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27 October 2020
Cross-border transactions by Maldives-based entities span a range of industries, such as:
The number of such transactions is on the rise, which could lead to disputes between parties based in different jurisdictions and instances where debtors' assets are located in a jurisdiction other than that where litigation was based.
Export-Import Bank of Malaysia Berhad (Exim Bank) granted a loan facility to Sultans of the Seas Marine Taxi Pvt Ltd (first defendant) and a corporate guarantee was given to the facility by Sultan of the Seas Pvt Ltd (second defendant), both Maldives-incorporated entities. The defendants defaulted on the loan. The facility agreement was governed by Malaysian law and the Malaysian courts had non-exclusive jurisdiction.
On 1 November 2011 the Malaya High Court in Kuala Lumpur (Commercial Division) issued a default judgment for non-appearance against the defendants for the payment of outstanding dues in the loan plus interest, penalty and costs (Export-Import Bank of Malaysia Berhad v Sultan of the Seas Marine Taxi Pvt Ltd).(1)
On 5 June 2013 Exim Bank filed suit in the Maldives Civil Court(2) against the defendants to obtain a local judgment, as foreign judgments are not automatically enforced in the Maldives.
The defendants raised a procedural point (before responding to the claim) that the matter had already been adjudicated in the Malaya High Court and that proceeding with the case in the Maldives would amount to res judicata and double jeopardy.
The presiding judge at the Civil Court declared that the matter had already been adjudicated in Malaysia and that the Maldivian courts did not have jurisdiction on the matter. The case was dismissed.
Exim Bank appealed the decision to the High Court. The three-judge bench at the High Court upheld the Civil Court's decision that proceeding with the matter in the Maldivian courts would amount to res judicata.
Exim Bank appealed the High Court decision to the Supreme Court. The points of appeal were the same as those before the High Court:
On 14 October 2020 the Supreme Court issued its judgment, holding as follows:
Based on the above, the Supreme Court ruled that parties seeking to apply foreign law to a matter in the Maldivian courts have the burden of proving the foreign law to the court. Where a party fails to prove the foreign law, the judge may apply Maldivian law.
In light of the above, foreign court judgments can be submitted to the Maldivian courts as evidence. Further, a local court decision will be required to enforce a foreign judgment in the Maldives, as initially submitted by Exim Bank.
The judgment also leaves opens the possibility of the Maldivian courts adjudicating on foreign law-governed contracts.
The Maldivian economy comprises multinational investments and high-net-worth transactions but has limited capacity for dispute resolution. A mechanism for applying principles practised in developed nations will increase the credibility of the Maldivian justice system. The recent outcome of the Hague Conference on Private International Law, the Convention on Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters 2019, is an international instrument that would harmonise private international law among jurisdictions which accede to the convention. The Maldives should consider acceding to the convention, as it did to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958.
For further information on this topic please contact Ahmed Murad at Mazlan & Murad Law Associates by telephone (+960 3 344 720) or email (email@example.com). The Mazlan & Murad Law Associates website can be accessed at www.mmlawassociates.com.
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