LEGAL IS­SUES: ‘MY SHIP­MENT HASN’T BEEN PAID FOR! NOW WHAT?’

For com­pa­nies do­ing busi­ness across bor­ders, ques­tions of the ap­pli­ca­ble law and the meth­ods for en­forc­ing con­tracts can be crit­i­cal. Erik An­der­sen out­lines the op­tions in Pa­pua New Guinea should a deal hit prob­lems.

Business Advantage Papua New Guinea - - Contents -

For com­pa­nies do­ing busi­ness across bor­ders, ques­tions of the ap­pli­ca­ble law and meth­ods of en­force­ment of con­tracts can be crit­i­cal.

For trans­ac­tions large enough to have lawyers ad­vis­ing on the deal as it is be­ing put to­gether, it will be one of the first is­sues con­sid­ered, but the is­sue can be just as im­por­tant for the small or medium-sized busi­ness (SME), whether you’re ship­ping goods to buy­ers in PNG or pro­vid­ing ser­vices to PNG res­i­dent en­ti­ties with­out the pro­tec­tion of a lengthy con­tract.

Where some­thing goes wrong enough to need court ac­tion and you need to con­sider the ques­tion of where to com­mence pro­ceed­ings, it is im­por­tant to think about whether or not any judg­ment you ob­tain in your home coun­try will be able to be en­forced in PNG and, if so, how much trou­ble and cost do­ing so will en­tail.

As many busi­ness peo­ple will be aware, there is a net­work of in­ter­na­tional link­ages that al­lows judg­ments in one coun­try to be en­forced in an­other with rel­a­tively lit­tle pro­ce­dural dif­fi­culty, and PNG is not ex­cluded from this process. But the leg­is­la­tion in PNG is now of con­sid­er­able age and has not kept pace with the devel­op­ment of court sys­tems in many coun­tries. The cur­rent Re­cip­ro­cal En­force­ment of Judge­ments Act (shall we be lawyerly and call it the ‘REJACT’) dates from 1976, with an up­date in 1980.

To be cap­tured by the REJACT, two prin­ci­pal re­quire­ments must be sat­is­fied. First, the coun­try in which the judg­ment was orig­i­nally given must be listed by gazette in PNG. The list of coun­tries for which this recog­ni­tion is given is limited, and largely re­flects trad­ing pat­terns from the 1950s (when the orig­i­nal leg­is­la­tion was en­acted) and PNG’S colo­nial past as part of the Bri­tish Com­mon­wealth. It also con­tains var­i­ous in­clu­sions and omis­sions from the wash of his­tory or other quirks of fate. (For ex­am­ple, Sin­ga­pore is in but Hong Kong is not; Man­i­toba is in but Canada as a whole is not.) The list can be ac­cessed from Gadens Lawyers’ web­site at: www.gadens.com.au/pub­li­ca­tions/ Pages/re­cip­ro­cal-en­force­ment-of-judge­ments.aspx.

The sec­ond prin­ci­pal re­quire­ment is that the judge­ment em­anate from a ‘su­pe­rior’ court of that for­eign coun­try. In the Aus­tralian con­text, that would mean the Supreme Courts of the var­i­ous states. The lim­i­ta­tion of the rule to ‘su­pe­rior’ courts can have im­por­tant reper­cus­sions, as in many for­eign ju­ris­dic­tions sig­nif­i­cant amounts are claimable nowa­days from statu­tory courts, which aren’t ‘su­pe­rior’ courts in this con­text. For ex­am­ple, the New South Wales Dis­trict Court has a ju­ris­dic­tion up to the equiv­a­lent of nearly K2.0 mil­lion (US$0.78 mil­lion)—a fairly ma­te­rial sum for an Sme—but it is not en­force­able in PNG un­der the REJACT.

That isn’t the end of the op­tions, how­ever, as judge­ments that are out­side the REJACT can still be en­forced by the PNG Courts by the much more cum­ber­some pro­cesses that ex­isted in the days be­fore for­mal re­cip­ro­cal en­force­ment ar­range­ments be­tween na­tions be­came the norm.

Con­se­quently, a com­pany con­sid­er­ing pro­ceed­ings in, say, NSW against a PNG de­fen­dant would be well served to give thought to the trade-off be­tween ease of process in get­ting a judg­ment in the NSW Dis­trict Court ver­sus the Supreme Court, and the ease of en­forc­ing any re­sult­ing judg­ment in PNG.

As ever, it comes back to be­ing thought­ful about your choices and get­ting good ad­vice at the time.

'Where some­thing goes wrong enough to need court ac­tion and you need to con­sider the ques­tion of where to com­mence pro­ceed­ings, it is im­por­tant to think about whether or not any judg­ment you ob­tain in your home coun­try will be able to be en­forced in PNG'

Erik An­der­sen is a part­ner at Gadens Lawyers and has prac­tised in PNG for more than 20 years.

Gadens lawyers’ Erik An­der­sen

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