A foreigner to litigation? Attaching property of a foreign entity to secure payment of an amount due

An important consideration for South African companies and individuals (local entity) when transacting with a foreign company or individual (foreign entity), is whether the local entity will ultimately have any recourse against the foreign entity, in the event of the transaction going sour.

25 Jan 2022 4 min read Dispute Resolution Alert Article

At a glance

  • When transacting with a foreign entity, South African companies need to consider if they have recourse in case of a dispute.
  • The ability to execute a judgment against a foreign entity's property is crucial for recovering a debt.
  • By attaching the property of the foreign entity before instituting a claim, the local entity can establish or confirm jurisdiction and prevent the disposal of assets. This allows for execution on the attached property if the local entity succeeds in its claim. However, the foreign entity can avoid attachment by submitting to South African court jurisdiction or providing suitable security for the plaintiff's costs.

Assuming the local entity has a valid claim against the foreign entity, the issue arises as to whether there is any prospect of the local entity recovering any amount due from the foreign entity. In legal terminology, whether the local entity can “execute” on any judgment that it obtains against the foreign entity. Noting that one would be concerned here with claims instituted in the courts, an alternative dispute resolution, such as arbitration will have its own rules and procedures which often do not include the attachment possibilities discussed in this article.

A key consideration is whether the local entity can attach property belonging to the foreign entity. Normally, it is only after a judgment in a party’s favour that it can attach the property belonging to the defendant to execute on such judgment, i.e., attach and sell the property to satisfy the judgment debt.

However, there is also a procedure whereby the claiming party (in this case the local entity) can, before instituting its claim, attach the property of the debtor (in this case the foreign entity) , to “found jurisdiction”, where there is no jurisdiction otherwise) or to “confirm jurisdiction”, in the case where there is already jurisdiction, but not over the person of the defendant. Although the primary purpose in doing so is to bring the matter/defendant within the jurisdiction of the local courts, on the basis that the foreign entity holds property in the local country, an important benefit that flows from such attachment is that the property cannot in the meantime be disposed of by the foreign entity. Furthermore, if the local entity is then successful with its claim in the courts, it can execute against the attached property to satisfy the judgment debt. In the absence of such attachment, the foreign entity could simply dispose of the property in question before the local entity has an opportunity to execute against such property, thus making any order that the local entity may obtain in the courts a hollow one.

However, one should note that the foreign entity can normally avoid the attachment of its property by submitting to the jurisdiction of a South African court and/or by providing suitable security for the costs of the plaintiff in the intended action.

The recent Supreme Court of Appeal (SCA) case of Federation Internationale de Football Association v Kgopotso Leslie Sedibe and Another (303/2020) [2021] ZASCA (8 September 2021) dealt with and confirmed the principles relating to the civil procedure practice of attaching property to found or confirm jurisdiction. 

One of the key issues in this case was the fact that Mr Sedibe, a local entity/person did not have a monetary claim against FIFA, a foreign entity. Rather, the application brought in the Gauteng Division of the High Court was for the review of a finding by the Adjudicatory Chamber of FIFA’s Ethics Committee that Mr Sedibe was guilty of match-fixing, in friendly matches played leading up to the 2010 World Cup. Mr Sedibe successfully brought an application to attach the trademarks of FIFA to found jurisdiction.

At the SCA hearing, it was found that Mr Sedibe had not instated a claim for a monetary amount and that Mr Sedibe’s lack of jurisdiction could not be cured by an attachment to found jurisdiction.

The SCA took issue with the High Court’s finding that Mr Sedibe had a possible money claim, in that it had conflated Mr Sedibe’s application to attach property and his potential defamation action. His attachment application was not on the basis of defamation.

The court found it unnecessary to deal with the various claims made by Sedibe as the lack of a money claim posed an insurmountable obstacle. The principles relating to the attachment of property to found or confirm jurisdiction are well established – a local entity (incola), such as Mr Sedibe, may only attach the property of a foreign entity (peregrinus), such as FIFA, if there is a monetary claim or a property-related claim. Mr Sedibe had neither.

It is therefore important when contracting with a foreign entity that you are protected should you need to bring a case in a South African court by, for example, ensuring you have sufficient security in place (e.g. a bond / guarantee). Failing which, you should act quickly to attach property held by the foreign entity to found or confirm jurisdiction if you have a monetary or property-related claim.

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