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.

Gadens’ Erik Andersen

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.

International agreements

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.

‘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.’

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 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.

Complications

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.

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