinent Swiss Banks failed.16 It was held that the declaratory order would violate the act of state doctrine as it “would not only contradict, and therefore declare invalid, the Swiss freeze orders, but would also require the Banks to disregard the Swiss orders”.17

7 Before the Court of Appeal in ROP v Maler Foundation, the HRVs contended that the Chinn Assignment was valid and binding on WestLB and all competing claimants (it was implicit in their case that this was whether or not WestLB stood in the position of the Swiss Banks). Presumably, as there was no longer any question of the Swiss Banks being affected by the Chinn Assignment, all parties and the court assumed that the contention simply called for a choice of law question to be determined. The court reviewed a range of possible connecting factors, looking for the most appropriate connecting factor to identify the applicable law. Four models were considered as possible models of analogy. The analogy to a...